Today we’ll look at the core Canadian equity ETFs that you might use when you build a global ETF portfolio. The Canadian stock market is dominated by financials and energy. It is not a well-diversified index. It might be a case of pick your poison, a level of ‘undiversification’. That said, the weakness of the Canadian stock market is quickly picked up by U.S. and International market ETFs. Also, Canadian stocks can add a layer of inflation protection that is missing from the U.S. market. Once again, we’re coming back to the beauty of a global ETF portfolio, on the Sunday Reads.
Off the top, what do we mean by buying the stock market of a country or region? Have a read of … What is index investing?
Building your global ETF portfolio
For an overview of ETF portfolio building, check out the ETF model portfolio page. We’re going to build around the core assets …
You can certainly add more assets such as gold, REITs (real estate) plus U.S. and international bonds, but many Canadians will stop a simple but effective core ETF portfolio.
The core models are offered at Tangerine Investments where I was an investment advisor and trainer for several years.
Canadian Core Equity ETFs
The most popular index used to capture the Canadian stock market is the TSX Composite. To buy the ETF that tracks the index you could use the ticker XIC-T.
The index holds 300 of the largest publicly traded companies in Canada across many sectors.
We can see that the index is dominated by Financials, Energy and Materials. It is not a well diversified index / stock market. That said the index plays to Canada’s strengths by design. We have one of the strongest banking and insurance industries in the world, and we have the oil and gas and materials that North America and the world needs. Canadian banks have historically outperformed just about everything over the longer term (even including U.S. stocks, the S&P 500), but that doesn’t mean that you necessarily want to go all in on Canadian financials.
Another popular index for Canada is the TSX 60 ticker XIU-T. The index holds 60 of the largest companies in Canada. Here is the sector breakdown.
XIC is moving to a period of outperformance says Morningstar due to greater exposure to materials, and less reliance on financials compared to XIU. We can say that XIC is more “diversified”. The materials index includes gold and other mining stocks that are on a tear.
Here’s the materials ETF vs XIC.
Gold and materials are very inflation-friendly. You can see the spike in the COVID period as well when we had a brief inflation scare.
iShares Core S&P/TSX Capped Composite Index ETF XIC
Here’s the overview from Morngingstar.
The C$19.1 billion iShares Core S&P/TSX Capped Composite Index ETF rose 4.95% in August. The gain on the fund beat the 3.61% gain on the average fund in the Canadian equity category, leaving it in the 14th percentile for performance. Over the past year, the iShares fund rose 25.77%, while the average fund in its category rose 21.35%. The fund, which launched in February 2001, has climbed 17.40% over the past three years and gained 14.92% over the past five years.
iShares S&P/TSX 60 Index ETF XIU
In August, the iShares S&P/TSX 60 Index ETF rose 4.79%, while the average Canadian equity fund gained 3.61%. The fund placed in the 24th percentile for performance. The C$17.5 billion fund has climbed 24.51% over the past year, outperforming the average fund in its category, which rose 21.35%. The iShares fund, which launched in September 1999, has climbed 16.84% over the past three years and gained 14.75% over the past five years.
The TSX Composite vs the TSX 60?
It’s a coin toss really. They are very close in sector allocation. I offered XIU in the ETF portfolio section as I like the additional weighting to the financials. XIU has outperformed XIC from XIC’s inception and over the last 10 years.
Keep in mind that Vanguard and BMO and other ETF providers also offer core Canadian equity ETFs.
Other core ETF considerations?
Vanguard VDY-T
In my wife’s personal RRSP account I used Vanguard’s Canadian High Dividend ETF VDY-T. That increases the financials concentration even beyond that of XIU. It outperformed the TSX 60 by about 1% annual. We have since moved on to create a Canadian stock portfolio.
iShares XDIV-T
iShares Canadian Quality Dividend ETF XDIV-T offers a solid history of outperfomance (in back tests). It is also big on financials, but also boosts the defensive utilities up to 13%. It is a concentrated portfolio of just 20 stocks. A company has to pass the quality screens to ‘make it in’.
BMO’s Low Volatility ZLB-T
I’m a big fan of the low volatility approach in Canada. It has a long history of outperformance with less volatility and less draw down (decline) in recessions.
