ETFs · 9 min read

Best Canadian Tech ETFs 2026: XIT vs TEC vs ZQQ vs HXQ

Canadian technology is a tiny sliver of the S&P/TSX Composite (about 8 percent), and one company, Shopify, dominates it. If you want serious tech exposure from a Canadian brokerage account, you almost always end up buying a US-focused fund wrapped in a Canadian-listed ETF wrapper. Here is how XIT, TEC, ZQQ and HXQ stack up on fees, holdings and currency treatment in 2026, and which one belongs in your TFSA, RRSP or non-registered account.

Stock market data screens showing technology sector price movements

Why hold a Canadian tech ETF at all?

Information technology is roughly 8 to 10 percent of the S&P/TSX Composite in 2026, a fraction of the 30-plus percent weight it carries in the S&P 500. That means if you already own a broad Canadian index fund like VCN, XIC or ZCN, you have almost no tech exposure at all beyond Shopify, Constellation Software and a handful of smaller names.

A dedicated technology ETF only makes sense when you want to overweight the sector. The three usual reasons Canadian investors do that: chasing the long-run growth premium tech has historically delivered, gaining exposure to US megacap names like Apple, Microsoft and Nvidia without opening a US-dollar account, or hedging currency risk on those same US holdings so the returns come through in Canadian dollars.

The four names to knowAlmost every Canadian retail investor picks between XIT (iShares S&P/TSX Capped Information Technology), TEC (TD Global Technology Leaders), ZQQ (BMO Nasdaq 100 Equity Hedged to CAD) and HXQ (Global X Nasdaq-100 Index). They sound similar but hold completely different baskets and treat currency very differently.

Head-to-head: the 2026 numbers

Metric	XIT	TEC	ZQQ	HXQ
Issuer	iShares	TD	BMO	Global X
MER	0.61%	0.39%	0.39%	0.28%
Holdings	~11 Canadian names	~250 global tech	100 Nasdaq-100 names	100 Nasdaq-100 names
Top holding weight	Shopify ~40%	Apple/Microsoft ~10% each	Apple/Microsoft ~9% each	Apple/Microsoft ~9% each
Currency treatment	CAD (native)	USD unhedged	CAD hedged	USD unhedged (swap)
Distributions	Quarterly	Semi-annual	Annual	None (total return swap)
AUM (approx)	$1.0B	$1.7B	$2.8B	$1.1B
Uses derivatives?	No	No	Yes (FX forwards)	Yes (total return swap)

MER is not the whole costZQQ's 0.39% MER looks reasonable but the hedging strategy carries a hidden drag of roughly 0.3 to 0.7 percent per year in trending markets, because FX forwards have to be rolled monthly. HXQ's 0.28% headline fee also excludes the swap counterparty spread. In practice, expect total cost of ownership to be 15 to 40 basis points higher than the sticker MER for both hedged and swap-based funds.

XIT vs TEC: two totally different bets

XIT is a concentrated Shopify play

Only 11 holdings, capped at 25 percent per name (but Shopify still ends up near 40 percent by market cap methodology)
Almost pure Canadian tech: Constellation Software, OpenText, CGI, Descartes, Kinaxis, Lightspeed, Enghouse
No US megacap exposure at all - no Apple, no Microsoft, no Nvidia
Highest MER of the group at 0.61 percent
Volatile: single-name risk is real when Shopify moves 5 to 10 percent in a day

TEC is a diversified global tech basket

250-plus holdings across the US, Europe and Asia
Top-10 concentration around 45 percent - Apple, Microsoft, Nvidia, Alphabet, Meta
Unhedged USD exposure - Canadian dollar weakness helps you, CAD strength hurts
Includes non-Nasdaq names like TSMC, ASML and Samsung that Nasdaq-100 funds miss
0.39 percent MER is competitive for a global equity mandate

ZQQ vs HXQ: same index, very different tax treatment

Both ZQQ and HXQ track the Nasdaq-100, so their pre-fee gross returns should be almost identical. What differs is how the return is delivered to you and how the CRA taxes it. ZQQ physically holds the 100 stocks and hedges USD to CAD via monthly forwards, then passes through dividends as ordinary distributions. HXQ uses a total-return swap with a Canadian bank as counterparty: no dividends flow through, and any gain is only realised when you sell the ETF, at which point it is a capital gain.

The tax edgeIn a non-registered account, HXQ's swap structure converts what would be dividend income into deferred capital gains - taxed at 50 percent inclusion rate and only when you sell. For a high-income Canadian, that can save 20 to 30 percent of the annual distribution yield in taxes. In a TFSA or RRSP the structure does not matter and ZQQ is simpler to hold.

Which account should each ETF live in?

