Top 8 Canadian Index Funds for Long-Term Growth in 2025

According to recent data compiled by Morningstar, Canadian Index Funds Investment continues to stand out as a practical approach for both novice and seasoned investors. By tracking specific benchmarks rather than attempting to outsmart them, these Top Canadian Index Funds reduce costs and deliver steady, transparent performance. From broad all-cap funds that capture the heartbeat of Canada’s markets to specialized ETFs focusing on financials or mid-cap companies, each product offers a unique angle on the country’s economic landscape. Below are 8 of the Best Canadian Index Funds, each highlighting a particular segment of the market and reflecting a diverse range of investment strategies.

1. Vanguard FTSE Canada All Cap Index ETF (VCN)

• Global Composition: Tracks the FTSE Canada All Cap Index (~180 stocks)
• Expense Ratio: 0.06%
• Annualized Return: ~7.9% (5‑year average)
• Morningstar Rating: 4.5 Stars

VCN casts a wide net across Canadian Equity Index Funds, incorporating about 180 different stocks. Thanks to its all cap approach, you’ll gain exposure to large banks like Royal Bank of Canada (around 15% allocation), Toronto-Dominion Bank (~13%), and Bank of Nova Scotia (~10%), along with smaller companies in materials, energy, and industrials. This balanced spread typically includes around 40% in financials, giving investors reliable dividend income with moderate volatility. One of VCN’s biggest selling points is its ultra-low expense ratio of 0.06%, making it a safe option for those aiming to capture Canada’s overall market growth at minimal cost. The fund’s ~7.9% five-year annualized return and robust Morningstar rating underscore its appeal for both new and seasoned investors looking to Invest in Canadian Index Funds without sacrificing quality.

2. iShares Core S&P/TSX Capped Composite Index ETF (XIC)

• Global Composition: Tracks the S&P/TSX Capped Composite Index (~250 stocks)
• Expense Ratio: 0.06%
• Annualized Return: ~7.8% (5‑year average)
• Morningstar Rating: 4.5 Stars

XIC stands out among the Best Canadian Index Funds for those who want exposure to nearly the entire Canadian market. With roughly 250 stocks in its portfolio, it leans heavily on blue-chip financial companies such as RBC, TD, and Scotiabank, which collectively often represent 40–45% of the fund’s weight. By including diverse sectors like energy, technology, and consumer staples, XIC reduces the risk that any single industry decline will drag the fund down. Its expense ratio is also a mere 0.06%, making it one of the most competitive Canadian ETF Index Funds on the market. For long-term, passive investors—such as those building a Best Canadian Long-Term Index Funds strategy—XIC’s track record of ~7.8% over five years and a 4.5-star Morningstar rating solidify it as a top choice.

3. BMO S&P/TSX Capped Composite Index ETF (ZCN)

• Global Composition: Tracks the S&P/TSX Capped Composite Index (~250 stocks)
• Expense Ratio: 0.06%
• Annualized Return: ~7.8% (5‑year average)
• Morningstar Rating: 4.5 Stars

ZCN mirrors XIC’s approach by tracking the same benchmark, the S&P/TSX Capped Composite Index. With around 250 stocks, it showcases broad exposure to prominent Canadian names, especially in banking and natural resources. The ultra-low expense ratio matches that of its peers at 0.06%, making ZCN a reliable avenue for those aiming for consistent market-wide returns. It’s a prime example of Canadian Passive Investment Funds—once you buy in, the fund automatically maintains the index weighting, eliminating the hassle of constant rebalancing. Over a five-year span, its performance hovers around 7.8%, aligning with other top-tier Canadian Diversified Index Funds and earning it a well-deserved 4.5-star rating.

4. iShares S&P/TSX 60 ETF (XIU)

• Global Composition: Tracks the S&P/TSX 60 Index (60 large‑cap stocks)
• Expense Ratio: 0.18%
• Annualized Return: ~7.0% (5‑year average)
• Morningstar Rating: 3.5 Stars

XIU zeroes in on the 60 largest and most liquid Canadian companies, a strategy that has helped it become one of the Top Canadian Dividend Index Funds—particularly because Canadian blue-chip banks and energy companies often produce consistent dividends. You’ll see major holdings like RBC, TD, Scotiabank, and Bank of Montreal dominating the top of the portfolio. However, note that financials can hover between 50–55% of the total weighting, leading to a heavier sector tilt. While XIU’s expense ratio (0.18%) is higher than some broader funds, it remains appealing for investors who prefer focusing on large, stable corporations. Its 7.0% five-year average return and strong liquidity keep it on the radar for those seeking straightforward, Canadian Financial Index Funds exposure.

