Canada introduced the first-ever exchange-traded fund (ETF) in March 1990 as an alternative to mutual funds. Since then, demand for the asset class has significantly grown. Today, investors buy and sell ETFs like individual stocks on the TSX and other global stock markets.
Instant diversification is a prominent feature of ETFs. Investing in a “basket of assets” eliminates the cumbersome task of stock selection and mitigates risks. A balanced strategy in 2026 is to prioritize ETFs that cover nearly all primary sectors, especially the reliable segments of the TSX. The top three Canadian ETFs also provide monthly distributions at attractive yields.
Source: Getty Images
Exposure to the “Big 6”
BMO Global Asset Management is the fund manager of the BMO Equal Weight Banks Index ETF (TSX: ZEB). Canada’s Big Six banks, individually, are rock-solid investments for their financial stability and healthy long-term returns. ZEB offers exposure to all these giant lenders in one basket. The ETF replicates the performance of the Solactive Equal Weight Canada Banks Index.
Banking is a high-quality sector in Canada, which is considered a bedrock of stability globally. The weight allocation per bank is equal, not based on market capitalization, to lessen specific risks. An underperformance by a bank stock will not unduly impact the entire fund.
Thus far in 2026, ZEB is up 15.6% year-to-date. If you invest today, the unit or share price is $66.77. The current dividend yield is 2.6%.
Basket of dividend growth stocks
The iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (TSX: CDZ) of BlackRock offers more diversified exposure. The fund invests in established Canadian dividend payers, specifically stocks with dividend growth streaks of at least five years.
The exposure is heaviest on the energy and financial sectors. Only healthcare is not represented among the TSX’s 11 primary sectors. SouthBow Corporation, TELUS, and Westshore Terminals are the top three holdings. CDZ’s inception date is September 2006
As of May 14, 2026, the number of holdings is 96. At $44.79 per share, current investors enjoy an 11% year-to-date gain on top of the 3.1% dividend.
Equal-weight advantage
BMO Global Asset Management also manages the BMO Equal Weight REITs Index ETF (TSX: ZRE). The fund replicates the Solactive Equal Weight Canada REIT Index and seeks to provide long-term capital growth. The exposure is to various real estate investment trusts (REITs). These institutional landlords own and operate residential, multi-family residential, industrial, retail, and office properties.
Like with ZEB, this ETF is equal-weighted. The purpose is to spread risk evenly, with no heavy concentration in any particular real estate sector or large-cap REITs. ZRE trades at $23.22 per unit (+7% year-to-date) and pays a hefty 4.2% dividend. RBC Capital Markets forecast a high single-digit return for Canada’s REIT industry in 2026.
Tailored to modern investors
ETFs are tailored to modern investors, especially for those seeking instant diversification. The top Canadian ETFs with specific themes provide stability and consistent passive monthly income. Furthermore, despite their medium to high-risk ratings, all three continue to demonstrate resilience amid a volatile market in 2026.
