The best index funds in Canada for 2025 are VCN and XUU. Along with the others that make up our top 10, these funds are created to mimic a certain investment index and give you a well-diversified fund in one purchase.
Index funds have risen to prominence for their simplicity, diversity, and cost-effectiveness, making them one of the top choices for investors in Canada. They're well-suited to newbie investors, but even more experienced investors enjoy what these securities can provide.
Whether you're a seasoned investor or just starting your wealth-building journey, understanding the top index funds in Canada can be a game-changer in achieving your financial goals. So, let's dive in and learn what makes these top index funds the best of the best.
Key Takeaways
- The best index funds include VCN, CIB300, and XUU.
- When choosing index funds, look for low MER, a reasonable price, and dividend payments.
- In general, index funds are low cost, offer easy diversification, and are easy to understand.
- Potential investors should be aware that index funds provide only average returns and are subject to market volatility.
- You can buy index funds from the issuer itself, through an online broker, or with a financial advisor.
Comparing the best index funds in Canada
Here are 10 of the best index funds in Canada, including both mutual funds and ETF options.
| Index fund name | Ticker | MER | Minimum investment | 1-year return* | Return since inception (inception date)* |
|---|---|---|---|---|---|
| Vanguard FTSE Canada All Cap Index ETF | VCN | 0.05% | None | 21.74% | 9.49% (August 2, 2013) |
| iShares Core S&P US Total Market Index | XUU | 0.07% | None | 13.54% | 12.83% (February 10, 2015) |
| CIBC Canadian Index Fund | CIB300 | 1.14% | $500 + $25 per month | 19.46% | 7.6% (July 25, 1996) |
| iShares U.S. IG Corporate Bond Index ETF (CAD-Hedged) | XIG | 0.32% | None | 3.73% | 3.3% (January 21, 2010) |
| TD International Index Fund - e | TDB911 | 0.39% | $100 + $25 per month | 13.67% | 4.16% (October 10, 2000) |
| Global Aggregate Bond Index | VGAB | 0.33% | None | 3.88% | -0.88% (January 17, 2020) |
| FTSE Emerging Markets All Cap Index ETF | VEE | 0.25% | None | 12.64% | 5.75% (November 30, 2011) |
| iShares Core MSCI All Country World ex Canada Index ETF | XAW | 0.22% | None | 13.7% | 10.21% (February 10, 2015) |
| Balanced ETF Portfolio | VBAL | 0.24% | None | 12.01% | 6.43% (January 25, 2018) |
| Vanguard Conservative ETF Portfolio | VCNS | 0.24% | None | 10.1% | 4.72% (January 25, 2018) |
* It’s important to note that returns can change dramatically from day to day, so it’s best to check real-time stats for the most up-to-date information. These returns are included here for illustrative purposes only. All numbers were gathered on June 18, 2025.
How we chose the best index funds in Canada
Our methodology when creating this top 10 list of index funds in Canada includes the following:
- Analyzing the annual earnings
- Looking at any barriers to entry of getting into the fund
- Considering the long-term trend of rising markets
- Checking out any management expenses of owning the index fund
That's how we came up with our top 10 list, but what should you keep in mind while you're out there on your own, trying to pick a new fund to add to your portfolio?
Best index funds in Canada
The question is, what are the best index funds to hold if you're a Canadian investor?
The answer is always based on your tolerance for risk and how the fund helps you create a diversified portfolio that can ride out the highs and lows that come with investing. Having a core of index funds is one step in that direction.
Let's take a closer look at each of the Canadian index fund options listed above.
1. Best index fund in Canada for the Canadian equity market: VCN
The FTSE Canada All Cap Index ETF attempts to track the broad Canadian equity market, seeking to invest in large, medium, and small-cap Canadian stocks.
Paying a quarterly dividend of $0.37 a share, it has earned a return of 9.49% since inception.
Considering a high interest savings account can net you around up to 4% these days, getting a five-year return of 15.2% with quarterly dividends is downright magical.
Top three holdings:
- RBC
- Shopify Inc.
- TD Bank
2. Best index fund in Canada for U.S. equity market: XUU
I like the iShares Core S&P U.S. Total Market Index ETF, which tracks the total CRSP US market index, due to its affordable entry price (at the time of writing this is around $59.90 per share) vs. other similar index funds (such as VFV at $145.52) that track a similar market index.