5. Horizons S&P/TSX 60 Index ETF (HXT)

• Global Composition: Tracks the S&P/TSX 60 Index via synthetic replication
• Expense Ratio: 0.03%
• Annualized Return: ~7.0% (5‑year average)
• Morningstar Rating: 5 Stars

HXT uses synthetic replication to follow the S&P/TSX 60, delivering ultra-low fees of just 0.03%. The holdings mirror XIU’s focus on blue-chip Canadian companies, especially in finance and energy. Because of its efficient structure, HXT boasts tight index tracking and minimal tracking error, culminating in strong net returns over time. It’s also a favorite for those who want a slice of Canada’s biggest brands without paying a high management fee. With a perfect 5-star rating from Morningstar, HXT ranks among the Top Canadian Investment ETFs, particularly for cost-conscious investors looking for stable, large-cap companies.

6. iShares S&P/TSX Completion Index ETF (XMD)

• Global Composition: Tracks the S&P/TSX Completion Index (≈250–300 mid‑ and small‑cap stocks)
• Expense Ratio: ~0.22%
• Annualized Return: ~8.0% (5‑year average)
• Morningstar Rating: 3.5 Stars

XMD is designed for investors interested in mid- and small-cap Canadian equities—companies outside the top 60. This approach often yields higher growth potential compared to predominantly large-cap portfolios. However, mid- and small-cap stocks can exhibit more volatility, which is a trade-off for that extra upside. With ~250–300 holdings across various industries, XMD is moderately diversified, mitigating some risks of single-company blowups. An 8.0% annualized return over the last five years is appealing to those willing to tolerate more fluctuation, making it a relevant pick for building a well-rounded Best Index Funds in Canada portfolio where you balance large-cap and mid-cap exposures.

7. Vanguard FTSE Canada All Cap ex-Financials Index ETF (VXC)

• Global Composition: Tracks the FTSE Canada All Cap ex-Financials Index (≈150–200 stocks; excludes financials)
• Expense Ratio: ~0.07%
• Annualized Return: ~7.5% (5‑year average)
• Morningstar Rating: 4.5 Stars

VXC is an interesting product because it eliminates financial sector stocks entirely. If you’re already heavily invested in Canadian banks or you simply want less concentration in financials—a common theme in the Canadian market—VXC is a strategic fit. Holdings often include energy giants like Enbridge and Suncor Energy, along with materials and industrial companies. By skipping financials, it offers a diversified exposure to other Canadian segments, helping reduce sector overlap. With a 7.5% annualized return over five years and a low expense ratio of 0.07%, VXC underscores how you can Invest in Canadian Index Funds while carefully managing sector risks.

8. iShares S&P/TSX Capped Financials Index ETF (XFN)

• Global Composition: Tracks the S&P/TSX Capped Financials Index (predominantly the five major banks)
• Expense Ratio: ~0.30%
• Annualized Return: ~6.5% (5‑year average)
• Morningstar Rating: 3.5 Stars

XFN offers concentrated exposure to Canadian Financial Index Funds, mainly Canada’s big five banks—RBC, TD, Scotiabank, Bank of Montreal, and CIBC—which can comprise up to 80–90% of the portfolio. This targeted approach allows investors to capitalize on Canada’s strong financial sector reputation, but it also means that if banking hits a rough patch, XFN’s performance might dip harder than a diversified fund. Nonetheless, the sector’s robust dividend yields often attract those looking for regular income. With ~6.5% over five years and a 3.5-star Morningstar rating, XFN is a strategic component for those who want a heavier bank tilt in their Canada Index Fund Options.

Shaping a Long-Term Index Strategy in Canada

Whether your priority is cost efficiency, dividend yield, or tapping into growth sectors, these Top Canadian Index Funds cover a range of possibilities. Blending a broad-based fund like VCN or XIC with niche options—such as small-cap-oriented XMD or financial-heavy XFN—can fine-tune your asset allocation. You might also consider ex-financial funds like VXC if you’re already overexposed to the banking sector. Because of their low fees and broad market coverage, these Canadian Passive Investment Funds are ideal building blocks for an Index Fund Portfolio Canada that prioritizes stability and growth over the long haul.

If you’re looking for specific outcomes—higher dividends, exposure to mid-cap growth, or an equal-weight strategy—these Best Index Funds in Canada provide flexible answers. As always, balancing your portfolio with Canadian Bond Index Funds or other asset classes can help manage risk, ensuring you can weather market fluctuations. By focusing on these Canadian Investment Funds with proven track records, strong sector diversification, and minimal fees, you set yourself up for steady, sustainable returns in the Canadian marketplace.

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