The Best ETFs In Canada (Ranked & Reviewed)

July 23, 2021
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What are the best ETFs to buy?

Exchange-traded funds (ETFs) allow investors to buy a collection of stocks or other assets in just one fund with (usually) low expenses, and they trade on an exchange like stocks. ETFs have become tremendously popular in the last decade and now hold trillions of dollars in assets. With literally thousands of ETFs to choose from, where does an investor start? And with the stock market rising furiously after an initial plunge as part of the coronavirus crisis, what are the best ETFs to buy? Below are some of the top ETFs by category, including some highly specialized funds.

Best ETFs for 2021

  • Vanguard S&P 500 ETF (VOO)
  • Vanguard FTSE Developed Markets ETF (VEA)
  • Vanguard Information Technology ETF (VGT)
  • Vanguard Dividend Appreciation ETF (VIG)
  • iShares MBS ETF (MBB)
  • Vanguard Short-Term Bond ETF (BSV)
  • Vanguard Total Bond Market ETF (BND)
  • iShares National Muni Bond ETF (MUB)
  • iShares Core Aggressive Allocation ETF (AOA)
  • SPDR Gold Shares (GLD)
  • Invesco DB US Dollar Index Bullish Fund (UUP)
  • Vanguard Real Estate ETF (VNQ)
  • iPath Series B S&P 500 VIX Short-Term Futures (VXX)
  • ProShares UltraPro QQQ (TQQQ)
  • ProShares Short S&P 500 ETF (SH)

Top Equity ETFs

Equity ETFs provide exposure to a portfolio of publicly traded stocks, and may be divided into several categories by where the stock is listed, the size of the company, whether it pays a dividend or what sector it’s in. So investors can find the kind of stock funds they want exposure to and buy only stocks that meet certain criteria.

Stock ETFs tend to be more volatile than other kinds of investments such as CDs or bonds, but they’re suitable for long-term investors looking to build wealth. Some of the most popular equity ETF sectors and their returns (as of July 26) include:

Top U.S. market-cap index ETFs

Vanguard S&P 500 ETF(VOO)

This kind of ETF gives investors broad exposure to publicly traded companies listed on American exchanges using a passive investment approach that tracks a major index such as the S&P 500 or Nasdaq 100.

Vanguard S&P 500 ETF Performance:

  • 2020 performance: 18.3 percent
  • Historical performance (annual over 5 years): 17.6 percent
  • Expense ratio: 0.03 percent

Some of the most widely held ETFs in this group also include SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV) and Invesco QQQ Trust (QQQ).

Top International ETFs

Vanguard FTSE Developed Markets ETF (VEA)

This kind of ETF can provide targeted exposure to international publicly traded companies broadly or by more specific geographic area, such as Asia, Europe or emerging markets. Investing in foreign companies introduces concerns such as currency risk and governance risks, since foreign countries may not offer the same protections for investors as the U.S. does.

Vanguard FTSE Developed Markets ETF Performance:

  • 2020 performance: 9.7 percent
  • Historical performance (annual over 5 years): 10.9 percent
  • Expense ratio: 0.05 percent

Some of the most widely held ETFs also include iShares Core MSCI EAFE ETF (IEFA), Vanguard FTSE Emerging Markets ETF (VWO) and Vanguard Total International Stock ETF (VXUS).

Top Sector ETFs

Vanguard Information Technology ETF (VGT)

This kind of ETF gives investors a way to buy stock in specific industries, such as consumer staples, energy, financials, healthcare, technology and more. These ETFs are typically passive, meaning they track a specific preset index of stocks and simply mechanically follow the index.

Vanguard Information Technology ETF Performance:

  • 2020 performance: 46.0 percent
  • Historical performance (annual over 5 years): 31.5 percent
  • Expense ratio: 0.10 percent

Some of the most widely held ETFs also include Financial Select Sector SPDR Fund (XLF), Energy Select Sector SPDR Fund (XLE) and Industrial Select Sector SPDR Fund (XLI).

Dividend ETFs

Vanguard Dividend Appreciation ETF (VIG)

This kind of ETF gives investors a way to buy only stocks that pay a dividend. A dividend ETF is usually passively managed, meaning it mechanically tracks an index of dividend-paying firms. This kind of ETF is usually more stable than a total market ETF, and it may be attractive to those looking for investments that produce income, such as retirees.

