How to Start Index Investing in Canada (2026 Beginner Guide)
Index investing is the strategy of owning the whole market rather than trying to pick the best stocks within it. It sounds boring. It is boring. And decades of evidence show it outperforms active stock picking for the vast majority of investors over the long run.
What is index investing?
An index is a list of securities that represent a market or market segment. The S&P/TSX Composite, for example, tracks the largest companies on the Toronto Stock Exchange. The S&P 500 tracks 500 large US companies. An index fund or index ETF simply buys all the securities in the index in proportion to their size, giving you ownership of the entire market in one purchase.
The alternative — picking individual stocks or paying a fund manager to pick them — is called active investing. Index investing does not try to beat the market. It aims to match the market's return, minus a small fee.
Why index investing beats most active managers
Every year, S&P Global publishes the SPIVA Canada Scorecard, which measures how many actively managed Canadian funds beat their benchmark index. The results are consistent: over 10 years, roughly 90% of active Canadian equity funds underperform their index. Over 20 years, it's even worse.
The reason is simple arithmetic: the average active investor must underperform the index by the amount they pay in fees. Canadian mutual funds charge 1.5–2.5% per year on average. An index ETF charges 0.10–0.25%. That 1–2% gap, compounded over 20–30 years, represents an enormous difference in final wealth.
ETFs vs index mutual funds: which to use?
Index ETFs
- Trade on stock exchange like a stock
- Can buy any amount (one unit minimum)
- MER: 0.10–0.25%
- Available at any brokerage
- Free to buy at Questrade, Wealthsimple
- Most tax-efficient structure
Index Mutual Funds (e.g. TD e-Series)
- Buy directly through the bank/provider
- Can invest any dollar amount (no unit size)
- MER: 0.30–0.50%
- Requires a TD account for e-Series
- Auto-invest by dollar amount is easy
- Good for small, round-dollar contributions
For most investors, index ETFs are the better choice due to their lower fees and availability at any Canadian brokerage. TD e-Series mutual funds are a reasonable alternative if you prefer to invest exact dollar amounts automatically without worrying about share prices.
The best index ETFs for Canadian investors
| ETF | What it holds | MER | Best for |
|---|---|---|---|
| XEQT | Global equities (Canada + US + Intl + EM), 100% stocks | 0.20% | Long-term growth, 20–45 years to retirement |
| VEQT | Global equities (similar to XEQT) | 0.22% | Long-term growth, Vanguard preference |
| XGRO | 80% global equities + 20% Canadian bonds | 0.20% | Moderate growth with some stability |
| VGRO | 80% global equities + 20% Canadian bonds | 0.20% | Moderate growth, Vanguard preference |
| XBAL | 60% global equities + 40% Canadian bonds | 0.20% | Conservative growth, near retirement |
| XIC / VCN | Canadian stocks only | 0.06% / 0.05% | Supplementing a global portfolio with Canada tilt |
How to get started in 5 steps
Your index investing checklist
- Open a brokerage account — Wealthsimple Trade (commission-free) or Questrade (free ETF buys) are ideal for beginners
- Open a TFSA inside the brokerage — your first $7,000/year grows completely tax-free
- Choose one ETF — XEQT or XGRO for most investors starting out
- Set up automatic contributions aligned to your pay schedule
- Ignore short-term market moves — stay invested and keep contributing
How much do you need to start?
You can start index investing with as little as the price of one ETF unit. XEQT and XGRO typically trade between $25–$35 per unit. With Wealthsimple Trade, there's no minimum account balance and no commission — you can literally start with $30.
Consistency matters far more than the initial amount. Starting with $50 per month at age 25 will build more wealth than starting with $500 per month at age 45 — even though the total contributions are similar — because of compound growth over a longer period.
Frequently asked questions
What is the best index ETF for Canadians in 2026?
XEQT (iShares Core Equity ETF Portfolio) and VEQT (Vanguard All-Equity ETF Portfolio) are the most popular choices for long-term investors who want 100% global equity exposure. For a smoother ride with bonds included, XGRO or VGRO (80/20) are excellent alternatives. All charge around 0.20% MER.
Is index investing risky?
Yes — index investing carries market risk. A global equity ETF like XEQT can fall 30–50% in a severe market downturn. However, because it owns thousands of companies across many countries, it eliminates the specific risk of any single company failing. The risk is market-wide, not company-specific, and historically recovers over time with patience.
How much do I need to start index investing in Canada?
You can start with the price of one ETF unit — typically $25–$40 for popular all-in-one ETFs. Wealthsimple Trade and Questrade have no minimum account balances. There is no meaningful advantage to waiting until you have a larger amount.
Should I use a robo-advisor or buy index ETFs myself?
Both approaches work. Robo-advisors like Wealthsimple Invest automate everything but charge an extra 0.40–0.50% management fee on top of the ETF's MER. Buying ETFs yourself at Wealthsimple Trade or Questrade is essentially free. The self-directed approach takes 15 minutes to set up and requires very little maintenance thereafter.