7 best Canada index funds to buy in 2025

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Canadian index funds provide investors with an opportunity to gain exposure to a diversified portfolio of Canadian stocks without the need to individually select and manage each stock. Canadian index funds are designed to track the performance of well-known indexes such as the S&P/TSX Composite Index S&P/ andTSX 60 Index in Toronto.

Below we’ve picked out some of the best index funds that you can invest in containing companies on the Toronto Stock Exchange.

What are the 7 top Canada index funds to buy?

1. iShares S&P/TSX 60 Index ETF (ZIU)
2. BMO S&P/TSX Capped Composite Index ETF (ZCN)
3. Vanguard FTSE Canada All Cap Index ETF (VCN)
4. RBC Canadian Index Fund (RBF556)
5. TD Canadian Index Fund (TDB900)
6. Horizons S&P/TSX 60 Index ETF (HXT)
7. CI First Asset Canadian REIT ETF (RIT)

The best Canada index funds, compared

1. iShares S&P/TSX 60 Index ETF (XIU)

Key details

• Date created: November 13, 1999
• Expense ratio: 0.18%
• 5-year return: 44.48%
• Minimum investment amount: No minimum
• Dividend yield: 2.89%
• Risk level: Medium

The iShares S&P/TSX 60 Index ETF seeks to provide investors with exposure to the performance of the S&P/TSX 60 Index, which represents 60 of the largest and most liquid stocks listed on the Toronto Stock Exchange. 

This is a passive index fund, so it aims to replicate the index’s returns by holding a diversified portfolio of stocks in the same proportions as the index. The fund provides broad market coverage across various sectors and is often used as a core holding for Canadian equity exposure. 

With a low expense ratio of 0.18% and a medium risk level, XIU is suitable for investors seeking a cost-effective way to gain exposure to Canada’s largest publicly traded companies.

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

Key details

• Date created: September 28, 2009
• Expense ratio: 0.06%
• 5-year return: 42.01%
• Minimum investment amount: No minimum
• Dividend yield: 2.80%
• Risk level: Medium

The BMO S&P/TSX Capped Composite Index ETF aims to track the performance of the S&P/TSX Capped Composite Index, which includes a broad range of Canadian companies across multiple sectors.

With over 200 stocks in its portfolio, this passive index fund provides diversified exposure to the Canadian equity market. It is designed to replicate the index’s returns by investing in constituent stocks in proportion to their market capitalization. 

ZCN has a low expense ratio of 0.06% and a medium risk level. The fund is ideal for investors seeking broad-based exposure to Canadian equities with a focus on large, mid, and small-cap companies.

3. Vanguard FTSE Canada All Cap Index ETF (VCN)

Key details

• Date created: November 4, 2013
• Expense ratio: 0.06%
• 5-year return: 40.61%
• Minimum investment amount: No minimum
• Dividend yield: 2.62%
• Risk level: Medium

The Vanguard FTSE Canada All Cap Index ETF tracks the performance of the FTSE Canada All Cap Index, which encompasses companies of all sizes that are listed on the Toronto Stock Exchange. 

With over 450 holdings, this passive index fund offers broad exposure to the Canadian equity market, including large, mid, and small-cap stocks. VCN aims to replicate the index’s returns by investing in a diverse portfolio of stocks, weighted according to their market cap.

VCN has a low expense ratio of 0.06% and a medium risk level. It’s ideal for investors seeking a comprehensive representation of the Canadian stock market.

4. RBC Canadian Index Fund (RBF556)

Key details

• Date created: November 26, 2001
• Expense ratio: 0.70%
• 5-year return: 32.45%
• Minimum investment amount: $500 CAD
• Dividend yield: 2.53%
• Risk level: Medium

The RBC Canadian Index Fund aims to closely match the performance of the FTSE Canada Index, which represents the overall state of the Canadian equity market. This mutual fund provides exposure to a diversified portfolio of Canadian stocks of all sizes, including large, mid, and small-cap companies. 

The fund is designed to passively replicate the index’s returns. The expense ratio for RBF556 is 0.70%, higher than what you can expect from an ETF, while the minimum investment amount is CAD 500, so it’s designed more for investors with a larger budget to play with, rather than the casual everyday investor.

5. TD Canadian Index Fund (TDB900)

Key details

• Date created: July 11, 1988
• Expense ratio: 0.30%
• 5-year return: 41.93%
• Minimum investment amount: $100 CAD
• Dividend yield: 2.03%
• Risk level: Medium

The TD Canadian Index Fund seeks to provide long-term capital growth by tracking the performance of the S&P/TSX Composite Index. This mutual fund holds a diversified portfolio of Canadian stocks, offering exposure to various sectors and market capitalisations. 

It is a passive index fund that aims to replicate the index’s returns. The expense ratio for TDB900 is 0.30%, and the minimum investment amount is CAD 100, making it accessible to individual investors looking for broad exposure to the Canadian equity market.

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

Key details

• Date created: March 28, 2011
• Expense ratio: 0.03%
• 5-year return: 33.75%
• Minimum investment amount: No minimum
• Dividend yield: N/A
• Risk level: Medium

The Horizons S&P/TSX 60 Index ETF seeks to replicate the performance of the S&P/TSX 60 Index, which represents the 60 largest and most liquid Canadian companies. 

