The Best ETFs for your TFSA (Tax Free Savings Account) in April 2024

Because the TFSA is completely tax-free, many investors may look to take a more aggressive approach and invest in high-growth technology companies. The iShares S&P/TSX  Capped Info Tech ETF (TSE:XIT)  from iShares is a strong option if you are among that crowd.

The fund looks to provide long-term capital growth and tracks the Capped Information Technology Index as a benchmark. So, this is an index fund. However, it has a high turnover ratio of 65%, highlighting the fact there is a lot of shuffling inside this high-growth ETF.

There is a large amount of concentration inside this ETF. But, this is a concentration that is ultimately beneficial to the investor. There are not many strong technology options here in Canada, so we must take advantage of the few successful ones we have.

This is why Shopify (SHOP) and Constellation Software (CSU) make up more than 50% of the fund at the time of writing.

Other holdings rounding out the top 5 include CGI Inc (GIB.A), which has a nearly 20% allocation, along with OpenText (OTEX), and Descartes Systems (DSG).

The ETF pays no distribution and has management fees of 0.61%, meaning you'll pay $6.10 per $1000 invested. With only 30 total holdings, it holds a relatively small basket of securities because of Canada's tech industry's overall size or lack thereof.

However, don't confuse a lack of size with a lack of returns. This fund has annualized returns of 18.41% over the last decade, crushing the TSX, the S&P 500, and the NASDAQ.

One of the best ways to grow your wealth is to invest in Canadian dividend stocks, particularly those that can make consistent, consecutive increases to the dividend. If you're looking for a fund that follows this, look no further than the TSX Canadian Dividend Aristocrats Index ETF (TSE:CDZ).

This ETF is also an index fund, tracking the TSX Canadian Dividend Aristocrats Index. To earn the title of Canadian Dividend Aristocrat, a company has to increase its dividend for 5 consecutive years and maintain that streak of dividend growth.

This is why you'll see some of the most prominent companies in Canada in the top holdings, including Enbridge (ENB), Manulife Financial (MFC), Pembina Pipeline (PPL), BCE Ince (BCE), and Canadian Natural Resources (CNQ). In total, the fund has 93 holdings.

In terms of fees, the MER is 0.66%, meaning you'll pay $6.60 per $1000 invested to own this fund. This is a bit on the expensive side, but considering it is a niche ETF, there is more turnover as they add new companies and remove ones that did not maintain growth streaks. As such, more activity means more fees.

Unlike XIT, this one pays a large distribution. At the time of writing, it pays a distribution of just shy of 4%, so income seekers will undoubtedly appreciate this element of the fund. To add to this, you'll gain the advantage of holding 93 companies that are continually growing dividends year in and year out.

In terms of performance, this fund used to track the TSX index quite well. However, since the pandemic, this ETF has struggled to keep up. This is likely because it doesn't have exposure to the smaller junior oil producers and gold companies, which soared due to high commodity prices.

You won't find an ETF older than the iShares S&P/TSX 60 ETF (TSE:XIU). The fund debuted in the early 90s and was the first ever exchange-traded fund. Its objective is quite simple. It holds 60 of the largest Canadian equities in the country.

Why only 60? The Toronto Stock Exchange is full of companies exposed to extremely cyclical environments. Think oil producers, gold producers, silver producers, and even to a certain extent, financial companies.

Many of these cyclical companies are smaller in nature and tend to be highly volatile. An investor may not want exposure to those companies and instead want to own some of the largest. As a result, the TSX 60 ETF gives an investor single-click exposure to some of the premiere companies in Canada.

The top holdings contain Canada's 3 major banks in Royal Bank (RY), Toronto Dominion Bank (TD), and Bank of Montreal (BMO). Other notable options in the top 10 include Canada's railways in Canada Pacific Railway (CP) and Canadian National Railway (CNR).

Finally, we have one of Canada's largest pipelines in Enbridge (ENB) and one of the largest asset managers in the world in Brookfield (BAM.A).

The fund is the largest ETF in Canada, with assets under management of just over $11B, and has relatively low fees, coming in at 0.18%, or $1.80 per $1000 invested on an annual basis.

Because most of the largest companies in the country are mature, income-paying companies, XIU pays a pretty reasonable distribution of nearly 3% at the time of writing.

In terms of performance, this fund has historically outperformed the TSX on almost every chart you see. Although it doesn't have exposure to those smaller, high-growth companies, its asset allocation to Canada's blue chips has proven to put up stronger long-term returns.

All-in-one ETFs are becoming extremely popular these days. They allow you to gain exposure to thousands and sometimes tens of thousands of holdings in a single click.

With VEQT, this differs from a fund like the Vanguard Growth ETF Portfolio (VGRO) primarily in its allocations. If we compare VEQT vs VGRO, while VEQT is all equity, VGRO contains around 20% exposure to bonds and other fixed income.

I won't go over VGRO in this article. Still, it is definitely something to investigate if you are looking for a lower-risk option than VEQT.

In terms of holdings with Vanguard All-Equity ETF Portfolio (TSE:VEQT), it contains 4 other ETFs that track a wide range of the market. The diversification of this ETF is quite significant, with Apple making up the largest holding in the ETF at only 2.5%.

You will see a mix of Canadian and US large caps making up the top ten holdings inside of this fund, including Canada's major banks, railways, and telecom companies. On the US end, it contains most of the big techs, including Apple, Microsoft, and Amazon.

Management fees are 0.24%, meaning you'll pay $2.40 per $1000 invested, and as an all-in-one ETF, it pays a relatively small dividend. An all-in-one ETF in relation to a dividend ETF will struggle to keep up in terms of yield.

This is because with thousands and even sometimes tens of thousands of holdings, the majority of the companies within it will be smaller or even non-dividend payers.

Considering the bulk of the exposure is to the United States in this ETF, it is best to compare performance to the S&P 500. In this case, it has under-performed, likely due to its Canadian exposure. We can't expect the Canadian market to keep up with the US. But, it has still put up strong 7.6% annualized returns over the last decade.

Much like VEQT, this ETF gives you broad exposure to the entire market in a single click. However, the one key difference is iShares Core MSCI Ex-Canada ETF (TSE:XAW) is ex-Canada, meaning it doesn't have any exposure to Canadian holdings.

As a result, this fund is perfect for someone looking for international exposure via an ETF. You could even use a TSX 60 and XAW strategy to gain exposure to the entire global market in just two ETFs.

From what I have witnessed, for the most part, this ETF is primarily held by those who do not want to focus too much on selecting international stocks while also wanting to build a portfolio of strong Canadian stocks. They buy this ETF which is ex-Canada, and then build an individual portfolio of Canadian companies.

XAW holds over 9200 companies at the time of update. Its top ten holdings contain virtually all of the mega caps in the United States. Outside of the big techs in Google, Amazon, Apple, and Microsoft, it holds Berkshire Hathaway, UnitedHealth Group, Tesla, and Johnson & Johnson.

With fees of 0.22%, the fund is relatively cheap, given the exposure it provides. You'll pay just $2.20 per $1000 invested annually to gain exposure to 9200+ companies. The fund also pays a distribution of 2.12% on a semi-annual basis.

This is a rarity in the investing and exchange-traded fund worlds and something to consider if you need the distributions paid out more frequently.

The fund has put up annualized returns of 8.10% over the last decade. Although this is not as good of returns as you'd get investing directly into the S&P 500, a significant drawdown in emerging markets has impacted this fund over the short term.