The Best Index Funds in Canada in 2025

When it comes to investing in index funds, also referred to as mutual fund investments, you can choose to work with a financial advisor or engage in self-directed investing. No matter which option you decide to go with, there are certain index funds that stick out above the rest. 

How Index Funds Work

Index funds track different markets in order to try to replicate their performance. When it comes to index funds, Canadian investors can get actively managed funds as well as passively managed funds. They can also be made of different stocks, including small-cap Canadian stocks. Some even reflect future values instead of current values. 

Unlike some other types of investments, your initial investment isn’t guaranteed. It’ll constantly change based on the unit value of the index. Often, the fund manager will manage this to avoid reduced returns. 

Wealthsimple Index Funds 

Because Wealthsimple is an online brokerage, there are a variety of investments that you can invest in. In terms of Index Funds, Wealthsimple offers ETFs or index mutual funds, which are also referred to as exchange-traded funds. With Wealthsimple, you can find a wide range of ETFs to invest in as you choose. 

Top Canadian Index Funds With Dividends

When it comes to index funds, there are ones you can get with dividends. Dividends are paid out on a monthly, quarterly or yearly basis, and the amount you get is based on how much you have invested. Here are some of the best index funds in Canada. 

Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY)

In terms of high dividend yield index funds, one of the most popular is the Vanguard FTSE Canadian High Dividend Yield Index. The purpose of this index fund is to track the performance of a broad Canadian equity index that measures investment returns of common stocks of Canadian companies that have high dividend yields. This particular index is market capitalization-weighted and focuses on dividend income. 

Like many other ETFs, this index is passively managed. It invests most, if not all of it’s assets into the stocks that make up th index. Here are the specifics of this particular index on the market. 

iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI)

As you probably may have guessed, this index tracks the iShares S&P/TSX Composite High Dividend Index. In total, it holds 75 different stocks, so it’s a simple way to invest in a lot of stocks all at once. Here are the specs of the index. 

iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (TSX:CDZ)

This fund seeks to track the S&P/TSX Canadian Dividend Aristocrat Index. This fund holds high-paying Canadian dividend companies as well as large-cap stocks. As a bonus, it pays out dividends monthly. Other specifics of this stock include:

Best US Index Funds in Canada

If you’re looking to invest in US stocks without actually investing in the US markets, one of the ways you can do this is through US index funds. In terms of US index funds, there are actually quite a few different options to choose from. 

iShares Core S&P 500 Index ETF (XUS)

This is just one of the funds that tracks the S&P 500. It’s made up of large-cap stocks that make up about 80% of the US Stocks market cap. It’s very similar to the other S&P stocks, but it has it’s own numbers. Here’s what they look like. 

Vanguard S&P 500 Index ETF (VFV)

This is another ETF that tracks the S&P 500. The main difference is that this is a Vanguard stock. It has slightly different diversification than the other S&P stocks. Here’s what this ETF currently looks like. 

BMO S&P 500 Index ETF(ZSP)

In terms of the S&P 500 Index ETFs, this ETF is the most diversified. It has low fees and is best used for long-term investing. Here is what the ETF itself looks like. 

iShares Core S&P 500 Index ETF CAD-Hedged (XSP)

This ETF is the same as the iShares ETF we discussed above, except it’s Canadian hedged. It’s different because it uses derivatives to offset the fluctuations in the exchange rate. Some choose to invest in this one because it’s less volatile, but it can also increase your cost. 

iShares Core S&P US Total Market Index ETF (XUU)

While this fund is similar to the ones above, it tracks total markets instead. The fees are low, but they give you access to a diversified portfolio that can earn you substantial long-term growth while still allowing for broad exposure. Here’s what it currently looks like. 

Vanguard US Total Market Index ETF (VUN)

This Vanguard ETF is another ETF that also tracks the total market. This market index offers even broader exposure than the iShares total market fund. It encompasses the entire US investable opportunity set while offering profitable long-term growth. Here’s what it looks like. 

Low-Cost Index Funds in Canada

Another thing that investors need to consider is the cost of the index fund. This will determine how much is invested into the index and will impact your total return. The lower the cost, the more funds that you can invest. Let’s take a look at some of the best low-cost index funds in Canada. 

