The investing industry in Canada benefits when you believe investing is complicated. It isn’t. The evidence overwhelmingly supports a simple, low-cost approach that most people can set up in an afternoon and then largely ignore.
Why Index Investing Works
An index fund (or ETF — Exchange-Traded Fund) holds every stock in a particular market index, weighted by size. A Canadian stock market ETF holds a slice of every publicly traded Canadian company. A global equity ETF holds thousands of stocks across dozens of countries.
The evidence on actively managed funds vs. index funds is damning for active management: over any 15-year period, approximately 85-90% of actively managed mutual funds underperform their benchmark index after fees. The reason is simple — high fees compound over time into enormous drags on returns.
Index ETFs typically charge 0.05-0.25% annually. Actively managed Canadian mutual funds typically charge 1.5-2.5% annually. Over 30 years, that difference on $100,000 invested is roughly $150,000-$200,000 in lost returns.
The One-ETF Portfolio
For most Canadian beginners, a single all-in-one ETF is the simplest starting point. These hold thousands of global stocks and bonds in a single fund, automatically rebalancing:
- XEQT (iShares Core Equity ETF Portfolio) — 100% global stocks, for long time horizons (20+ years). MER: 0.20%
- XGRO — 80% stocks / 20% bonds. MER: 0.20%
- XBAL — 60% stocks / 40% bonds. More conservative. MER: 0.20%
- VGRO / VBAL / VEQT — Vanguard’s equivalent options with similarly low fees
Buy one of these inside a TFSA or RRSP and you have a globally diversified portfolio for 0.20% per year. That’s it.
Where to Open an Account
- Questrade: Canada’s most popular discount broker. Free to buy ETFs; $4.95-$9.95 to sell. TFSA and RRSP accounts available. Low minimums.
- Wealthsimple Trade: Commission-free trading. Straightforward app. Good for beginners.
- Wealthsimple Invest: Robo-advisor that does the investing for you for 0.5% annual fee. Higher cost than DIY but genuinely hands-off.
- RBC/TD/Scotiabank Direct Investing: Big bank brokerages. Higher fees but integrated with your banking.
The Most Important Rule
Start before you feel ready. The biggest mistake is waiting until you understand everything — that day never comes, and every month of delay is compounding you’re not capturing.
Open a TFSA at Questrade or Wealthsimple. Contribute $50 or $500 — whatever you have. Buy XEQT or VGRO. Set up monthly automatic contributions. Stop looking at it daily. Review annually.
That approach, done consistently for 20-30 years, will outperform most financial advisors, most actively managed funds, and most people who spent years trying to pick winning stocks.