ZLB quickly fixes up the poor sector allocation and is more defensive. It wins by losing less.
Tax efficient Global X HXT-T
For taxable accounts you can consider the Global X HXT-T that is part of their tax-efficient Corporate Class structured ETFs. Global X aims for zero distributions, but that’s not a given. Here’s an introduction to the corporate class structure from Global X.
Please use the Contact Dale form if you have any questions. We’ll now move on to the Sunday Reads (and podcasts).
The Bank of Canada cuts by 0.25%
Here’s a good video podcast interview (on WONK) with Bank of Canada Governor Tiff Macklem. Mr. Macklem suggests that if tariffs stay where they are, Canada is not heading for a recession. Instead we’re heading for slow growth in the area of 1.0%.
The Fed cut 0.25% south of the border, it was double-cut week, and the markets are likely to approve …
And on utilities, here’s what they don’t like, but how we can hedge …
TFSA contribution hike?
Aaron is calling for $7000 in 2026 …
Related post: How to use your TFSA account.
At Findependence Hub, by way of Mark Seed, can your retire with a traditional 60 / 40 portfolio? Yes of course, it’s a wonderful approach as I often remind Retirement Club members. We also learn how to do a little bit better with some superior asset selection and an optimized retirement cash flow plan.
The 60 / 40 made it through (satisfied the 4% rule) even through the dot com correction of the early 2000s, the stagflation era that began in the 70’s and through the financial crisis of 2008-2009. Simple works.
Building the retirement portfolio podcast
Jonathan Chevreau joins the TD Direct Investing podcast, He discusses optimal asset allocation in retirement, savvy portfolio drawdown strategies, the best time to take Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, when to convert to a Registered Retirement Income Fund (RRIF) conversion, and more.
And speaking of Canada and gold stocks, Stocktrades.ca offers a few gold stocks for consideration.
It’s a regular stop to check in on Dividend Hawk’s portfolio action and news for the week.
At the Retirement Manifesto 3 questions that will determine 99% of your success. From a U.S. perspective but all this will apply north of the border …
1) Do You Have A Reliable Cash Flow Plan?
2) Have You Accounted for Healthcare and Unexpected Costs?
3) How Will You Spend Your Time And Stay Fulfilled?
At Booming Encore they ask a retirement expert – Did I retire too soon?
The Loonie Doctor looks at dividends within a corporation.
Recent retirement posts / must reads
Can you retire on a million dollars?
Retirement tip: Don’t forget the spousal account.
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It’s not just the fact that the main Canadian index funds are badly out of kilter when it comes to sector diversification, perhaps I missed it, but I never see any mention here or other blogs regarding the portfolio turnovers from XIC and XIU. It’s like, are these supposed very intelligent people at Blackrock actually running an index or an active fund?
The above is why years ago, I built our own sector diversified, low turnover conglomerate. The lagging sectors get any new money flowing into the portfolio.
Hi, they would simply follow the passive index methodology. There is turnover in passive funds. Some are quite busy, such as SCHD in the U.S. Where was the big turnover you witnessed in the core Canadian ETFs?
Dale
Hi Dale,
It’s on page 5 of the 2025 Interim Management Reports.
Under the heading “Ratios and Supplemental Data(e)”.
XIU
https://www.blackrock.com/ca/investors/en/literature/semi-annual-mrfp/sa-mrfp-xiu-en-ca.pdf
XIC
https://www.blackrock.com/ca/investors/en/literature/semi-annual-mrfp/sa-mrfp-xic-en-ca.pdf
As they also say under (i)
“The Fund’s portfolio turnover rate indicates how actively the Fund’s portfolio adviser manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the period. The higher a fund’s portfolio turnover rate in a period, the greater the trading costs payable by the fund in the period, and the greater the chance of an investor receiving taxable capital gains in the period. There is not necessarily a relationship between a high turnover rate and the performance of a fund”
I will go have a look, but the TER for XIC appears to be 0.01%. The ETF is up 23.5% in 2025.
Incredible returns. And once again, this is a PASSIVE fund.
Dale