XIU vs ZCN vs VCN 2026: Which Canadian Equity ETF Should You Own?
Three ETFs, three index providers, three different ways to own the Canadian stock market. XIU is the oldest exchange-traded fund in the world and still the most liquid Canadian ETF. ZCN and VCN charge roughly a third of its fee and hold three to four times as many stocks. Here is what actually separates them, and how to pick without second-guessing.
What each ETF actually tracks
XIU (iShares S&P/TSX 60 Index ETF) tracks the S&P/TSX 60: the 60 largest Canadian companies by market capitalization, screened by a committee at S&P Dow Jones. It was launched in March 1990 as the Toronto 35 Index Participation Fund, making it the oldest exchange-traded fund in the world. Rebalances quarterly.
ZCN (BMO S&P/TSX Capped Composite Index ETF) tracks the broader S&P/TSX Capped Composite: roughly 230 Canadian stocks weighted by market cap, with a hard 10% cap on any single name. The cap matters because historically Nortel at its peak and Shopify in 2021 would have pushed past 10% without it. Rebalances quarterly.
VCN (Vanguard FTSE Canada All Cap Index ETF) tracks the FTSE Canada All Cap Domestic Index: around 180 Canadian stocks across large, mid, and small cap, weighted by free-float market cap. FTSE uses slightly different inclusion rules than S&P, which means Brookfield's dual-listed structure and a handful of other names are treated differently. Rebalances semi-annually.
Head-to-head: the numbers that actually matter
| Metric | XIU | ZCN | VCN |
|---|---|---|---|
| Issuer | iShares (BlackRock) | BMO | Vanguard |
| Index tracked | S&P/TSX 60 | S&P/TSX Capped Composite | FTSE Canada All Cap |
| Holdings | ~60 | ~230 | ~180 |
| MER (2026) | 0.18% | 0.06% | 0.05% |
| Assets under management | $12-13B | $8-9B | $7-8B |
| Trailing 12-mo yield | ~2.8% | ~2.9% | ~2.9% |
| Average bid-ask spread | 1 cent | 1 cent | 1-2 cents |
| Mid and small cap weight | 0% | ~15% | ~17% |
| Top-10 concentration | ~47% | ~37% | ~35% |
| Options chain available | Yes (very deep) | Minimal | Minimal |
| Distribution frequency | Quarterly | Quarterly | Quarterly |
Where the three index rules actually diverge
The 60-stock S&P/TSX 60 and the 230-stock Capped Composite share the same top 60 names. The extra 170 names in the Composite are mid caps and smaller large caps: companies like Dollarama, Lululemon's Canadian listing, Celestica, Methanex, Lightspeed, and the full roster of smaller Canadian financials, miners, and REITs. In most years those extras add about 0.3 to 0.6 percentage points of return - a tiny edge, but one that compounds.
FTSE's rule differences matter at the margins. FTSE moved Brookfield's primary listing designation around in 2022, which briefly caused VCN's weight in BAM to drift from ZCN's. FTSE also uses stricter liquidity screens, which can delay the inclusion of fast-growing names by a quarter or two. For a core Canadian holding on a 20-year horizon, none of this moves the needle.
Fees compounded over 30 years
The 13-basis-point gap between XIU (0.18%) and VCN (0.05%) looks small, but drag compounds. On a $100,000 lump sum earning 7% a year for 30 years, the gap is roughly $29,000 by the end. On $500,000 you leave $145,000 on the table over the same horizon. The counter-argument is that XIU has sometimes outperformed by more than its fee gap because the TSX 60 avoided a few mid-cap blowups, but historical outperformance from the top-heavy index is not something anyone can promise forward.
Pick XIU if
- You trade options on your Canadian equity sleeve (covered calls, puts, collars)
- You run six-figure block trades and need the tightest spreads
- You already hold XIU in a non-registered account and selling would trigger large capital gains
- You want a tax-loss harvest partner for the Capped Composite (XIU to ZCN works)
- You value a 36-year track record over a few basis points of fee
Pick ZCN or VCN if
- You want the lowest ongoing cost (both at the floor of Canadian equity ETF pricing)
- You want exposure to mid caps and small caps alongside the big names
- You do not trade options and you place normal retail-sized orders
- You bank with BMO (ZCN) or prefer Vanguard's governance model (VCN)
- You are starting fresh and have no reason to default to XIU
Liquidity: where XIU still earns its fee
XIU trades roughly 2 to 3 million units a day. ZCN and VCN trade 400 to 700 thousand units a day. For a retail investor buying 100 shares at a time, this does not matter - all three show 1 to 2 cent spreads during normal market hours. For a $500,000 single trade, XIU will fill tighter and faster. For a market-on-close order from an institutional desk, XIU is the only one that absorbs the flow without noticeable impact. If you are a retail investor and you are even asking this question, you probably are not the target of this concern.
The options chain is the real story. XIU has deep, liquid, multi-expiry options going out two years, with tight bid-ask spreads on strikes within 15 to 20 percent of spot. ZCN has thin, sporadic options and VCN has essentially none. If you ever want to write covered calls on your Canadian equity position, XIU is the only option that works.
