Canada's Best ETF Broker for 2024

If you had invested $10,000 in January 2001 in an ETF (exchange-traded fund) that passively tracks the most famous stock market index in the US, the S&P 500, by the end of 2022, your investment would have been worth $45,227.

Yes, ETFs (also known as trackers) have immense potential as simple and easy financial products with a solid return on investment, but who are the best ETF brokers on the Canadian market? And what’s the best way to invest in ETFs? What is the best broker for beginners and which is the cheapest?

This guide will help you find out the answers to these questions and everything else there is to know about ETFs in Canada.

Top 3 best ETF brokerages in 2024

Qtrade: the option for an ETF-only portfolio

Qtrade is a Canadian brokerage based in Vancouver, Canada. They’re known for their excellent customer service and intuitive platform. Qtrade is one of the best online brokerage companies in Canada, especially if you plan on investing heavily in Canadian ETFs and prioritizing low-fee ETF trading strategies.

Qtrade is a great option for beginners and experts alike. With Qtrade, you can invest in stocks, free ETFs, options, mutual funds, bonds, GICs and other securities, all at competitive prices. A trusted name, it has been on the market since 2001.

You can trade hundreds of commission-free ETFs on the Qtrade brokerage platform. Using the investor tool, you can choose between diverse strategies like fixed income, money market and equity ETFs. Qtrade allows you to buy EFTs from around the world, and you can also choose between a range of sectors like industrial, real estate and precious metals.

Questrade: Canada's leading discount brokerage

Questrade is a high-profile Canadian online brokerage that delivers in-house trading platforms. They were awarded Canada’s Best Managed Company an impressive 11 times. With over $30 billion in assets under administration and over 250,000 new accounts each year, it’s safe to say Questrade is one of the best brokers in Canada, online or not.

The company gives investors two primary options in the management of their Questrade account. Autonomous investors can build their own portfolio with a self-managed account to save on fees, while those seeking some guidance can select a pre-designed QuestWealth portfolio, curated and managed by experts to help them achieve their financial goals. This service fee for QuestWealth portfolios starts at 0.25%. Both types of accounts can focus on ETFs.

The majority of Questrade reviews are very positive. With Questrade’s well-designed app and website, investing in ETFs is simple, and buying ETFs is commission-free. You will have to pay a fee when you decide to sell, though.

XTB: the global CFD broker with great trading platforms

XTB is one of the biggest online trading brokerages in the world. Their headquarters are in Warsaw, Poland, but they have offices in 13 countries and are regulated in many other countries. Because of this, XTB is highly reliable. They offer advanced trading platforms and include insurance coverage for all their customers up to a value of €1 million, in case of bankruptcy.

They also provide commission-free ETFs, up to €100k monthly trade volume, which for most is plenty. Depositing and withdrawing your money is quick and mostly free. Opening an account is as fast and user-friendly. However, XTB has a limited product portfolio, and is know largely as CFD broker, so if you’re looking to invest in trackers at XTB, you’ll have to get familiar with contracts for difference (CFDs).

What is an ETF?

If you’ve never heard of ETFs, you might be wondering, what does ETF stand for? ETF stands for Exchange-Traded Fund, and ETFs are collections of securities (be it stocks, bonds, commodities, crypto or otherwise) combined into a single purchasable fund. Merging assets into one product allows investors to buy multiple different assets in a single trade.

An ETF is traded on exchanges just like stocks. They are often created by fund management companies to mimic the composition of major exchange indexes like the S&P500 or the Canadian S&P/TSX Composite Index.

ETFs are widely known as passive index trackers, but they can comprise any type of asset class from stocks to bonds or commodities. In addition, ETFs can also be specific to certain industries like real estate or renewable energy. As a truly flexible financial product, they can even blend a mix of asset classes and cover any geographical region.

It’s also worth mentioning that ETFs can be traded directly on an exchange or indirectly with CFDs (contracts for difference), which are derivative products that replicate the price of an ETF.

How do ETFs work?

ETFs simplify the investment process for average investors by eliminating the need to invest in multiple assets individually. The ETF provider, or fund manager, assembles a collection of assets based on specific criteria and gives the resulting ETF a name that reflects its composition. For instance, the iShares Core S&P/TSX Capped Composite Index ETF is made up of stocks from the Canadian S&P/TSX index.

If you want to invest in the particular basket of assets included in an ETF, you can do so easily. Similar to purchasing shares of a company, you can simply buy ETFs on stock exchanges.

If you want to trade beyond ETFs, compare the best overall brokers in Canada:

What are the different types of ETFs?