XUU also has an impressive 13.54% return since inception, a low MER (0.07%), and large underlying holdings.
Top three holdings:
- iShares Core S&P ETF Trust
- iShares Core S&P Total U.S. Stock
- iShares Core S&P Mid-cap ETF
3. Runner-up best index fund in Canada for the Canadian equity market (mutual fund): CIB300
If mutual funds are your investment vehicle of choice, take a look at the CIBC Canadian Index Fund.
This Canadian index fund also has decent earnings, like VCN, and a low management fee for a mutual fund. And – no surprise here – the top three holdings are very similar to VCN's.
It's equity-heavy and prone to more volatility, but over the long run, this fund is growth-oriented, earning a 7.6% return since inception.
Minimum initial investment is low – anyone with $500 can buy in with subsequent investment minimums of $25 per month.
Top three holdings:
- RBC
- Shopify
- Toronto-Dominion Bank
4. Best index fund in Canada for U.S. bond market: XIG
The iShares U.S. IG Corporate Bond Index ETF (CAD-Hedged) is one to look at if you need some U.S. Bond indexing for your portfolio.
It currently has a 1-year return of 3.73% and usually has a good since-inception return, coming up at 3.32% right now. It also has monthly dividend distributions, making it an attractive addition.
With the price per share around $19.61, XIG provides an affordable entry point for investors.
This index fund holds the ETF LQD along with several bonds. The top three issuers of those bonds are:
- JPMorgan Chase & Co.
- Bank of America Corp.
- Morgan Stanley
5. Best index fund in Canada for broad international equity markets: TDB911
The TD International Index Fund - e has an MER of 0.39%, which is low compared to other mutual funds on the market.
Coming from a big bank, this Canadian index fund pursues its long-term growth objective by tracking the international market indexes for Europe, Asia, and the Far East regions, keying in on large, well-established companies.
Top three holdings:
- TD International Equity Index ETF
- Cash (Bank Overdraft)
- NMC Health PLC
6. Best index fund in Canada for broad international bond markets: VGAB
The Global Aggregate Bond Index ETF (CAD-hedged) is a new index fund that has most of its holdings in bonds.
Its goal is to track the performance of a broad global bond index, hedged to the Canadian dollar. To top it off, the MER is low at 0.33%.
At the time of writing, no information was available regarding holdings for this fund. We can see, though, that slightly less 50% of its market allocation is in the U.S.
7. Best index fund in Canada for emerging markets: VEE
The sheer volume of equities held in the FTSE Emerging Markets All Cap Index ETF makes it something to note when looking for something that tracks emerging markets (less Canada) with holdings in China, Taiwan, India, and Brazil. Plus, its MER is a mere 0.25%.
Top three holdings:
- Taiwan Semiconductor Manufacturing Co. Ltd.
- Tencent Holdings Ltd.
- Alibaba Group Holding Ltd.
8. Best index fund in Canada for growth total world: XAW
Total world market tracking ETFs like the iShares Core MSCI All Country World ex Canada Index ETF are a one-stop shop when it comes to portfolios.
This growth-focused fund is the world, less Canada – which means it doesn’t hold any Canadian equity or bonds.
With semi-annual dividends of 1.75%, it’s a great way of owning the world market at about $45 per share.
Top three holdings:
- iShares Core S&P 500 ETF
- iShares MSCI EAFE IMI Index
- iShares MSCI Emerging Market
9. Best index fund in Canada for balanced total world: VBAL
Started in January 2018, the Vanguard Balanced ETF Portfolio seeks to primarily invest in equity and fixed income securities with a 60% (equities), 40% (fixed income).
The fund invests mainly in other ETFs, which comprise the top three holdings. At roughly 75%, most of the fund’s investment is in North America.
Top three holdings:
- Apple Inc
- Microsoft Corp.
- NVIDIA Corp.
10. Best index fund in Canada for conservative total world: VCNS
Vanguard has also put together a more conservative total world fund called the Vanguard Conservative ETF Portfolio with 40% equity and 60% fixed income.
This fund holds a large variety of stocks and bonds, with over 13,000 equities and nearly 19,200 fixed-income holdings. With that much diversification, market swings should be fairly stabilized by the diversification of this fund.
