When looking for an Exchange Traded Fund (ETF) that indexes Canadian equities, the two most suitable choices are from iShares.
The iShares CDN LargeCap 60 Index Fund (XIU) tracks the S&P/TSX 60 Index. This index is composed of S&P’s selection of 60 of the largest, most liquid stocks on the TSX. The Management Expense Ratio (MER) on this ETF is a very low 0.17%.
The iShares CDN Composite Index Fund (XIC) tracks the S&P/TSX Capped Composite Index. This index includes over 200 companies listed on the TSX. It’s MER is 0.25%.
I believe XIC is worth the extra 0.08% MER as is provides much more diversification, including some exposure to small cap stocks. Ultimately, either of these ETFs will provide a better return than the majority of actively managed funds, which are dragged down by higher MERs.
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Tom Drake is the owner and head writer of Canadian Finance Blog.
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