Tax treatment in a non-registered account
All three ETFs distribute Canadian eligible dividends, which qualify for the dividend tax credit (DTC). In a non-registered account that credit effectively taxes dividends at roughly 25 to 35 percent, depending on your marginal rate and province. All three also pass through small amounts of return of capital and the occasional capital gains distribution. Over the past five years, XIU has distributed slightly fewer capital gains per unit than ZCN - a function of its lower turnover - but the gap is small and depends heavily on market conditions.
Which one belongs in each account type
| Account | Best default | Reason |
|---|---|---|
| RRSP / RRIF | VCN or ZCN | Lowest ongoing fee drag over decades of compounding |
| TFSA | VCN or ZCN | Fee drag compounds tax-free, so every basis point matters |
| FHSA | VCN or ZCN | Short horizon (max 15 years), low fee wins on a near-certain basis |
| Non-registered | ZCN + XIU as TLH pair | Dividend tax credit on all, plus the swap gives you a loss harvesting partner |
| Options-enabled account | XIU | Only Canadian ETF with a usable options chain for covered calls |
Common mistakes investors make picking between them
- Holding all three. The overlap is 90%+ in weighted terms. You are paying three MERs for one exposure.
- Switching from XIU to VCN in a non-registered account without checking the tax hit. A $200,000 position with $50,000 of embedded gain triggers roughly $12,000 of tax to save $260 a year.
- Assuming the Capped Composite is dramatically more diversified than the TSX 60. The extra 170 names are only 15% of the weight.
- Picking the ETF with the highest trailing yield. The yield gap is 10 to 20 basis points and reflects timing of distributions, not underlying income.
- Confusing VCN with VCE. VCE is Vanguard's TSX 60 tracker (0.09%) - think of it as a cheaper XIU alternative, but a different product than VCN.
The 60-second decision tree
- Do you trade options or run block trades? Yes = XIU. No = continue.
- Do you already hold XIU in a non-registered account with large embedded gains? Yes = keep XIU, do not switch. No = continue.
- Do you bank with BMO and want everything under one roof? Yes = ZCN. No = continue.
- Do you prefer FTSE indexing over S&P indexing (or Vanguard's governance structure)? Yes = VCN.
- Still stuck? Default to ZCN. 1 basis point of difference versus VCN does not change your retirement.
Frequently asked questions
Is XIU, ZCN, or VCN better for a 25-year-old starting from zero?
ZCN or VCN. On a 40-year horizon the 13 basis point fee gap versus XIU compounds to roughly $100,000 on a $200,000 ending portfolio. VCN edges out ZCN by 1 basis point, so VCN is the mathematically optimal pick, but the practical difference is nothing. Choose whichever you already have an account with.
Why is XIU still so popular if it costs three times as much?
Three reasons. First, inertia - XIU has been around since 1990 and has decades of accumulated holdings in non-registered accounts where selling would trigger large capital gains. Second, liquidity - block traders and options writers legitimately need XIU's depth. Third, brand - 'iShares' and 'S&P/TSX 60' are instantly recognizable to Canadian investors in a way that 'FTSE Canada All Cap' is not.
Can I use XIU and ZCN for tax-loss harvesting without triggering superficial loss rules?
Yes, in most interpretations. The CRA's superficial loss rule applies to 'identical property.' XIU tracks the S&P/TSX 60 and ZCN tracks the S&P/TSX Capped Composite - different indices, different holdings counts, different providers. Tax professionals generally treat them as not identical. That said, the rule has not been definitively tested in court for ETF pairs, so if you want certainty talk to a CPA before harvesting large losses.
Does XIU, ZCN, or VCN include Brookfield (BAM / BN)?
All three include Brookfield exposure, but through different weights because of how the three index providers handle its dual listing. BN (Brookfield Corporation) and BAM (Brookfield Asset Management) are both in the TSX 60 and the Capped Composite, and both appear in FTSE's Canada All Cap. The combined BN+BAM weight is roughly 3 to 4% across all three ETFs.
What about XIC - should I use that instead of ZCN?
XIC and ZCN track the same index (S&P/TSX Capped Composite) at essentially the same fee (0.06% vs 0.06%). They are near-perfect substitutes. XIC has more AUM ($14B+) and slightly tighter spreads on average. If you want iShares branding at Composite-level pricing, use XIC. If you prefer BMO or already bank there, use ZCN. For VCN we published a dedicated HXT vs XIC vs VCN comparison that covers the three-way choice.
How much of my portfolio should be in Canadian equities?
A market-cap neutral weight would be roughly 3% - Canada is about 3% of global stock market value. Most Canadian model portfolios land between 20 and 30% Canadian equity, reflecting a home bias that trades diversification for familiarity, dividend income, and a currency match to local spending. The all-in-one ETFs land in that range too: VEQT is 30% Canadian, XEQT is 25%, VGRO is 24%.