There are numerous types of ETFs available to meet the specific needs of investors, ranging from simple to complex. For instance, if you’re seeking a stable income from your ETF investment, you might want to choose a dividend-paying or bond ETF. Alternatively, if you are interested in investing solely in renewable energy, then you may select an industry or sector ETF that tailors to your objectives.

The most common types of exchange-traded funds include Stock or Equity ETFs, Industry/Sector ETFs, Commodities ETFs, Bond ETFs and International ETFs, while lesser-known ETFs include Inverse ETFs and Leveraged ETFs.

Equity ETFs

As their name suggests, these ETFs are collections of shares on the stock market. They are generally preferred if you want to implement a long-term strategy.

Equity ETFs provide more diversification than direct equity investments, so they are less risky. Some of these ETFs can pay a dividend and others focus more on stock growth strategies.

Industry/Sector ETFs

Sector ETFs allow you to invest in a particular business sector. You can use them, for instance, to invest in 5G, biotechnology, energy or finance. There are also more surprising ETFs such as the TSE:MTAV ETF which specializes in the metaverse.

These ETFs are compiled of stocks from specific companies within these sectors.

Commodities ETFs

Some ETFs are compiled of commodities. Note that commodities can be traded on the market in the same way as any other product. Commodity ETFs group different types of commodities from markets like:

• Energy raw resources such as oil or natural gas
• Precious metals like gold or silver
• Agricultural raw materials such as coffee or sugar

Commodity ETFs can be made up of the actual commodities or shares of companies that produce, transport or store commodities.

Bond ETFs

Bond ETFs do not work the same way as individual bonds. Unlike bonds, with ETFs, you will not have a maturity date. Dividends will be paid regularly as long as you hold shares in these ETFs.

The income generated by these ETFs comes from the dividends generated by the individual bonds that make up the funds.

International Index ETFs

These ETFs are aimed at investors who wish to invest in foreign financial markets. They can be a collection of stocks from a single country or a block of countries such as China ETFs, SP500 ETFs or Russell 2000 ETFs.

You can also invest in an ETF that tracks a national stock market index, such as the DAX 30 (Germany), the CAC 40 (France) or the FTSE 100 (UK).

Other types of ETFs

There are many other types of ETFs, based on different criteria, including:

• Inverse ETFs: As the name suggests, these ETFs operate inversely to the underlying asset they are tracking. They rise when the asset falls and fall when this asset rises.
• Leveraged ETFs: these ETFs use both shareholder equity and debt to try and increase returns to shareholders of the leveraged fund. By maintaining exposure of $2 or $3 to the underlying index for every $1 of shareholder investment, the leveraged ETF will specifically try to achieve double or triple returns, respectively

Who are the biggest ETF companies?

Among the largest ETF issuers in Canada and the U.S. are:

Are ETFs a good investment?

Yes, ETFs are a sound investment for many people. There are many advantages to investing in ETFs but also some disadvantages.

The main pros of investing in ETFs are:

• Low fees: investing in an ETF means making a diversified investment in various assets with a single commission.
• A lot to choose from: there are currently almost 9,000 ETFs on the world’s stock markets. With such a wide choice, it would be hard not to find something that suits you.
• High liquidity: the ETF market is very liquid. These assets can be traded throughout the day and sometimes at an attractively high volatility.
• Targeted investments: with ETFs, you can choose to invest in a particular sector, without the hassle of picking individual stocks.
• No minimums: you can start with very low initial investments.
• Easy access: ETFs allow you to invest in alternative markets that would otherwise be harder to invest in. For example, commodities or cryptocurrencies.

Naturally, ETFs also have some downsides, such as:

• High diversification: ETFs are not actively managed and are built to follow a specific index, which can lead to over-diversification.
• Imperfect rebalancing: most ETFs are not actively managed, which means their asset allocation can stray from the desired strategy. If an asset with an ETF does particularly well or poorly, the ETF overall can sometimes suffer.

Different ETF trading styles

There are several strategies for investing in ETFs. Below are a few.

If your plan is to buy and hold ETF shares, then you might consider picking ETFs that pay dividends.

These specific ETFs are suitable for a passive investment strategy and the assets that compose them are generally determined based on the payment of dividends.

Investor profiles that work well with ETFs

Investing in ETFs suits several different investor profiles. Here is a quick guide for 3 broad investor types:

• Beginners. If you are a beginner, taking your first steps in financial products, a traditional broker, such as Questrade, might be best.
• Veterans. if you already have experience in the financial markets, then you might favour CFD brokers allowing you to trade ETFs with some leverage. XTB is a good option for you.
• Mixed. If you have a bit of experience in the market but still want to benefit from leveraging, you can choose a broker offering to directly buy and sell ETFs as well as trade them with CFDs.

Minimum deposits for investing in ETFs

How to buy ETFs in Canada?