Vanguard FTSE Canada All Cap Index ETF (VCN)

The purpose of this particular index fund is to track the progress of a broad Canadian equity index. Unlike many other index funds, this one includes all market capitalization types that are publicly traded on the market. The current index that it tracks is the FTSE Canada All Cap Domestic Index. This index is passively managed and uses cost-effective management techniques. 

iShares Core S&P/TSX Capped Composite Index ETF (XIC)

Like many other index funds, this one seeks long-term capital growth. It does so by tracking the performance of the S&P/TSX Capped Composite Index’s net of expenses. This is specifically designed for those who are seeking to grow their wealth over time. It’s also a great way for you to own the entire stock market with just one index. 

BMO S&P/TSX Capped Composite Index ETF (ZCN)

This portfolio is designed to track the S&P/TSX Capped Composite Index’s net of expenses. It invests in and holds the securities in the same proportions as the index. It includes over 200 top stocks (all Canadian), and it represents around 95% of the Canadian equity market. A nice feature of this index is that it mostly holds the most liquid and traded Canadian equities. 

iShare S&P/TSX 60 ETF (XIU)

One neat fact about the iShares S&P/TSX 60 ETF is that it was the first ETF in the world. It was created in 1990. It’s also one of the largest and most liquid ETFs in Canada. Specifically, this ETF gives you exposure to large and established companies in Canada by tracking the S&P/TSX 60 index’s net of expenses. 

Horizons S&P/TSX 60 Index ETF (HXT)

When it comes to this ETF, you only get exposure to 60 of the most liquid Canadian companies. These are also considered to be the largest Canadian companies. Unlike some other ETFs, this one doesn’t just cover one sector; it covers all sectors, including financials, energy, and industrials. Those who invest in this index need to be aware that there aren’t regular distributions with this ETF. It’s also very volatile and meant for long-term investing. 

iShares S&P/TSX Completion Index ETF (XMD)

This index is also ideal for those who are seeking long-term growth. It does this by tracking the net expenses of the S&P/TSX Completion Index. What’s interesting about this index is that it only consists of small and medium cap Canadian equities. Most investors use this type of index to diversify a mostly large cap portfolio. 

Vanguard FTSE Canada All Cap ex-Financials Index ETF (VXC)

This index is slightly different than the others we have discussed. It focuses on large, small and mid-cap stocks of companies outside of Canada that are in both developed and emerging markets. The purpose of the index is to track the FTSE Canada All Cap ex China A Inclusion index. For investors, it’s a passively managed index that uses cost-effective management techniques. 

iShares S&P/TSX Capped Financials Index ETF (XFN)

This index fund offers exposure to Canadian financial companies by replicating the performance of the S&P/TSX Capped Financial Index’s net expenses. What’s interesting is that this index is used to express a sector view. 

Vanguard Index Funds

When it comes to investing in Canada, Vanguard and iShares are dominating the spot for the best index funds in Canada. As you can see, we’ve already gone over some of their best index fund options. Here are some others. 

Vanguard FTSE Canada ETF (VCE)

Another passively managed fund from Vanguard is the FTSE Canada ETF. It tracks the performance of a broad Canadian equity index. This index measures the investment return on the Canadian market. However, it only measures publicly traded securities. It’s also known for primarily investing in the largest Canadian stocks. 

Vanguard Growth ETF Portfolio (VGRO)

Another affordable ETF from Vanguard is their Growth ETF Portfolio. Like many of the other index funds that we’ve discussed, it seeks to provide long-term capital growth. It does this by investing in both equity and fixed-income securities. While this index can be rearranged, it strives to keep a balance of 80% equity and 20% fixed income. 

Vanguard Balanced ETF Portfolio (VBAL)

This is another Vanguard index fund that is designed for long-term growth. It’s also designed for a moderate level of income, which it does by investing in equity as well as fixed-income securities. The asset allocation for this portfolio is normally 60% equity and 40% fixed-income securities; however, this can change. 

