The Best Low Cost Equity Index Funds on the Toronto Stock Exchange

With over 700 listed ETFs on the Toronto Stock Exchange (TSX), it’s no wonder how a person would suffer from indecision.

Within those 700 ETFs, exist a few low cost equity index funds hidden in a sea of high fee investments.

Index funds are passive investments that are rebalanced regularly based on the the market index they are tracking.

Some common market indices are:

• The S&P 500 -tracks the largest 500 U.S. Companies
• The Dow Jones Industrial Average (DJIA) – tracks the largest 30 and most influential U.S. Companies
• The Nasdaq Composite Index – tracks all companies (>3000) listed on the NASDAQ Exchange
• The Wilshire 5000 – tracks all publicly traded companies headquartered in the U.S (Total U.S. Stock Market Index)
• S&P/TSX 60 – tracks the largest 60 Canadian Companies
• S&P/TSX Composite Index – tracks about 70% of the TSX (~250 stocks)

This post will cover the best, low cost, market specific, equity index funds on Canadian exchanges. This is meant to be a starting point for investors and is not meant to be taken as investment advice.

In Canada, the three largest index fund issuers are BMO, iShares, and Vanguard. Each offer similar products in each geographical sector. 

Canadian Equity

As a Canadian investor, it’s important to have a portion of your investments in Canada.

But the Canadian market is only 3% of the total world market (source). As a results, Canadian investors are often overweighted in Canadian equities. This is known as a home country bias. 

The low cost index funds listed below all have low management expense rations (MERs) but differ in the amount of Canadian stocks they track. 

United States Equity

The United States represents nearly 50% of the total word stock market (source). 

The U.S. is home to many strong companies. Investors will want to take advantage of those equity growth oppotrutnitcs and should consider having a fund that holds U.S. equities. 

Name	Ticker	Issuer	MER	# of Holdings	Yield
BMO S&P 500 Index ETF	ZSP	BMO	0.09%	505	1.39%
BMO S&P 500 Hedged to CAD Index ETF	ZUE	BMO	0.09%	505	1.37%
iShares Core S&P 500 Index ETF	XUS	iShares	0.10%	503	1.10%
iShares ESG Aware MSCI USA Index ETF	XSUS	iShares	0.22%	300	1.26%
iShares Core S&P U.S. Total Market Index ETF	XUU	iShares	0.08%	3278	0.95%
Vanguard S&P 500 Index ETF	VFV	Vanguard	0.09%	505	1.24%
Vanguard U.S. Total Market Index ETF	VUN	Vanguard	0.17%	3859	1.16%

International Equity

The international developed stock market includes companies from Japan, United Kingdom, Switzerland, Australia, Singapore, France, South Korea, and Germany.  

It generally costs more to hold international ETFs because of the trading costs and currency conversions. You’ll notice the MERs are higher with these funds. 

Name	Ticker	Issuer	MER	# of Holdings	Yield
BMO MSCI EAFE Index ETF	ZEA	BMO	0.22%	805	3.08%
BMO MSCI EAFE ESG Leaders Index ETF	ESGE	BMO	0.28%	391	2.94%
iShares Core MSCI EAFE IMI Index ETF	XEF	iShares	0.22%	>1500	3.60%
iShares MSCI Europe IMI Index ETF	XEU	iShares	0.28%	1267	4.16%
Vanguard FTSE Developed Europe All Cap Index ETF	VE	Vanguard	0.22%	1300	3.14%
Vanguard FTSE Developed Asia Pacific All Cap Index ETF	VA	Vanguard	0.22%	2362	2.70%

Emerging Markets Equity

Emerging markets typically have significant room for growth but are also more prone to volatility compared to developed markets.

Countries that are often included in emerging market ETFs are China, Brazil, and India. Similar to international ETFs, emerging market ETFs will have higher MERs.

Name	Ticker	Issuer	MER	# of Holdings	Yield
BMO MSCI Emerging Markets Index ETF	ZEM	BMO	0.28%	829	2.65%
iShares Core MSCI Emerging Markets IMI Index ETF	XEC	iShares	0.27%	3082	0.99%
Vanguard FTSE Emerging Markets All Cap Index ETF	VEE	Vanguard	0.24%	5729	1.64%
iShares ESG Aware MSCI Emerging Markets Index ETF	XSEM	iShares	0.31%	286	0.25%

Parts of the World

Vanguard and iShares both offer funds that cover the total world market but excluding a certain geographical area. 

Name	Ticker	Issuer	MER	Region	# of Holdings	Yield
Vanguard FTSE Developed All Cap ex North America Index ETF	VIU	Vanguard	0.23%	Europe Asia	3866	2.75%
Vanguard FTSE Developed All Cap ex U.S. Index ETF	VDU	Vanguard	0.22%	Europe Asia Canada	4045	2.95%
Vanguard FTSE Global All Cap ex Canada Index ETF	VXC	Vanguard	0.22%	U.S. Europe Asia Emerging	11 499	2.24%
iShares Core MSCI All Country World ex Canada Index ETF	XAW	iShares	0.22%	U.S. Europe Asia Emerging	9502	1.67%

The Whole World – All-in-One ETFs

A recent product that was launch in Canada by the big three ETF issuers is the all-in-one ETF. This is an excellent option for an investor that doesn’t want the hassle of rebalancing their own portfolio. 

Each of the ETFs below is very similar. They each hold U.S. equity, Canadian equity, international equity, and emerging marking equity. Each has a low MER and rebalances regularly. 

Name	Ticker	Issuer	MER	# of Holdings	Yield
iShares Core Equity ETF Portfolio	XEQT	iShares	0.20%	>9000	2.99%
Vanguard All-Equity ETF Portfolio	VEQT	Vanguard	0.24%	>9000	1.86%
BMO All-Equity ETF	ZEQT	BMO	0.20%	>9000	2.13%

Conclusion and Take Aways

One of the cornerstones of index investing is keeping fees low. The ETFs in the above tables all have low MERs and can help you arrive at financial independence quicker. If you decide that buying a bunch of individual ETFs is too much work, you can opt for an all-in-one ETF. For more details on iShares All-In-One Portfolios click here to learn more.

So long as you hold diversified index funds, rebalance regularly, and hold for the long term, it’s hard to go wrong.

Happy Investing!