All you need to start investing in ETFs is an online brokerage. By comparing and shopping around you can find the best ETF broker for you.

Here are the steps to sign up with Qtrade, one of the best brokers for ETFs in Canada.

1. First, you have to sign up by going to their home page and clicking on Open an account.
2. Fill out the basic form. You will need to provide your first and last names, email address and create a password.
3. They send you a four-digit confirmation code to your email inbox. You will need it to activate your account.
4. Select an account type, enter your personal information and confirm your identity. You’ll need your ID and your social insurance number as well as your income and assets details.
5. Once your account is set up, you can transfer funds online by selecting Accounts, then Transfer Funds, then Electronic Funds Transfer. Otherwise, you can add money in the same way you would pay a bill from your credit union or bank account. Simply select Qtrade as a bill payee.
6. Go to your Account Summary page, within the Accounts tab at the top of the page. Click the dropdown menu labelled Select beside the account you want to use and select equity order.
7. Select the ETF you want to invest in. You can either look at a list of all Qtrade’s ETFs or search for a specific one.
8. Enter the details of your order, and when you’re ready, click Review Order.
9. Make sure all the details are correct before entering your trading password and clicking Submit Order.

How to choose the right ETF broker?

All Canadian online brokerages offer different features to attract your business. However, try to look past the marketing and branding to uncover the real differences that will affect your investing experience, and make sure the one you choose fits your investment plan.

ETF broker defined

An online broker is a type of financial company that allows you to open an online stock account. Online brokerage firms act as virtual intermediaries that give you access to all sorts of investment markets. No online broker in Canada focuses entirely on ETFs, but the brokers listed above offer attractive conditions to those wishing to invest mostly in ETFs.

Factors to consider when choosing an ETF broker

Here are some tips to help you choose the best online broker for ETF investments:

• Regulation and security. Before investing your capital with a broker, be sure that it’s safe. It’s always best to favour brokers who are regulated by an official body.
• Variety of ETFs offered. A wide selection of ETFs allows you to diversify your portfolio more, which limits your risks.
• ETF fees. Whether it's commissions or spreads, you should compare the different fees charged by ETF brokers.
• Other instruments available. If you want to invest in something other than ETFs, you can also opt for a broker or broker offering you, for example, access to stocks or CFDs on other types of assets.
• Tools and functionality. Make sure you know what your brokerage platform can and can’t do. You’ll want to choose your ETFs wisely.

The best ETF broker for beginners

Questrade offers the best trading platform for beginners in Canada. Their platform is easy to use, and you can open a demo account before investing your real, hard-earned money. In addition to having comprehensive beginner guides, Questrade also offers competitive fees and a good amount of tradable assets, including commission-free ETFs.

The cheapest ETF broker

Questrade has extremely low commissions and minimal overall costs. They also offer free ETF investing for long-term investors which makes them one of the best low-fee online brokers.

How much is an ETF broker?

When investing in ETFs, you need to consider the various costs and fees that may apply.

And here is an explanation of some of these costs:

• Transaction fees apply when buying or selling securities or ETF shares. They can include custodian fees, stock market fees and others.
• The Total Expense Ratio or TER is the fee for managing the ETF. They are annual and automatically deducted.
• Spread refers to a slight difference between the buy price and the sale price of the ETF. CFD brokers use spreads as their main source of revenue.

Are ETFs safe?

ETFs are fairly safe investments because they are naturally diversified. When you invest in an ETF, you aren’t investing in one company alone which carries high risk, instead, you’re buying into a collection of assets. That way, no asset can compromise your investment singlehandedly. For example, the Vanguard FTSE Canada All Cap Index ETF includes 182 publicly traded companies. Even if one of these companies goes bankrupt, the impact on the ETF will be minimal.

However, ETFs are still volatile and you do assume market risk when investing in them. For instance, if you invest in an Energy ETF and the overall energy sector suffers a crisis, then your investment will reflect the market trend and you may lose money. That is why it is important to build an ETF portfolio to cover multiple industry sectors, geographical regions and asset classes.

How are ETFs taxed in Canada?

Like most stock market investments, there are two ways ETF gains should be filed on your taxes. If your investment account is taxable (TFSAs and RRSPs aren’t), then you must pay capital gains tax if, and only when, you sell your ETF. The tax is based on the ETF sale price compared to your adjusted cost basis (ACB).

In addition, if your ETFs pay out any distributions, such as dividends, you also have to pay tax on those gains.

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Alexandre Desoutter

Alexandre Desoutter has been working as editor-in-chief and head of press relations at HelloSafe since June 2020. A graduate of Sciences Po Grenoble, he worked as a journalist for several years in French media, and continues to collaborate as a as a contributor to several publications.