The best dividend ETFs tends to offer higher returns and low cost.

Vanguard Dividend Appreciation ETF Performance:

  • 2020 performance: 15.4 percent
  • Historical performance (annual over 5 years): 15.4 percent
  • Expense ratio: 0.06 percent

Some of the most widely held ETFs here also include) Vanguard High Dividend Yield Index ETF (VYM) and Schwab U.S. Dividend Equity ETF (SCHD).

Top bond ETFs

A bond ETF provides exposure to a portfolio of bonds, which are often divided into sub-sectors depending on bond type, their issuer, maturity and other factors, allowing investors to buy exactly the kind of bonds they want. Bonds pay out interest on a schedule, and the ETF passes this income on to holders.

Bond ETFs can be an attractive holding for those needing the safety of regular income, such as retirees. Some of the most popular bond ETF sectors and their returns (as of July 26) include:

Long-term bond ETFs

iShares MBS ETF (MBB)

This kind of bond ETF gives exposure to bonds with a long maturity, perhaps as long as 30 years out. Long-term bond ETFs are most exposed to changes in interest rates, so if rates move higher or lower, these ETFs will move inversely to the direction of rates. While these ETFs may pay a higher yield than shorter-term bond ETFs, many don’t see the reward as worthy of the risk.

iShares MBS ETF Performance:

  • 2020 performance: 4.1 percent
  • Historical performance (annual over 5 years): 2.2 percent
  • Expense ratio: 0.06 percent

Some of the most widely held ETFs also include iShares 20+ Year Treasury Bond ETF (TLT) and Vanguard Mortgage-Backed Securities ETF (VMBS).

Short-term bond ETFs

Vanguard Short-Term Bond ETF (BSV)

This kind of bond ETF gives exposure to bonds with a short maturity, typically no more than a few years. These bond ETFs won’t move much in response to changes to interest rates, meaning they’re relatively low risk. These ETFs can be a more attractive option than owning the bonds directly because the fund is highly liquid and more diversified than any individual bond.

Vanguard Short-Term Bond ETF Performance:

  • 2020 performance: 4.7 percent
  • Historical performance (annual over 5 years): 2.1 percent
  • Expense ratio: 0.05 percent

Some of the most widely held ETFs in this category also include iShares 1-3 Year Treasury Bond ETF (SHY) and Vanguard Short-Term Treasury ETF (VGSH).

Total bond market ETFs

Vanguard Total Bond Market ETF (BND)

This kind of bond ETF gives investors exposure to a wide selection of bonds, diversified by type, issuer, maturity and region. A total bond market ETF provides a way to gain broad bond exposure without going too heavy in one direction, making it a way to diversify a stock-heavy portfolio.

Vanguard Total Bond Market ETF Performance:

  • 2020 performance: 7.7 percent
  • Historical performance (annual over 5 years): 3.0 percent
  • Expense ratio: 0.035 percent

Some of the most widely held ETFs also include iShares Core U.S. Aggregate Bond ETF (AGG) and Vanguard Total International Bond ETF (BNDX).

Municipal bond ETFs

iShares National Muni Bond ETF (MUB)

This kind of bond ETF gives exposure to bonds issued by states and cities, and interest on these bonds is typically tax-free, though it’s lower than that paid by other issuers. Muni bonds have traditionally been one of the safest areas of the bond market, though if you own out-of-state munis in a fund, you will lose the tax benefits in your home state, though not at the federal level. Given the tax advantages, it is advantageous to consider a municipal bond ETF that invests in your state of residence.

iShares National Muni Bond ETF Performance:

  • 2020 performance: 5.1 percent
  • Historical performance (annual over 5 years): 2.9 percent
  • Expense ratio: 0.07 percent

Some of the most widely held ETFs also include Vanguard Tax-Exempt Bond ETF (VTEB) and iShares Short-Term National Muni Bond ETF (SUB).

Top balanced ETFs

iShares Core Aggressive Allocation ETF (AOA)

A balanced ETF owns both stock and bonds, and it targets a certain exposure to stock, which is often reflected in its name. These funds allow investors to have the long-term returns of stocks while reducing some of the risk with bonds, which tend to be more stable. A balanced ETF may be more suitable for long-term investors  who may be a bit more conservative but need growth in their portfolio.

iShares Core Aggressive Allocation ETF Performance:

  • 2020 performance: 12.8 percent
  • Historical performance (annual over 5 years): 12.1 percent
  • Expense ratio: 0.25 percent

Some of the most widely held balanced ETFs also include iShares Core Growth Allocation ETF (AOR) and iShares Core Moderate Allocation ETF (AOM).