Vanguard Conservative ETF Portfolio (VCNS)

While this is another Vanguard portfolio that invests in equity and fixed-income securities, this one is designed to provide income as well as for long-term growth. Due to this, the ideal asset allocation is 40 equity and 60% fixed income. The advisor has the ability to rebalance the portfolio from time to time as needed. 

Vanguard Conservative Income ETF Portfolio (VCIP)

The Vanguard Conservative Income ETF is another ETF that focuses on both long-term growth as well as income. It does this by investing in equity and fixed-income securities. Like a few of the others we’ve already mentioned, this is an actively managed portfolio. The sub-advisor who manages this portfolio aims to keep a strategic portfolio balance of 20% equity and 80% fixed-income securities. However, this balance may need to change at the discretion of the sub-manager. 

Questrade Index Funds

Because Questrade is just a brokerage, you have a ton of options to choose from. This includes the different index fund options that we’ve already mentioned. The only difference with using Questrade is the fees that the brokerage charges. 

TSX Index Funds

When it comes to index funds, there’s a wide variety to choose from. There are more than you may think available on the Toronto Stock Exchange. Having so many options to choose from can make it very difficult to choose the best option or options for you. To help you with this, we made a list of some of the best TSX index funds. It’s important to keep in mind, though, that there are so many that could make this list, but we had to narrow it down. 

iShares MSCI Minimum Volatility Canada ETF (XMV)

This index fund works differently than many of the others that we’ve already discussed. It tracks the net expenses of the MSCI Canadian Minimum Volatility Index. The reason that investors use this portfolio is it can reduce losses during declining markets but it can still see gains during rising markets. Due to this, it may not earn long-term growth, but it can balance your portfolio to reduce your overall losses. 

CIBC Canadian Index Fund (CIB300)

This is a CIBC fund that is used to provide long-term growth. This is done with capital appreciation. The purpose of this index is to gain a return similar to the performance of the S&P/TSX Composite Index, which in turn represents the Canadian equity market. In fact, it’s an option to diversify your portfolio and be competent in the Canadian equity market. It's also a good option for those looking for a medium to long-term investment. 

Global Aggregate Bond Index (VGAB)

One thing to note about this index is that it’s Canadian-hedged. It seeks to the performance of a broad global bond index. Like many of the other indexes we discussed, it seeks to be passively managed. The sub-advisor matches this index's investments with the index it seeks to track. It also uses derivative instruments to seek to hedge foreign currency exposure. 

iShares Core MSCI All Country World ex Canada Index ETF (XAW)

This is another index fund that seeks to track long-term growth. However, it’s also a great way to add some global diversification to your portfolio. Many investors choose this because it’s an easy way for you to invest in US, international and even emerging markets. It’s also low-cost, so it doesn’t require a lot of funds to begin your investment journey. 

FTSE Emerging Markets All Cap Index ETF (VEE)

The point of this index fund is to track the performance of a broad emerging markets index. It currently seeks to track the FTSE Emerging Markets All Cap China A inclusion index. Some neat features of this index are that it primarily invests in the US-domiciled Vanguard FTSE Emerging Markets ETF and it uses a passively managed strategy. This fund also has low expenses, which helps minimize any tracking errors. 

TD International Index Fund - e (TDB911)

This index fund is purchased through TD Bank in Canada. It’s identified as having a medium risk and tracks the performance of an international equity markets index. Specifically, one that measures returns of both mid and large-cap issuers in the Far East, Asia and Europe. 

This option is a great choice for those who have an active investment style and who want low MERs. It’s also a great choice for those who are looking for an index that gives exposure to overseas companies, especially large ones that are included in the MSCI EAFE Index. 

Canadian Equivalent of VTSAX

While the VTSAX is a US index fund, there is a Canadian equivalent. This is a fund we’ve already discussed, which is the Vanguard S&P 500 Index ETF (VFV). This way, they can invest in the US fund without having to invest in the US market. 

The Big 3 Index Funds

When it comes to index funds, there are 3 companies that control index funds. These are known as the big three: Vanguard, Big Rock, and State Street. Here’s some information about them. 

Vanguard

Vanguard is considered to be one of the world’s largest asset managers. They have over 50 million clients, 17 global offices and $8.6 Trillion in Assets Under Management. Unlike some other asset managers, Vanguard is independent from their external owners. This means that they focus on their clients and keep their costs reduced. 