Top three holdings:
- Apple Inc.
- Microsoft Corp.
- NVIDIA Corp.
Runner-up index funds
While these index funds didn't quite make it into our top ten, they are still worth considering:
Best for consistent market-wide returns: ZCN
The BMO S&P/TSX Capped Composite Index ETF (ZCN) is pretty evenly allocated among the various sectors – 32.39% financials, 16.69% energy, 13.98% materials, and 12.17% industrials, to start with. This big-picture type of focus makes it an especially good choice for those who are new to index investing.
Plus, ZCN's very reasonable 0.06% MER is right in line with similar funds, making it a solid option for anyone looking to track the overall market.
Top three holdings:
- Royal Bank of Canada
- Shopify Inc.
- Toronto Dominion Bank
Best for longevity and size: XIU
This fund evolved from the Toronto 35 Index Participation Units (TIPs 35), which was the very first ETF ever listed (March 9, 1990). Now known as iShares S&P/TSX 60 Index ETF (XIU), it’s currently the largest Canadian ETF available.
XIU has CAD $16,730,761,378 in net assets, and most of its holdings are with large, stable corporations. It's consistently listed as one of the top Canadian dividend index funds.
Top three holdings:
- Royal Bank of Canada
- Shopify Subordinate Voting Inc. CLA
- Toronto Dominion
Best for financial sector exposure: HXT
Not only does Horizons S&P/TSX 60 Index ETF (HXT) have 36.66% of its holdings weighted in the financial sector, it also has a completely Canadian exposure.
HXT is particularly appealing for savings-conscious investors as its MER is a mere 0.08%. Investors have exposure to some of Canada's biggest brands without paying through the nose – it's currently priced at $69.70 per share.
Top three holdings:
- Royal Bank of Canada
- Toronto-Dominion Bank
- Brookfield Corp.
Best for sustainable investing: XFN
The Morningstar Sustainability Rating measures how well a fund's holdings manage ESG risks compared to similar funds, and iShares S&P/TSX Capped Financials Index ETF (XFN) earns an impressive 4/5 score. This score indicates a relatively low ESG risk, especially for a fund with such a strong financial focus.
With a 29.94% 1-year return and a 10.16% return since inception, it's a pretty valuable investment option.
Top three holdings:
- Royal Bank of Canada
- Toronto Dominion
- Brookfield Corp. Class A
Best for long-term, passive investors: XIC
iShares Core S&P/TSX Capped Composite Index ETF (XIC) offers wide exposure to the Canadian market, with a relatively heavy focus on the financial sector (32.65%). Its 20.95% 1-year, 14.86% 5-year, and 7.63% since inception returns prove that it's a solid choice for long-term performance.
It won't set you back too much either, thanks to a 0.05% management fee, 0.06% MER, and current price of $42.55 per share.
Top three holdings:
- Royal Bank of Canada
- Shopify Subordinate Voting Inc. CLA
- Toronto Dominion
What is the best index fund for beginners?
The Fidelity Zero Large Cap Index (FNILX) is one of the cheapest major S&P 500 index funds. The top three holdings for FNILX are Microsoft Corp., NVIDIA Corp., and Apple Inc. This fund was one of the first to charge no annual expenses.
The Invesco Nasdaq 100 ETF (QQQM) is one of the cheapest major Nasdaq-100 index funds. The top three holdings for QQQM are Microsoft Corp., NVIDIA, and Apple Inc. QQQM includes 100 of the biggest nonfinancial companies listed on the Nasdaq.
Both index funds require no minimum investment.
What are index funds in Canada?
Index funds are a type of investment that holds a collection of stocks or bonds (or both).
- Long-term growth
- Potentially lower volatility
- Low management fees
- Quarterly rebalancing
Index funds are either exchange-traded funds (ETFs) or mutual funds.
Exchange-traded fund: No monthly minimum or restrictions. Typically free to buy with online brokers like Questrade.
Mutual fund: Minimum investment with monthly additional monies of around $25 per month.
Index funds are built to mimic the performance of a specific financial market index. For instance, the Toronto Stock Exchange is a financial market index, and some index funds try to emulate the holdings and returns of the TSX (such as VCN, XIC, and ZCN).