Top commodity ETFs

SPDR Gold Shares (GLD)

A commodity ETF gives investors a way to own specific commodities, including agricultural goods, oil, precious metals and others without having to transact in the futures markets. The ETF may own the commodity directly or via futures contracts. Commodities tend to be quite volatile, so they may not be well-suited for all investors. However, these ETFs may allow more advanced investors to diversify their holdings, hedge out exposure to a given commodity in their other investments or make a directional bet on the price of a given commodity. The best-performing gold ETFs tend to offer highly effective portfolio diversification with added defensive stores of value.

SPDR Gold Shares ETF Performance:

  • 2020 performance: 24.8 percent
  • Historical performance (annual over 5 years): 5.5 percent
  • Expense ratio: 0.40 percent

Some of the most widely held commodities ETFs also include iShares Silver Trust (SLV), United States Oil Fund LP (USO) and Invesco DB Agriculture Fund (DBA).

Top currency ETFs

Invesco DB US Dollar Index Bullish Fund (UUP)

A currency ETF gives investors exposure to a specific currency by simply buying an ETF rather than accessing the foreign exchange (forex) markets. Investors can gain access to some of the world’s most widely traded currencies, including the U.S. Dollar, the Euro, the British Pound, the Swiss Franc, the Japanese Yen and more. These ETFs are more suitable for advanced investors who may be seeking a way to hedge out exposure to a specific currency in their other investments or to simply make a directional bet on the value of a currency.

Invesco DB US Dollar Index Bullish Fund Performance:

  • 2020 performance: -6.6 percent
  • Historical performance (annual over 5 years): 0.6 percent
  • Expense ratio: 0.76 percent

Some of the most widely held currency ETFs also include Invesco CurrencyShares Euro Trust (FXE) and Invesco CurrencyShares Swiss Franc Trust (FXF).

Top real estate ETFs (REIT ETFs)

Vanguard Real Estate ETF (VNQ)

Real estate ETFs usually focus on holding stocks classified as REITs, or real estate investment trusts. REITs are a convenient way to own an interest in companies that own and manage real estate, and REITs operate in many sectors of the market, including residential, commercial, industrial, lodging, cell towers, medical buildings and more. REITs typically pay out substantial dividends, which are then passed on to the holders of the ETF. These payouts make REITs and REIT ETFs particularly popular among those who need income, especially retirees. The best ETF REITs maximize dividend yields, as dividends are the main reason for investing in them.

Vanguard Real Estate ETF Performance:

  • 2020 performance: -4.6 percent
  • Historical performance (annual over 5 years): 7.1 percent
  • Expense ratio: 0.12 percent

Some of the most widely held real estate ETFs also include iShare U.S. Real Estate ETF (IYR) and Schwab U.S. REIT ETF (SCHH).

Top volatility ETFs

iPath Series B S&P 500 VIX Short-Term Futures (VXX)

ETFs even allow investors to bet on the volatility of the stock market through what are called volatility ETFs. Volatility is measured by the CBOE Volatility Index, commonly known as the VIX. Volatility usually rises when the market is falling and investors become uneasy, so a volatility ETF can be a way to hedge your investment in the market, helping to protect it. Because of how they’re structured, they’re best-suited for traders looking for short-term moves in the market, not long-term investors looking to profit from a rise in volatility.

iPath Series B S&P 500 VIX Short-Term Futures Performance:

  • 2020 performance: 11.0 percent
  • Historical performance (annual over 3 years): -41.0 percent
  • Expense ratio: 0.89 percent

Some of the most widely held volatility ETFs also include the ProShares VIX Mid-Term Futures ETF (VIXM) and the ProShares Short VIX Short-Term Futures ETF (SVXY).

Top leveraged ETFs

ProShares UltraPro QQQ (TQQQ)

A leveraged ETF goes up in value more rapidly than the index it’s tracking, and a leveraged ETF may target a gain that’s two or even three times higher than the daily return on its index. For example, a triple leveraged ETF based on the S&P 500 should rise 3 percent on a day the index rises 1 percent. A double leveraged ETF would target a double return. Because of how leveraged ETFs are structured, they’re best-suited for traders looking for short-term returns on the target index over a few days, rather than long-term investors.