Just like with other asset management firms, their investment costs include commissions, management fees and expenses. They’re also clear that their investments aren’t guaranteed, and all investments come with a risk. That said, there is always someone there to help you. This is because their goal is to provide their clients and investors with long-term success. 

Black Rock

BlackRock asset management Canada promotes itself as not just an investment manager for the wealthy but for everyone. They’re also considered to be one of the world’s leading providers of investments as well as advisory and risk management solutions. Currently, they’ve been serving Canadian investors for over 30 years and have over 180 pension plans using their services. That’s over $18 M in retirement savings. They also manage over $335 B for Canadians. 

Essentially, Black Rock publicly manages money clients and provides investment solutions for both professional and long-term investors. Their goal is to provide their investors with long-term wealth so they can reach their financial goals. You may not know this, but iShares ETFs are Black Rock. 

State Street

State Street is another one of the big 3 asset managers. They’re considered to be a global leader in financing, investment management, markets and investment servicing. They actually end up dealing with 11.5% of the world finances everyday. 

In terms of experience, State Street has over 232 years of it. They’re also the first back-to-front investment platform, the 4th largest asset manager in the world, do business on over 100 markets and have over 53,000 employees worldwide. 

S&P 500 Index Funds in Canada

When it comes to index funds that track the S&P 500, there’s more than you may think. Here’s a list of a few of them, including the ones we’ve already discussed. 

How To Determine The Best Index Fund For You

When it comes to index funds, your financial situation and reason for investing become very important. The type of investment that you choose can play a big role in your ability to meet your financial goals. This is why there are different risk levels for each type of investment, as well as different options for short-term and long-term investments. 

When it comes to the index fund itself, you want something that is diversified. This means that you want something that will hold an array of holdings. It’s also important that you get something with liquid investments so it’s simple to track. 

The best type of index funds to invest in are those that have a low turnover. This means that you want something that is managed by the index. It’s also important to have a rational investment, something realistic and sensible. It should also be transparent, meaning that you can track it and anticipate its behaviours. 

Index Funds and Income Taxes

If you do own Canadian mutual funds, you may be wondering how you pay taxes on these amounts. Well, income taxes payable are based on the income you receive for the mutual fund, not what the fund is worth. What these are depends on the type of income you receive, but they can be capital gains, capital gains dividends, dividends, foreign income, interest, return of capital or other income. You will receive slips in order to claim these amounts on your taxes. 

Protecting The Funds You Invest

While you can’t guarantee you aren’t going to lose your money, in the event of a bank failure, you can protect your funds. In Canada, this is the CDIC, which is not only a government deposit insurer, but since there’s no other government deposit insurer of any kind, it's the only deposit insurer. It will protect up to $100,000 of your funds in an account. 

Why Invest in Index Funds

Investing in index funds is a great way to invest in more than just individual stocks while still maintaining lower management fees. You have to worry less about trading strategies and instead focus on the past performance of Canadian ETFs. This can also reduce your actual expenses when it comes to investing low-cost Canadian equity. 

With index funds, you have access to their inception month, historical performance, as well as other fund facts. Since their values change frequently, many authorized dealers offer charts for illustrative purposes to show the axis displaying categories and axis displaying values. These details are used to track and replicate the performance of a specific index. This isn’t done on an annualized basis but rather on a daily basis. Sometimes even more. 

With many index funds, there are management fees you need to pay but these are indicated rates and trailing commissions are paid using them. You can shop around to find lower fees or even choose to manage the Canadian index yourself using a self-directed investment broker which may have some optional charges. 

Final Thoughts

Investing in Canada can be scary, especially since it’s so risky. This is why there’s the option of an investment manager. However, an investment manager isn’t the only option. Many brokerages also offer self-directed investing, which allows you to choose your own investments and investment amounts without the help or cost of an advisor. 

In terms of index funds, there are so many different options available to choose from. Each one has its own positives and negatives, so the details of the fund, as well as your financial goals, will determine which investments are your best options. It also makes a difference in which financial tool you’re going to invest the security in. No matter what you decide, though, you can always move your investments around or get a second opinion.