How to invest in S&P/TSX Composite index funds in 2024

By:

James Knight

James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.

Updated: May 12, 2023

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It only takes a few minutes to invest in the S&P/TSX Composite index. One of the simplest and most popular ways to invest is to buy shares in a Vanguard S&P/TSX Composite ETF through an online trading platform.

Where can I invest in the S&P/TSX Composite index?

According to our expert research, eToro is the best ETF broker to invest in S&P/TSX Composite index funds. 

Both S&P/TSX Composite ETFs and S&P/TSX Composite CFDs are available to invest in through eToro .

Here are three more places to buy the S&P/TSX Composite, ranked according to their cost, security, and features.

Most Popular

1

Min. Deposit

$ 10

Best offer

User Score

10

Up to $240 bonus!

Deposit with ACA, Wire, Pay with my bank

Invest for dividends and get payout on stocks on Ex-Dividend day

Start Trading more info

Payment Methods:

Bank Transfer, Credit Card, Debit Card, PayPal, Wire Transfer

Full Regulations:

CySEC, FCA

77% of retail CFD accounts lose money.

2

Min. Deposit

$ 100

Best offer

User Score

9.8

Trade +2000 CFDs on Shares, Options, Commodities & more

Unlimited risk-free Demo Account

0 commissions & attractive spreads with up to 1:5 leverage

Start Trading more info

Payment Methods:

American Express, Apple Pay, Bank Transfer, Credit Card, Debit Card, Discover, Google Pay, Mastercard, PayPal, SEPA, Trustly, Visa, , skrill

Full Regulations:

ASIC, FCA, FSA, MAS, cysec-250-14-regulator, isa-regulator

Buy or sell stock CFDs with Plus500. 82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

3

Min. Deposit

-

Best offer

User Score

9.7

Diverse Stock Selection: Interactive Brokers offers a wide range of domestic and international stocks, providing investors with a diverse array of options for their portfolios.

Advanced Trading Tools: Investors benefit from real-time market data and advanced tools, empowering them to make informed decisions and execute trades with precision in the dynamic stock market.

Easy Portfolio Management: Interactive Brokers makes it simple to handle your investments by allowing you to easily switch between stocks and other assets on one platform, streamlining the way you manage your overall portfolio.

Start Trading more info

Payment Methods:

ACH, Bank Wire, Check

Full Regulations:

CFTC, FCA, FINRA, IIROC, NFA, NYSE, SIPC

How do I invest in the TSX index?

The easiest way is to sign up to a stock broker, open an investment account, and buy shares in an S&P/TSX Composite ETF or CFD. This guide explains how to do it:

Step 1. Sign up to eToro

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We recommend using eToro to invest in S&P/TSX Composite. Sign up for a brokerage account and deposit some money. You may need to supply a form of photo ID to verify the account.

Most Popular

1

Min. Deposit

$ 10

Best offer

User Score

10

Up to $240 bonus!

Deposit with ACA, Wire, Pay with my bank

Invest for dividends and get payout on stocks on Ex-Dividend day

Start Trading more info

Payment Methods:

Bank Transfer, Credit Card, Debit Card, PayPal, Wire Transfer

Full Regulations:

CySEC, FCA

77% of retail CFD accounts lose money.

Step 2. Decide how to buy S&P/TSX Composite

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This boils down to choosing between an S&P/TSX Composite ETF or CFD. ETFs are generally better suited to investors who want to passively track the S&P/TSX Composite’s performance. CFDs offer a greater range of trading options: you can use leverage, short the index, or buy and sell it outside of trading hours.

Step 3. Invest in the S&P/TSX Composite

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Sign into your trading account and search for the S&P/TSX Composite. Hit the ‘buy’ button and enter the details of your purchase, such as how much you want to spend. Hit ‘buy’ again to execute the trade.

Step 4. Monitor your investment

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When you buy a CFD, the trade goes through more or less instantly, and you’ll be able to see your new open position in your trading account. ETF purchases can take longer, and if you buy outside of traditional trading hours it won’t go through until the next morning.

