Canada was the first to introduce the concept of exchange-traded funds (ETFs), or a basket of investments that you can trade on a stock exchange like regular shares. The Toronto 35 Index Participation Units (TIPs) were launched in early March 1990.
Today, the modern portfolio might include an ETF for instant diversification or even a foundational holding. Legendary value investor Warren Buffett recommends the asset to people who do not have the time or experience to pick individual stocks.
In August 2026, the TSX has already registered multiple record highs, with the latest milestone on August 12. ETF investors should be happy because select funds are outpacing the broader market.
Funds like the TD Canadian Bank Dividend Index ETF (TSX: TBNK), iShares S&P/TSX Composite High Dividend Index ETF (TSX: XEI), and BMO Canadian Dividend ETF (TSX: ZDV) are performing extremely well in the current market environment. Investors seeking passive income and growth can add these surging Canadian ETFs to a Tax-Free Savings Account (TFSA) right now.
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Banking giants-focused
Canada’s banking sector, primarily the Big Six, is a bedrock of stability. Any of these giant lenders can be a core stock holding. TD Canadian Bank Dividend Index ETF offers exposure to all financial powerhouses. TD Asset Management, the portfolio adviser, uses a rules-based weighting methodology but puts more weight in the bank with higher dividend growth.
Currently, Royal Bank of Canada and Canadian Imperial Bank of Commerce are the top two holdings, accounting for 28.3% and 23.9% of the total fund, respectively. As of this writing, TBNK enjoys a 35.2% year-to-date gain and a commanding plus-65.8% trailing one-year return. If you invest today, the unit price is $55.27, while the yield is 2.2% (monthly dividend).
All-weather
A top-of-mind choice if you want exposure to the TSX’s 11 primary sectors is the iShares S&P/TSX Composite High Dividend Index ETF. You’d be investing basically in an all-weather fund. Financials (31.9%), Energy (28.93%), and Utilities (13%) have the highest sector weights. Dividend gem Open Text is the only technology stock out of 75 total holdings.
BlackRock Asset Management Canada Limited manages XEI. At $40.12 per unit, the year-to-date gain is 26.7%. The 15-year-old fund pays a 3.4% dividend, paid monthly. You can say that this ETF is somehow a buy-and-forget holding for TFSA long-term investors.
Yield-weighted
As fund manager for the BMO Canadian Dividend ETF, BMO (TSX: BMO) Global Asset Management invests in Canadian dividend-paying stocks selected for their strong fundamentals as well as potential for long-term capital appreciation and sustainable dividends.
This premier ETF follows a rules-based, yield-weighted methodology. It prioritizes yield over company size or total market value. Total stock holdings are 61; only the technology sector has zero representation.
Like XEI, the heavier exposure is in the Financials (39.2%) and Energy (21.3%) sectors. ZDV investors are up 25% year-to-date. At $33.65 per unit, you can partake in the 2.7% yield and receive monthly dividends.
Double benefits for TFSA investors
Canada’s top-performing ETFs allow you to maximize the tax-free growth feature of your TFSA. Their regular monthly dividends double these benefits, as reinvesting the distributions accelerates long-term compounding and wealth-building simultaneously.
