If you spend enough time reading investing books, you’ll eventually come across the concept of home-country bias. The idea is simple: investors tend to allocate more money to their domestic stock market than a purely global market-cap weighted portfolio would suggest.
In theory, Canadians should only have a small percentage of their portfolios in Canadian stocks because Canada represents only a small fraction of the global equity market. In practice, however, there are good reasons many investors maintain a larger Canadian allocation.
Canadian dividends receive favourable tax treatment in taxable accounts. Domestic investments reduce currency risk. Most importantly, Canadian investors often feel more comfortable owning businesses they understand and interact with regularly.
That does not mean putting your entire portfolio into Canadian stocks. Diversification still matters. But maintaining a meaningful allocation to Canadian equities can make a lot of sense as part of a broader portfolio.
Here are three Canadian exchange-traded funds (ETFs) that I think deserve consideration heading into 2026.
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The broad market option
The iShares Core S&P/TSX Capped Composite Index ETF (TSX:XIC) is one of the simplest and most affordable ways to gain exposure to the investable Canadian stock market.
The ETF tracks the S&P/TSX Composite Index and holds roughly 225 Canadian companies across virtually every major sector. Financials, energy, materials, industrials, utilities, telecoms, and consumer stocks are all represented.
The ETF currently offers a trailing 12-month yield of 2.1% and charges an expense ratio of 0.06%. For investors looking for a low-cost core Canadian holding, XIC remains one of the strongest options available.
The blue-chip option
The iShares S&P/TSX 60 Index ETF (TSX:XIU) takes a more concentrated approach. Rather than holding hundreds of stocks, XIU focuses on Canada’s 60 largest and most liquid public companies.
The portfolio includes many of the country’s dominant banks, pipelines, railways, insurers, telecoms, and energy firms. Because the ETF focuses on larger companies, it tends to be more heavily tilted toward established blue-chip businesses.
The ETF currently offers a trailing 12-month yield of 2.2% and charges an expense ratio of 0.18%. For investors seeking exposure to Canada’s corporate heavyweights, XIU remains a popular choice.
The dividend option
The iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI) is designed for investors who place a greater emphasis on monthly income instead of capital appreciation.
The ETF screens for higher-yielding Canadian dividend stocks, resulting in a portfolio concentrated in sectors such as financials, pipelines, utilities, and telecoms. These industries have historically been among Canada’s strongest dividend payers.
The ETF currently offers a trailing 12-month yield of 3.5% and charges an expense ratio of 0.22%. For investors looking to build a stream of dividend income while maintaining broad exposure to Canadian equities, XEI remains an attractive option.
