Canadian index funds remain a popular choice for both new and experienced investors, offering a simple and cost-effective way to invest. Instead of trying to outperform the market, these funds track specific benchmarks, providing steady, transparent returns. Whether you’re looking for broad exposure to Canada’s economy or focusing on specific sectors, there’s an index fund for nearly every investor. Below, we highlight eight of the top Canadian index funds, each offering a different investment strategy and reflecting various market segments.

1. Vanguard FTSE Canada All Cap Index ETF (VCN)
   This fund tracks the FTSE Canada All Cap Index, covering around 180 stocks. With a low expense ratio of just 0.06%, VCN gives you broad exposure across large and small companies in industries like banking, materials, and energy. It’s heavily weighted in financials, including top banks like RBC and TD, making it a great choice for those seeking reliable dividends with moderate risk. With an annualized return of 7.9% over the last five years, it offers solid performance at a low cost.
2. iShares Core S&P/TSX Capped Composite Index ETF (XIC)
   XIC follows the S&P/TSX Capped Composite Index, which includes approximately 250 stocks from various sectors. The fund is also heavily weighted in financials, but it diversifies across other industries like energy and technology, helping to reduce risk. With an expense ratio of 0.06% and a 7.8% return over the past five years, XIC is a great option for long-term, passive investors seeking broad exposure to the Canadian market.
3. BMO S&P/TSX Capped Composite Index ETF (ZCN)
   Like XIC, ZCN tracks the S&P/TSX Capped Composite Index and offers exposure to about 250 stocks, with a similar focus on Canadian financials and natural resources. With an expense ratio of 0.06%, ZCN is a reliable choice for those looking to match the performance of the broader Canadian market. Its 7.8% return over five years makes it a solid option for diversified long-term investing.
4. iShares S&P/TSX 60 ETF (XIU)
   XIU targets Canada’s 60 largest companies, providing a more concentrated investment strategy. With a higher expense ratio of 0.18%, it’s focused on blue-chip stocks, particularly banks and energy companies, which are known for paying strong dividends. The fund’s 7.0% annualized return over the past five years and solid liquidity make it a good option for investors interested in large, stable companies.
5. Horizons S&P/TSX 60 Index ETF (HXT)
   HXT uses synthetic replication to track the S&P/TSX 60, offering a unique way to invest with ultra-low fees of just 0.03%. Like XIU, it focuses on Canada’s largest companies, particularly in the financial and energy sectors. The fund’s efficient structure results in strong returns with minimal tracking error, and its perfect 5-star Morningstar rating makes it an excellent choice for cost-conscious investors seeking exposure to top Canadian brands.
6. iShares S&P/TSX Completion Index ETF (XMD)
   XMD focuses on mid- and small-cap Canadian companies, providing higher growth potential but with increased volatility. With an expense ratio of 0.22%, this fund includes about 250-300 stocks, offering diversification across several sectors. With an 8.0% annualized return over the last five years, XMD appeals to those who are willing to tolerate more risk for potentially higher rewards.
7. Vanguard FTSE Canada All Cap ex-Financials Index ETF (VXC)
   VXC tracks the FTSE Canada All Cap ex-Financials Index, which excludes financial companies. This is a great option for those who want to avoid overexposure to the Canadian banking sector. The fund includes energy, materials, and industrial stocks, offering a diversified mix across various industries. With an expense ratio of 0.07% and a 7.5% annualized return, VXC provides balanced exposure to the Canadian economy outside of financials.
8. iShares S&P/TSX Capped Financials Index ETF (XFN)
   XFN targets the Canadian financial sector, primarily investing in Canada’s big five banks. This concentrated approach means that financials can make up 80-90% of the fund’s holdings. While this creates the potential for higher returns from Canada’s strong financial industry, it also increases the risk if the sector faces challenges. With a 6.5% return over five years, XFN is a good choice for investors looking for concentrated exposure to the banking sector.

Building a Long-Term Index Strategy in Canada
When creating a long-term investment strategy, you can blend broad-based funds like VCN or XIC with more focused funds such as XMD or XFN. By mixing different types of funds, you can adjust your portfolio to suit your goals and risk tolerance. Funds like VXC are a smart choice if you want to reduce your exposure to the financial sector. These funds are ideal building blocks for a portfolio that focuses on long-term stability and growth.

For those seeking specific outcomes, such as higher dividends or mid-cap growth, these Canadian index funds offer flexible options. To further diversify, consider adding Canadian bond index funds or other asset classes to manage risk. With low fees, proven performance, and solid sector diversification, these funds provide a strong foundation for sustainable returns in Canada’s market.