When it comes to building long-term wealth with Canadian stocks and exchange-traded funds (ETFs) in your Tax-Free Savings Account (TFSA), most investors already know what they’re supposed to do.
You find the best investments on the market, then hold them for years and let compounding do the work. It’s a simple strategy on paper. However, sticking to it is often much more difficult than investors anticipate.
Because understanding the strategy is straightforward, however, actually sticking to it when markets get volatile, headlines change, or certain sectors take off while others go nowhere is when it becomes a lot harder, and it’s often when investors start making mistakes.
Emotions start to take over, and investors try to adapt or adjust their portfolios. They start overthinking something that was supposed to be simple.
That’s why the best approach is to build something that is so simple, reliable and diversified you can have the confidence to hold through periods of higher uncertainty and market volatility.
And that’s why two broad-market ETFs like iShares Core S&P 500 Index ETF (CAD-Hedged) (TSX:XSP) and iShares S&P/TSX 60 Index ETF (TSX:XIU) are some of the best ETFs Canadians can buy in their TFSAs and never touch.
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Why XSP is one of the best ETFs that Canadians can buy in their TFSAs
If you were to own just one ETF for global exposure, the S&P 500 is one of the best places to start.
First off, it offers instant diversification with exposure to 500 of the largest companies in the U.S., many of which generate revenue all over the world. So, even though it’s technically a U.S. index, you’re still getting global exposure.
That matters because not only is an ETF like the XSP a bet on the broader American economy and global economic growth, but the S&P 500 specifically has consistently been one of the best-performing indices in the world.
That’s why the XSP is one of the best ETFs that Canadians can buy in their TFSA and never touch.
With the XSP, you don’t need to try to pick the best American stocks or try to time the market.
You just need to stay invested and stick to your long-term buy-and-hold strategy. Because the longer you hold reliable, high-quality Canadian ETFs like the XSP in your TFSA, the more powerful compounding becomes.
Why the XIU is the best way to get Canadian exposure
While the XSP is unquestionably one of the best ETFs that Canadians can buy for exposure to the American and global economy, if you’re looking for broad market exposure to the Canadian economy, the XIU is one of the top names to consider.
Unlike the XSP, which offers exposure to the entire S&P 500, the XIU doesn’t own the entire TSX Composite Index but instead focuses on the 60 largest companies in Canada.
That’s significant because over time, those large-cap, blue-chip stocks have consistently outperformed the broader index, and that’s not necessarily surprising.
The XIU is made up of well-established companies that are more stable, generate more reliable cash flow and tend to hold up better across different economic environments.
That’s why the XIU is one of the best ETFs that Canadians can buy in their TFSAs and never touch.
It gives you exposure to Canada’s strongest companies, including major banks, energy producers, and other essential businesses that play a critical role in the economy.
On top of that, many of these companies pay consistent dividends, which adds another layer of returns and gives you the confidence to hold the XIU even as volatility is spiking.
Because at the end of the day, building wealth isn’t about constantly finding new investments.
It’s about owning the right ones and giving them time to work.
That’s why gaining exposure to the entire market through a low-cost Canadian ETF makes so much sense. You can buy them, never touch them and let compounding do the work.
Plus, once that foundation is in place, it gives you the flexibility to layer in individual stocks on top, while still being confident in your long-term strategy without overcomplicating your portfolio or taking on unnecessary risk.