This ETF uses a total return swap (TRS) structure, which allows it to charge a much lower expense ratio than the competition. This means it doesn’t directly hold the underlying stocks, as a fund usually would. Instead, it pays a fee to a third party who does the buying and selling, then simply pays the returns to the ETF.

This can make the process more efficient as well as less expensive, although it does also introduce counterparty risk. That is, the ETF is reliant on the third party’s ability to fulfil its obligations.

7. CI First Asset Canadian REIT ETF (RIT)

Key details

• Date created: April 7, 2004
• Expense ratio: 0.75%
• 5-year return: 21%
• Minimum investment amount: No minimum
• Dividend yield:  3.67%
• Risk level: Medium

The CI First Asset Canadian REIT ETF focuses on Canadian real estate investment trusts (REITs) and aims to track the performance of the Solactive Canada REIT Index. 

This ETF provides exposure to a diversified portfolio of Canadian REITs, which own and manage a range of income-generating properties across Canada.

It allows investors to generate both income and capital appreciation based on the performance of  the Canadian real estate market. The expense ratio is a bit higher than other funds, at 0.75%, but it’s accessible to all investors and an alternative way to take advantage of the Canadian economy

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Best index funds in Canada

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What is a Canada index fund?

A Canadian index fund is a type of mutual fund or exchange-traded fund (ETF) that aims to replicate the performance of a specific stock market index in Canada, such as the S&P/TSX Composite Index or the S&P/TSX 60 Index. 

These funds hold a diversified portfolio of securities that closely match the composition and weighting of the chosen index. The goal is to provide investors with broad exposure to the Canadian stock market and achieve returns similar to the overall performance of the index in question.

Two of the main industries represented on the Toronto Stock Exchange are financial services and energy. Major Canadian banks such as Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Nova Scotia are prominent constituents of the Canadian stock market, while Canadian energy giants like Suncor Energy, Enbridge, and Canadian Natural Resources are key players in the energy sector.

How much do Canada index funds cost?

For most passive funds the cost is less than 0.5% per year. Each index fund charges an annual maintenance or management fee, which is referred to as the fund’s ‘expense ratio’ and given as a percentage of your investment. 

For active funds, you may have to pay 0.75% or more. That type of mutual fund is run by active managers, so you’re paying for the time and expertise of the fund managers who decide which stocks to invest in.

In addition, you may have to pay a trading fee when you buy or sell a stake in a mutual fund. Some trading platforms charge a fee each time you make an investment. This varies depending on the brokerage you use; most services don’t charge any commission, others charge a couple of pounds each time.

How to choose the right Canada funds for you

Our experts ranked the best index funds based on a range of factors, from the annual running cost to the risk profile of each fund. You should use the same features to pick the mutual funds that suit your expectations and investment goals.

• Annual management fee. Each mutual fund charges an annual fee as a percentage of your investment. Passive funds tend to be cheaper, while active funds are more expensive. When you invest in Canada index funds, you’re normally looking to buy and hold for a few years. Small fee differences can add up to a big variation in returns over the long term, so you should favour mutual funds with the lowest maintenance fees.
• Fund size. The more money in an index fund, the more stable its performance is likely to be. Funds with low assets under management (AUM) can rely too heavily on the performance of one or two stocks and lack the diversification investors want. 
• Index fund weighting. Each index fund tracks a stock market index, but there can be big differences in how the fund tracks its benchmark index. Pay close attention to the weighting in particular. An index fund that scales its weighting so that a larger percentage, say 10%, goes into one or two stocks is going to be far more affected by the performance of those companies than one which invests 5% in all stocks equally.
• Risk profile. Each index fund factsheet has to report its risk profile on a scale between 1 and 7, with 7 being the riskiest. This synthetic risk and reward measure (SRRI) is an industry standard that you can use to compare risk across asset management companies. Less risk is better, but many people choose to have a balance of different risk profiles in their portfolio, as the riskier ones can generate higher returns (as well as higher losses).
• Hedging and currency risk. Every index fund is denominated in a particular currency, such as GBP or USD. That means that fluctuations in the strength of that currency can act as a drag or boost on performance. If your fund is in GBP and the pound is weak relative to USD, that means the fund will underperform the same fund denominated in USD. Some index funds hedge their currency risk to avoid this, others don’t.
• Share class. Some funds generate income from dividends. For these types of funds there are two share classes: income and accumulation. The former means that any income is paid out automatically, while accumulation means the money is automatically reinvested. Accumulation is more convenient, while income means you might build up spare cash in your brokerage account. An index fund can be one or the other, while some offer a choice between both.

Are Canada index funds a good investment?

Canadian index funds are a good investment option for many investors, bt it ultimately depends on your individual circumstances, investing goals, and risk tolerance.

Canadian mutual funds typically provide broad market exposure to a diversified portfolio of Canadian stocks, spreading your risk across different sectors and companies. Many funds on offer are passive, offering low expense ratios and an inexpensive way to invest, which is particularly important if you’re focused on long term returns and looking to minimise costs.

Consider your investment goals, whether they are long-term growth, income generation, or capital preservation. Canadian index funds can be suitable for long-term investors seeking broad exposure to the Canadian equity market. If you have specific goals or a shorter investment timeframe, you may need to consider other investment options or diversify your portfolio further.

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