You can hold index funds in your investment portfolio or retirement portfolio, such as in an RRSP, TFSA, or non-registered account.
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$25 GeniusCash + Delicious meal choices with fresh ingredients + Front-door delivery.What to look for when choosing index funds in Canada
While your initial instinct may be to choose the index fund in Canada with the highest returns, that’s not always the smartest choice for long-term investments. The value of stocks and funds changes often, so today’s price isn't a guarantee of tomorrow’s.
Consider these three things when choosing index funds in Canada:
- Low MER: The management expense ratio (MER) is the main fee you pay, so a lower fee means more money for you. Plus, a lower MER can indicate that the fund manager is more confident in the fund and it won’t need constant readjustments.
- Price: ETFs, mutual funds, and individual stocks go up and down in value. You need to be able to afford the investment, so buy accordingly, but remember that something that’s too cheap may indicate poor quality. Look out for minimum investments for mutual funds too.
- Dividends: Instead of only getting a payout when you sell the fund, dividend stocks allow you to make some money while still holding on to them. It’s a monthly, quarterly, or semi-annual payment. You can either cash out these earnings or reinvest them to grow your investments even more.
Who should invest in index funds?
Young investors (20 to 35): Long-term growth mindset, can invest small and steady amounts, no micromanaging of your account, low or no fees
Mid-career savers (35 to 50): Medium-term goals like saving for a child’s education or retirement, more discretionary income to invest, passive growth, diversification of investment portfolio
FIRE enthusiasts: Index funds can help you achieve financial independence to retire early, especially in tax-advantaged accounts, thanks to passive long-term savings.
Retiree with growth potential: Retirees can look for bond-heavy index funds to provide income, while other indexing can help offset inflation in old age, and low-cost fund management
Ultimately, many people should consider investing in index funds in Canada. Indexing helps create growth in your portfolio over a long period of time, whether you have a million dollars in the bank or a few hundred.
It's time to start investing, but where do you start?Here's everything you need to know about investing in Canada .
Pros and cons of index funds in Canada
Index funds in Canada are an easy way to get your foot in the door when it comes to investing, as they're low-cost and provide good diversification. But the returns aren't as high as other investment types. Here's a look at these and other pros and cons.
| Pros | Cons |
|---|---|
|
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Common mistakes to avoid when investing in index funds
- Focusing only on past performance: Past returns don't guarantee similar results in the future, especially given how wildly the market can fluctuate. Focus more on the fund's fees and what index it tracks.
- Overlooking fees: Management fees and MERs can be quite a shock if you're not expecting them. Be sure to check these fees before making any kind of investment.
- Not achieving proper diversification: Diversification helps reduce your overall risk, so if one sector isn't doing well, your funds in other sectors will balance things out.
- Ignoring the long-term view: Long-term success is more important than short-term success for index funds. Look at how similar indexes have performed across 10, 20, and even 30-year periods.
- Trying to time the market: By not staying fully invested, you’re probably hurting your chances of making the most money over the long term. It's also very difficult to do, so it's really a waste of time and energy.
- Not rebalancing your portfolio: Since indexes automatically rebalance, not rebalancing your portfolio means you'll likely end up with a much different portfolio than what you originally thought you'd have. And this can be risky.
- Ignoring dividends: Dividends can be reinvested (accounting for a big chunk of your growth), and they add stability to your income. Ignoring these details is a particularly bad move for long-term investors.
Alternatives to index funds in Canada
Of course, investing in index funds in Canada isn't your only option for highly diversified investments.
We'll take a look at the difference between three other major investment options.
ETF vs. index funds in Canada
There are a lot of similarities between ETFs and index funds in Canada. For example, both collections of investments that aim to track a certain market. They're also not actively managed, meaning they have relatively low fees.
The major difference is that ETFs can be traded just like stocks, which means they can be bought and sold at any point when markets are open. Index funds, on the other hand, can only be bought and sold once per day. This gives ETFs the advantage of greater flexibility.
Because some index funds can be mutual funds – simply referred to as index mutual funds – you may run into some minimum investment requirements, which is seldom an issue when buying ETFs.
The similarities between the two types of investments are especially apparent when considering all-in-one ETFs (like VGRO).