Your trading account will show the price change in the S&P/TSX Composite since you bought it, so you can see your profit/loss at a glance. Use that information, along with your own research, to decide when to sell the S&P/TSX Composite and close your position, ideally at a profit!

The different ways to invest in the TSX

As we mentioned above, there are numerous ways to put your money into the S&P/TSX Composite. ETFs and CFDs are the simplest options for beginners, but there are alternatives. Here’s a brief overview of each option and who it’s best suited for.

S&P/TSX Composite ETFs

An ETF (exchange-traded fund) is an investment fund traded on a stock exchange, much like a stock. Exchange traded funds can hold different assets, such as individual stocks, bonds, or commodities, or serve as a proxy for a stock market index.

An S&P/TSX Composite ETF is one way of investing in the S&P/TSX Composite. It’s simply an investment fund that mirrors the performance of the S&P/TSX Composite. When you buy shares in the fund, the value of your investment will rise or fall with the S&P/TSX Composite itself. 

ETFs are ideal for new investors because they have a very low minimum investment. You can start with a few pounds and get exposure to some of the world’s largest companies. They’re also practical if you plan on trading the S&P/TSX Composite index, because you can buy or sell shares in the fund throughout the day.

Examples of popular TSX ETFs

• iShares S&P/TSX 60 Index ETF (XIU)
• BMO S&P/TSX Capped Composite Index ETF (ZCN)
• Horizons S&P/TSX 60 Index ETF (HXT.U)

S&P/TSX Composite index funds

An index or mutual fund is an investment fund that aims to track the performance of a stock market index, such as the S&P/TSX Composite. It’s very similar to an ETF, in that there are low management fees and you can buy shares through your online broker.

However, there are a couple of differences. S&P/TSX Composite index funds are only priced at the end of each trading day, so you can buy or sell shares in the fund once per day. There may also be a higher barrier to entry, through a much larger minimum investment when you invest in S&P/TSX Composite index funds.

That means an S&P/TSX Composite mutual fund is better suited for long term investors with a higher initial budget, where the infrequent trading and barriers to entry are far less of an issue.

S&P/TSX Composite CFDs

CFDs (contracts for difference) are a way to speculate on S&P/TSX Composite price changes with more flexibility than if you use an ETF or index fund. A CFD is a ‘derivative’, which means it gets its value from the underlying asset – in this case the S&P/TSX Composite – but it’s separate from it.

As a result, CFDs can be leveraged, where you borrow money to multiply the size of the trade, or they can be used to go ‘short’, where you place a trade on the index to fall in value. You can also buy and sell them outside of regular trading hours.

All of this means S&P/TSX Composite CFDs offer the potential to outperform a fund that passively tracks the S&P/TSX Composite’s performance. Of course, you can also underperform it as well. Tools like leverage and shorting introduce a lot more risk, and are best left to experienced traders.

S&P/TSX Composite futures

Futures contracts are agreements to buy or sell the TSX at an agreed price on a set date in the future. S&P/TSX Composite futures are a means to predict how you think the index is going to perform over a set time frame, such as the next three or six months.

Most futures contracts involve leverage, so you only put up a small part of the total trade value (the margin) when you buy one. That makes futures more risky, and they require a bit more financial expertise to understand as well.

Some traders use futures as a hedge against the performance of stocks they own. For instance, if you own stocks that are part of the S&P/TSX Composite then you might want to short the S&P/TSX Composite so that you still make some money if the price falls.

S&P/TSX Composite stocks

Another way to invest in the S&P/TSX Composite is to buy shares in the individual stocks that the index tracks. It isn’t practical to buy every share in the index, but you can invest directly into a few of the most heavily weighted stocks in the S&P/TSX Composite in order to get broad exposure to its performance.

The most heavily weighted stocks in the S&P/TSX Composite tend to be the largest companies by market capitalisation. If you invest directly in those largest stocks, you gain exposure to the index without taking on the risk of all the underlying companies.

