One of the best wealth-building tools available to Canadian investors is the Tax-Free Savings Account (TFSA). The account provides a space for contributions and gains from stocks and Canadian ETFs to grow tax-free.
The key for investors is being able to select the very best Canadian ETFs to kick off that compounding. Fortunately, there’s no shortage of great options on the market, with some offering exposure to the U.S. market and others providing diversification appeal.
That’s an underrated advantage of ETFs. They spread the investment (and risk) across dozens, or in some cases, hundreds of different companies within a single ticker.
To help meet that goal, here’s a look at three great Canadian ETFs that investors should consider adding to their TFSA for the long-haul.
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XIU provides a simple way to own Canadian blue chips
The first of three Canadian ETFs to consider is iShares S&P/TSX 60 Index ETF (TSX:XIU). This ETF tracks 60 of Canada’s largest publicly traded companies. This also gives investors exposure to some of the best dividend-paying, blue-chip stocks on the Canadian market.
That includes the big bank stocks, energy companies, railways, telecoms and utilities, to name just a few. For investors looking at Canadian ETFs to buy, that checks off a lot of the boxes.
Even better, the ETF offers a quarterly distribution to investors. As of the time of writing, the yield offered is 2.2%. That’s not the highest yield on the market, but it’s stable and runs secondary to the ETF’s growth.
In fact, over the past year, XIU’s price has grown 28%.
ZSP provides access to America’s largest companies
Another great option to include in the basket of Canadian ETFs is BMO S&P 500 Index ETF (TSX:ZSP). This ETF provides investors with exposure to 500 of the largest companies in the U.S. market.
That means owning a slice of some of the leading businesses on the planet across multiple sectors, including technology, consumer goods, financials, healthcare, and industrials.
This lets Canadian investors benefit from the growth of U.S.-based companies within a TFSA, without many of the hassles of owning U.S. stocks in a tax-sheltered account.
And like XIU, the BMO S&P 500 Index offers a distribution with a yield of 0.8%. That being said, the main focus of holding this fund, along with the other Canadian ETFs, in a TFSA is growth.
Over the past year, ZSP has recorded growth of 23%.
Select the all-in-one ETF for global diversification
Rounding out the three Canadian ETFs to own is iShares Core Equity ETF Portfolio (TSX:XEQT). This ETF is geared toward investors seeking a globally diversified portfolio within a single fund.
Specifically, this ETF holds Canadian, U.S., and international stocks.
That includes a similar mix of some of the top names from ZSP and XIU, along with other international holdings.
This makes it a great option for investors looking to buy the market over individual stocks. It also removes the diversification question from a portfolio, as the fund is allocated across domestic and international holdings.
Turning to income, iShares Core Equity does offer investors a distribution yielding 1.6%. While it is higher than ZSP, the goal of the fund isn’t income, but diversification and long-term growth.
The best Canadian ETFs to buy today
Investors building a TFSA portfolio of Canadian ETFs have plenty of options to choose from. The three Canadian ETFs mentioned above can provide a good mix for that portfolio, with each catering to a different focus.
XIU is focused on the Canadian market and providing income, while ZSP offers an easy way to add broad U.S. market exposure. Finally, XEQT provides a means for Canadian investors to invest in a globally diversified ETF.
In my opinion, any of the Canadian ETFs mentioned above can be core holdings in any long-term TFSA.
Buy them, hold them, and watch your portfolio grow.