Mutual funds vs. index funds in Canada
Index funds in Canada and mutual funds are also similar, especially considering that index funds can hold mutual funds. They're basically a type of mutual fund.
That said, mutual funds are much more actively managed than index funds, which also means higher fees are more common. But those might be worth it to you if you prefer knowing someone is taking care of your investments more often.
Index funds are also more specifically designed to track a certain index (hence the name), whereas mutual funds have the main goal of gaining a return. This means the fund manager puts together investments with less regard for representing a specific index.
Check out our reviews of mutual funds here:
Stocks vs. index funds in Canada
Because index funds are a collection of stocks, they're pretty similar, but investing in stocks vs. investing in index funds is a completely different investment approach.
Buying individual stocks takes a lot of time, money, and discipline. But you also get absolute control over where your money is going.
Buying an index fund, on the other hand, is buying a bunch of stocks at once. That means you get less control, but more diversification, lower fees (think of it like a bulk deal), and potentially better long-term return.
Generally speaking, indexes (which index funds are designed to mimic) trend upwards over a long period of time. On the other hand, individual stocks go up and down somewhat erratically.
Why are index funds popular with investors?
Low cost, broad diversification, consistent returns, and ease of use make index funds a popular choice among Canadian investors.
- Low fees: Index funds typically have lower management fees compared to actively managed funds. This means more of your money stays invested and grows over time.
- Diversification: Index funds mean you spread your money across a wide range of stocks or bonds, thus reducing the risk of any single investment impacting your entire portfolio.
- Consistent performance: Index funds track the performance of a market index, which historically has provided steady returns over the long term.
- Simplicity: Investing in index funds does not require extensive research or market timing. They’re ideal for investors who prefer a "set it and forget it" approach.
- Accessibility: Index funds are available through most major Canadian banks and investment platforms, making them easy to purchase and manage.
Both new and experienced investors in Canada find index funds an attractive option for these reasons.
How to invest in index funds in Canada
So now that you're familiar with index funds in Canada...how do you start investing?
There are three major ways to invest in these securities. Let's go over each briefly.
1. Buy index funds in Canada directly from the fund issuer
If you want to go straight to the source, you can buy directly from a fund issuer, like Vanguard.
This isn't a very flexible way to invest in index funds, however, since you'll be stuck with only their funds.
2. Use an online broker to invest in index funds in Canada
If you like to be in control of your finances, investing in index funds in Canada through an online broker may be your best bet.
An online broker is a type of financial software that allows you to buy and sell a multitude of investments, like:
- Index funds
- ETFs
- Stocks
- Bonds
- And more
The main thing to look out for is the cost per trade, since these can really add up if you're doing a lot of individual trading. The Big 5 Banks tend to put a flat fee of around $10 on most trades, but some discount brokers will be closer to half that price.
Some brokers will also have cheaper prices if you're considered an active trader (usually 250+ trades per quarter).
Let's go over three of your best options in Canada.
Best online broker from a Big 5 Bank
If you like sticking with a bank that you already know and trust, CIBC Investor's Edge is your best bet in Canada.
If you're trading stocks and ETFs, you'll get the cheapest rates from a big bank – $6.95 per trade. This goes down to $5.95 for students and $4.95 for active traders.
And the best part? Mutual funds are also available at this low price of $6.95 per trade, which includes index funds.
Want to learn more? Check out the full review:
This online investment brokerage is owned and run by CIBC, and is targeted towards people who are interested in managing their own investments, learning about how to manage their own investments, and people who do investment management for a living. With relatively low fees for trades, and discounts for students and active traders, this is a service worth looking into.
- Get 100 free online equity trades with code EDGE100
- No minimum investment required
- Lower than average fees per trade
- Discount on trade fees for students and young adults
- Discount on trade fees for active traders
- Seems to be designed for regular people, not just the ultra rich
- Per transaction fees can add up quickly
- Ages 18 - 24 trade for free
- Free investment research tools
- Extended trading hours
- TFSA
- RRSP
- RESP
- RRIF
- LRSP
- PRIF
- LIRA
- LRIF
- Cash
- Margin
- Corporate
- Partnership
- Formal trust
- Investment club
- Estate
- FHSA
- Stocks
- ETFs
- Options
- Mutual Funds
- GICs
- Fixed Income
- Precious Metals
- Structured Notes
- IPOs
- CDRs
Best discount online broker
If you don't care much about brand name and just want to get one of the best deals possible, Questrade may be exactly what you're looking for.