ProShares UltraPro QQQ ETF Performance:

  • 2020 performance: 110 percent
  • Historical performance (annual over 5 years): 72.5 percent
  • Expense ratio: 0.95 percent

Some of the most widely held leveraged ETFs also include ProShares Ultra QQQ (QLD), Direxion Daily Semiconductor Bull 3x Shares (SOXL) and ProShares Ultra S&P 500 (SSO).

Top inverse ETFs

ProShares Short S&P 500 ETF (SH)

Inverse ETFs go up in value when the market declines, and they allow investors to buy one fund that inversely tracks a specific index such as the S&P 500 or Nasdaq 100. These ETFs may target the exact inverse performance of the index, or they may try to offer two or three times the performance, like a leveraged ETF. For example, if the S&P 500 fell 2 percent in a day, a triple inverse should rise about 6 percent that day. Because of how they’re structured, inverse ETFs are best-suited for traders looking to capitalize on short-term declines in an index.

ProShares Short S&P 500 ETF Performance:

  • 2020 performance: -25.1 percent
  • Historical performance (annual over 5 years): -16.8 percent
  • Expense ratio: 0.90 percent

Some of the most widely held inverse ETFs also include ProShares UltraPro Short QQQ (SQQQ) and ProShares UltraShort S&P 500 (SDS).

How ETFs work

An exchange-traded fund is an investment fund that trades on a stock exchange. ETFs may hold positions in many different assets, including stocks, bonds and sometimes commodities.

ETFs most often track a specific index such as the Standard & Poor’s 500 or the Nasdaq 100, meaning it holds positions in the index companies at their same relative weights in the index.

So by buying one share in the ETF, an investor effectively purchases a (tiny) share in all the assets held in the fund.

ETFs are often themed around a specific collection of stocks. An S&P 500 index fund is one of the most popular themes, but themes also include value or growth stocks, dividend-paying stocks, country-based investments, disruptive technologies, specific industries like information technology or healthcare, various bond maturities (short, medium and long) and many others.

The ETF’s return depends on the investments that it owns. If the investments do well, then the ETF’s price will rise. If the investments do poorly, then the ETF’s price will fall.

For running an ETF, the fund company charges a fee called an expense ratio. The expense ratio is the annual percentage of your total investment in the fund. For example, an ETF might charge a fee of 0.12 percent. That means on an annual basis an investor would pay $12 for every $10,000 invested in the fund. Low-cost ETFs are very popular with investors.

How to invest in ETFs

It’s relatively easy to invest in ETFs, and this fact makes them popular with investors. You can buy and sell them on an exchange like a regular stock. Here’s how to invest in an ETF:

1. Find which ETF you want to buy

You have a choice of more than 2,000 ETFs trading in the U.S., so you’ll have to sift through the funds to determine which one you want to buy.

One good option is to buy an index fund based on the S&P 500, since it includes the top publicly traded stocks listed in the U.S. (Plus, it’s the recommendation of super investor Warren Buffett.) But other broad-based index funds can also be a good choice, reducing (but not eliminating) your investment risk. Many companies offer similar index funds, so compare the expense ratio on each to see which one offers the best deal.

Once you’ve found a fund to invest in, note its ticker symbol, a three- or four-letter code.

2. Figure out how much you can invest

Now determine how much you’re able to invest in the ETF. You may have a specific amount available to you now that you want to put into the market. But what you can invest may also depend on the price of the ETF.

An ETF may trade at a price of $10 or $15 or maybe even a few hundred dollars per share. Generally, you’ll need to buy at least one whole share when placing an order. However, if you use a broker that allows fractional shares, you can put any amount of money to work, regardless of the ETF price. In many cases these brokers do not charge a trading commission either.

Fortunes are built over years, so it’s important to continue to add money to the market over time. So you should also determine how much you can add to the market regularly over time.

3. Place the order with your broker

Now it’s time to place the order with your broker. If you have money in the account already, you can place the trade using the ETF’s ticker symbol. If not, deposit money into the account and then place the trade when the money clears.

If you don’t have a brokerage account, it usually takes just a few minutes to set one up. A handful of brokers such as Robinhood and Webull allow you to instantly fund your account. So in some cases you could be started and fully trading in minutes.

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