Best ETFs in Canada for 2023

Do-it-yourself (DIY) investors in Canada these days suffer from an overabundance of choices. There are more than 1,299 exchange-traded funds (ETFs) from 42 providers now listed on Canadian exchanges, making the task of constructing a simple “couch potato” portfolio that’ll likely do just as well as the investing pros more daunting than it has ever been. 

The best-performing ETFs in Canada had a year 

Never fear—the MoneySense expert panel is back with our 11^th annual list of Best ETFs for Canadian DIY investors to put together an affordable, diversified portfolio. The fact that we’re now in our second decade discerning the best funds on offer is a clue that the ETF industry is no longer a “kid.” It’s a force to be reckoned with in financial services, with $328 billion in assets under management in Canada as of Feb. 28, 2023, according to National Bank Financial. (The bank’s methodology excludes “ETFs of ETFs” that serve to double-count some assets.)

And all that after one of the worst market performance years in the ETF’s existence in Canada! Assets under management actually declined slightly over the course of 2022, due to the combination of wealth destruction in both the stock and bond markets and tepid net inflows from investors. Self-directed investors in Canada had few places to hide with the rare one-two punch of correlated losses in both equities and fixed income.

Fortunately, as evidenced so far in 2023, the normalization of interest rates and bond yields over the past year-plus has restored the diversification benefits between the two asset classes. This time, when stock markets went down, bond prices increased, which gives us confidence that decently diversified ETF investors will fare better this year and into 2024.

And affordable diversification is really what ETFs are all about, right? 

How to pick the best ETFs for Canadian investors–our methodology

As in past years, we’ve divided our selections into five categories that we think are really all you need to manage your own investment portfolio. On the equity side, we have separate categories for Canadian, U.S. and international stocks. Another category covers the best fixed-income options, which include bond funds but also money-market funds that have become popular over the past year thanks to rising interest rates and their lack of volatility. For investors who’d rather not get into the weeds of portfolio construction and rebalancing, we have a category of “one decision” (known in the industry as all-in-one or asset allocation) ETFs that cover all the bases. 

And just for argument’s sake, we challenged our panellists to name more exotic “desert island” picks than usual; ETFs that don’t make it through our mainstream filters and are still worth a look. These are listed in a sixth bonus category.

This year is different for our ETF picks

If you’ve been following our Best ETF picks over the years, you may have noticed a pattern. The whole point of owning ETFs, in our view, is that they’re on the side of the little guy. Those with nest eggs worth millions of dollars can access lower fees for advice and active management, though many still choose ETFs to construct their portfolio nonetheless. 

High net worth investors represent only a small proportion of Canadian households, however. 

The best most of us can hope for is passively capturing the returns of the primary asset classes without paying exorbitant fees, which ETFs allow us to do. Consistent with that worldview, our panel generally favours index ETFs with the lowest costs. Actively managed funds have to have very competitive management expense ratios (MERs) and other compelling attributes to make our lists.

Our decision in the past to exclude the many thematic ETFs out there was largely vindicated over the past year; almost all of these were crushed in the equity market volatility. 

That, sadly, applied to ESG funds screening for environmental, social and governance criteria too. We would like at some point to include a socially responsible investing category, but until a common set of reporting standards emerges, it is very difficult to evaluate these ETFs on an apples-to-apples basis.

So there you have it. There’s no shortage of options to populate your brokerage account. But from the 22 ETFs listed here, we think you should be able to find everything you need to succeed as a DIY investor.

Watch: MoneySense – BMO ETFs – ETFs and Mutual Funds fees

Meet the MoneySense 2023 ETF All-Star panel

Ben Felix is a portfolio manager and head of research with PWL Capital in Ottawa. He has a bi-weekly YouTube series called Common Sense Investing, and he co-hosts the weekly Rational Reminder podcast. PWL is a wealth management firm managing $3 billion in assets using low-cost ETFs and index funds.

Cameron Passmore joined PWL Capital in 1997. He is a partner in the firm and its executive chairman, as well as a portfolio manager in Ottawa. Passmore co-hosts the Rational Reminder podcast.

Yves Rebetez, CFA, is a partner at Credo Consulting, a brand analytics and research firm focused on the Canadian financial services industry. Rebetez ran ETFinsight between 2011 and 2018 and is now working on several ETF and advisor engagement initiatives.

Dale Roberts is a former investment advisor with Tangerine, founder of the Cut the Crap Investing blog and a regular MoneySense contributor.

Mark Seed is the blogger behind the My Own Advisor website, which caters to do-it-yourself investors and takes a hybrid approach to investing in both ETFs and individual securities.

Ioulia Tretiakova is vice-president and director of quantitative strategies at PUR Investing Inc. She specializes in risk management and quantitative portfolio construction, and she is the lead author of several peer-reviewed papers in the Rotman International Journal of Pension Management and the Journal of Retirement.

Mark Yamada is CEO of Toronto’s PUR Investing Inc., which provides the ETF screener for the TMX Money website. He writes about investment issues for Advisor, appears regularly at ETF conferences and publishes academic papers about advanced pension strategies.

Read more on investing:

• The best online brokers in Canada
• A guide to the best robo-advisors in Canada
• The best TFSAs in Canada
• The best RRSP investments

About Michael McCullough

Michael is a financial writer and editor in Duncan, B.C. He’s a former managing editor of Canadian Business and editorial director of Canada Wide Media. He also writes for The Globe and Mail and BCBusiness.

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