All four ETFs are Canadian-listed, so US withholding tax on dividends is unrecoverable in any account (unlike a US-listed ETF held in an RRSP, where the treaty exemption applies). That levels the playing field somewhat, but account choice still matters for currency risk and distribution taxation.

MATCH THE ETF TO THE ACCOUNT

TFSA: pick TEC if you want long-run growth with no distribution drag, or ZQQ if you want CAD-hedged Nasdaq exposure without touching USD
RRSP: TEC or HXQ - the RRSP shelters the low distributions either way, and both give broad US tech exposure
Non-registered: HXQ almost always wins on after-tax return because the swap defers all gains until you sell
Overweight Canadian tech: XIT is your only real choice, but position-size it small (5 percent or less) because it is really a Shopify proxy
Do not chase currency hedging in a long-term account - unhedged has beaten hedged in 6 of the last 10 years as the CAD weakened against the USD

When rebalancing tech into your portfolio matters

Tech ETFs are among the most volatile equity slices you can hold. A 5 percent target allocation to TEC can easily drift to 8 or 9 percent after a strong year, and back to 4 percent after a correction. If you never rebalance, you end up buying high and holding on the way down. Tools like Wealth Rebalancer let you set a target weight for each tech ETF and see exactly how much to buy or sell to bring it back to plan, using your next contribution instead of triggering taxable events.

Set your tech ETF target weight in Wealth Rebalancer as a percentage of your total portfolio
Use the 5 percent rebalance band rule to avoid over-trading - only act when drift exceeds 5 percentage points
In non-registered accounts, prefer rebalancing with new contributions over selling to avoid triggering capital gains
Review the concentration inside your tech ETF at least annually - top-5 weight in TEC and ZQQ has crept above 45 percent

For most Canadians, one broad global tech ETF (TEC in an RRSP, HXQ in a non-registered) plus a small XIT position for domestic exposure is enough. Piling on multiple Nasdaq-100 funds just adds fees without diversifying anything - you own the same 100 stocks twice.

Model your tech ETF allocation in Wealth Rebalancer

Free tool. Set targets for XIT, TEC, ZQQ or HXQ, see drift instantly, and rebalance with your next contribution.

Try it free

Frequently asked questions

Is XIT or TEC better in 2026?

They are answering different questions. XIT is a concentrated bet on Canadian tech and is roughly 40 percent Shopify by weight - if Shopify has a bad year, so does XIT. TEC holds 250-plus global tech names with Apple, Microsoft and Nvidia at the top, plus non-US names like ASML and TSMC. For diversified tech exposure with a lower 0.39 percent MER, TEC is the better core holding. Use XIT only as a small satellite position if you want Canadian tech overweight.

Should I choose hedged (ZQQ) or unhedged (HXQ, TEC) tech ETFs?

Over long horizons, unhedged has beaten hedged in most rolling 5-year windows since 2013 because the Canadian dollar has drifted weaker against the US dollar. Hedging also carries a 20 to 50 basis point drag from rolling monthly forwards. If you are within 3 years of needing the money and want to lock in CAD-terms returns, ZQQ makes sense. For any long-term account, unhedged is usually the better default.

Does HXQ pay any distributions?

No. HXQ uses a total-return swap with a Canadian bank counterparty, so all Nasdaq-100 dividends are reflected inside the ETF's NAV instead of being paid out. This means you owe zero tax each year in a non-registered account until you actually sell - and when you do, the entire gain is a capital gain, not a mix of dividends and gains. For high-income investors, this is often worth 20 to 30 percent of the distribution yield in tax savings.

Can I hold Canadian tech ETFs in my TFSA and FHSA?

Yes. All four ETFs discussed here (XIT, TEC, ZQQ, HXQ) trade on the Toronto Stock Exchange in Canadian dollars and are TFSA, FHSA, RRSP and RRIF eligible. Note that US withholding tax on any US dividends still applies to Canadian-listed ETFs in a TFSA and is unrecoverable, though this is small for tech which yields under 1 percent.

What is the best Nasdaq-100 ETF for a Canadian non-registered account?

HXQ almost always wins on after-tax return in a non-registered account because the swap structure defers all gains until you sell. ZQQ pays annual distributions that get taxed each year at your marginal rate on the dividend portion, plus you need to track return of capital in your adjusted cost base. For a taxable account and a long holding period, HXQ is meaningfully more tax-efficient.

How much of my portfolio should be in tech ETFs?

There is no universal answer, but the S&P 500 is already around 30 to 35 percent tech in 2026, so if you own a US index fund like VFV or ZSP you already have significant exposure. A dedicated tech ETF sleeve of 5 to 15 percent on top of that is typical for growth-oriented investors under 45. Anything higher and you are making a concentrated sector call - fine if you know that is what you are doing, but rebalance discipline becomes critical.