One of the biggest advantages of investing in a TFSA is that it encourages a long-term mindset. Rather than trying to time the market or constantly buy and sell stocks, the TFSA incentivizes investors to focus on building a portfolio that compounds over many years. That’s also why many Canadian ETFs have become so popular.
Instead of trying to pick individual winners, ETFs allow investors to gain exposure to dozens or even hundreds of companies with a single investment. So, not only does that make investing much simpler, but it also helps reduce risk through diversification.
And while many investors spend years trying to outperform the market, plenty ultimately fall short. That’s why simply owning broad sections of the market through high-quality index ETFs can be one of the smartest long-term strategies to consider in your TFSA.
So, with that in mind, here are three Canadian ETFs worth tucking into a TFSA and holding for years to come.
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One of the best ETFs to buy for exposure to the largest Canadian stocks
If you’re looking for a high-quality ETF that you can buy in your TFSA and hold for years, the iShares S&P/TSX 60 Index ETF (TSX:XIU) is one of the simplest choices that Canadians have.
Its portfolio includes many of the country’s biggest banks, pipeline companies, railways, utilities, telecoms, and other blue-chip businesses that have helped drive the Canadian economy for decades.
Because it focuses on large-cap companies, XIU also naturally provides exposure to many of Canada’s highest-quality dividend stocks, and therefore offers a current yield of 2.2%.
So, if you’re looking for investments that are simple and can help to build the foundation of a long-term TFSA, it’s difficult to go wrong with an ETF that offers broad diversification while tracking some of the strongest businesses on the TSX.
A top ETF offering exposure to America’s largest companies
While Canadian stocks deserve a place in most portfolios, it’s also important to diversify internationally, which is why many investors will want to pair the XIU ETF with a fund like the iShares Core S&P 500 Index ETF (CAD-Hedged) (TSX:XSP).
The XSP gives investors exposure to the S&P 500, 500 of the largest companies in the United States, including many of the world’s leading technology, healthcare, financial, and consumer businesses.
So not only does the XSP help Canadians diversify away from just the Canadian economy, but with exposure to the S&P 500, that diversification can be especially valuable because it gives investors exposure to sectors that aren’t nearly as well represented in Canada.
That’s why it’s one of the most popular ETFs Canadians can buy in their TFSAs to hold for decades.
A top Canadian ETF to buy for emerging markets exposure
For investors willing to think even longer term, the BMO MSCI Emerging Markets Index ETF (TSX:ZEM) can help round out a TFSA portfolio.
Rather than focusing on developed economies like Canada and the United States, the ZEM ETF provides exposure to emerging markets across countries such as China, India, Taiwan, Brazil, and several others.
Emerging markets can be more volatile than developed markets, but they also offer the potential for faster long-term economic growth as populations expand and economies continue to develop.
That’s why many investors choose to keep emerging markets as a smaller portion of their overall portfolio while still benefiting from the diversification they provide.
So, if you’re building a TFSA for the long haul and want exposure to higher-growth regions, the ZEM is one of the best Canadian ETFs you can buy to round out your portfolio.