When it comes to mutual funds and index funds, Questrade is a bit more expensive than CIBC at $9.95 per trade. That's still a good price, though.
But where Questrade really shines is in ETFs.
ETFs are free to buy – which is a tremendous drawing point. When you want to sell your ETFs, they still cost a low fee of 1 cent per share (minimum of $4.95 and maximum of $9.95). The selling price of ETFs is also the cost to buy and sell stocks.
If you want to learn more, here are the features of one of the best online brokers in Canada:
Questrade is one of Canada's top online investment platforms. With very low fees, including no-fee ETF trading, commission-free stock trades, and plenty of investment types, Questrade just about covers it all.
- Total transparency with fees
- Surprisingly low fees
- Lots of investment account and product choices
- Plenty of convenient methods for support
- Limited amount of time to report fraud for full reimbursement
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- TFSA
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- LIRA
- Locked-In RRSP
- RIF
- LIF
- RESP
- Family RESP
- Corporate
- Investment Club
- Partnership
- Sole Propietorship
- Individual Informal Trust
- Joint Informal Trust
- Formal Trust
- Individual Margin
- Joint Margin
- Individual Forex & CFDs
- Joint Forex & CFDs
- FHSA
- Stocks
- ETFs
- Options
- FX
- IPOs
- CFDs
- Mutual Funds
- Bonds
- GICs
- International Equities
- Precious Metals
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Don't have $1,000 yet to start investing with Questrade? Don't worry, Qtrade has cheap prices and free ETFs too – but with no minimum investment required.
You can look forward to a low fee of $8.75 on stocks, ETFs, and mutual funds. It also comes with special active investor student prices to save you more money in the long run.
Want to learn more? Check out the full review here:
Looking to take your investments into your own hands? Qtrade Direct InvestingTM is a discount online broker that offers top-of-the-line portfolio analytics tools and a robust trading platform designed for new and experienced DIY investors. You can even trade over 140 specially-picked ETFs commission free.
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- Select ETFs with no fees
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- Young investor pricing
- Discounts for active traders
- Options Lab
- Middle of the pack pricing
- $25 per quarter fee for smaller investors
$80 GeniusCash + Earn up to 5% cash back on deposits + 140+ ETFs with no trade fees
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- Second-to-none portfolio analytics tools (including scoring against key ESG components)
- Pre-market and after-hours trading available for US markets
- Cash
- TFSA
- RRSP
- Spousal RRSP
- LIRA
- RIF
- LIF
- RESP
- Margin
- FHSA
- LRSP
- Corporate
- Formal Trust
- Informal Trust
- Investment Club
- Estate
- Stocks
- ETFs
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- Bonds
- New Issues
- GICs
- Options
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3. Work with a financial advisor to invest in index funds in Canada
You can also discuss investing in index funds with your financial advisor.
This is a good choice for people who want direct one-on-one professional advice in their investments. Of course, this means the fees will likely be higher, but that's the price a lot of people are willing to pay.
FAQ
What are index funds in Canada?
Index funds are collections of stocks, bonds, and other investment vehicles that are designed to track a specific index. Because indices are shown to grow over time, index funds are seen as a lower-risk investment on a long enough horizon.
How do I buy index funds in Canada?
You can buy index funds directly from the source (i.e. Vanguard), through an online broker, or with your financial advisor. You'll want to research suitable funds, decide your investment amount, and place an order.
Should I start investing in index funds in Canada?
Whether or not you should invest in index funds depends on your financial objectives and personal risk tolerance. Among other pros and cons, they provide excellent diversification but only average returns, and they're affected by market volatility.
Are there any low-cost index funds in Canada?
Index funds are generally low-cost – especially if the fund holds mainly ETFs – largely because they aren't actively managed. That said, a mutual fund-type of index fund can have minimum investment requirements as well as higher fees.
What are the best U.S. index funds in Canada?
While you can’t invest in U.S. index funds from Canada, you can invest in indexes that follow the S&P 500’s performance. Try XUU from iShares, XUS from iShares, VFV from Vanguard, and ZSP from BMO.
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