One reason to do this is that these larger companies with the highest market cap dominate the index anyway, so that it can give you the impression of a diversified portfolio while actually being reliant on the performance of those particular stocks.

For the S&P/TSX Composite index, the largest stocks you might choose to invest in are:

The flip side of investing directly like this is that you lose the diversification and stability that comes with buying into an entire index. It requires much more hands-on management to do your own stock picking, so it’s best suited to more experienced investors.

How much does it cost to invest in the S&P/TSX Composite index?

From $0 to $5, depending on how you invest. For each option, you must consider the cost of buying the actual asset, whether that’s an ETF, index fund, CFD, or share, plus the fees associated with it.

*A fee comparison of 3 leading brokers for example purposes

ETFs and CFDs are generally the cheapest option overall, as they have low fees and a low minimum investment. Index funds and mutual funds have low fees but may have a high minimum investment. Buying individual stocks is the most expensive option in absolute terms, because the share price of a single large company is often more than $100.

All options are likely to include a trading fee, which you pay each time you make a transaction. Some trading platforms offer zero-fee trading, with others it may be a few dollars. 

Then ETFs and index funds each have their own expense ratio. Expense ratios refer to an annual management fee, charged as a percentage of your total investment. Expense ratios are usually no more than 0.05%, so if you invest $1,000, you would pay $5 per year in management fees.

Should I invest in the S&P/TSX Composite index? 

Yes, S&P/TSX Composite investing is a great choice if you’re looking for a safer investment with more price stability compared to picking individual stocks. It gives you an instantly diverse portfolio with exposure to a broad area of the stock market.

The flip side is that you have less control over which companies you invest in. An index committee decides how the index works, and you can’t pick and choose the underlying companies you like the most. The S&P/TSX Composite is better suited to hands-off investors, compared to those who have the skills, experience, and desire to pick their own stocks.

What are the advantages of investing in the S&P/TSX Composite index?

An index provides instant stock market diversification, where you spread your risk across a large number of underlying companies, rather than one or two. Here are some more reasons why you might want to invest in the S&P/TSX Composite index:

• Easy for a beginner to invest in. You can invest in a TSX ETF very easily and it provides a relatively safe and stable investment for beginners. Indices make for good first time investments, because diversity in the index protects it from really major falls in value.
• Get instant access to large Canadian companies. The TSX includes many of the largest companies in Canada. By investing in the index, you can create a portfolio that includes all those businesses, without having to buy each stock individually. 
• Create a diversified portfolio of stocks at a low cost. It’s much cheaper to invest in shares of an ETF compared to buying stocks in lots of different companies. You can usually start with just a few pounds, which makes it a great option for beginners or those who want to invest with little money.
• Canada has close ties to the US economy. Lots of Canadian companies operate in the US, or are closely linked to the performance of the US economy. It can be a slightly cheaper way to invest in North America.
• The TSX index is a great way to invest in the financial sector. Many of the largest companies on the TSX are banks or financial institutions. You can use the TSX as a way to invest in this sector as a whole, without having to choose one particular company.

What are the disadvantages of investing in the S&P/TSX Composite index?

The main risk of investing in the S&P/TSX Composite is that all the underlying companies are related in some way, so a broader economic downturn that affected the entire country would likely affect many stocks in the index at the same time. Here are some more risks of S&P/TSX Composite investing.

• Any issue that affects the Canadian economy is likely to impact the whole index. While an index provides diversity across different sectors, it doesn’t provide geographical diversity. A hit to the Canadian economy would have an outsized impact on the value of your investment.
• The TSX is heavily weighted to the financial and energy sectors. The two industries combined account for about half the value of the index, which means that a crisis that focused on banks or an energy issue could dramatically impact the value of the index.
• Your gains are capped by the index’s performance. There’s no way to pick individual stocks that may significantly outperform the market. You have a higher floor, but a lower ceiling to your investments as well.

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