ETF Market Trends in Canada
Currently, there are over 1,600 ETFs available on various exchanges across Canada. While some of these funds are actively managed with sales happening monthly, others seem challenging for potential investors to navigate. Experts suggest that 2025 could bring yet another record year for ETF launches, adding to the already intricate landscape.
Financial planner Anita Bruinsma from Toronto indicates that many investors are experiencing what she calls “analytical paralysis.” They often feel overwhelmed and unsure about where to begin, leading them to hold cash instead of investing. This seems to be a common sentiment.
As of May 31, a survey from the National Bank reported 1,628 ETFs in Canada. In 2025 alone, 24 have been delisted while 155 new ones have come onto the scene. Last year, there were also significant additions, with 224 new ETFs and 61 registrations in 2024.
Tiffany Zhang, who oversees ETFs and financial product research at National Bank Financial, notes that the variety of options is increasing. This includes a rise in aggressively managed ETFs and niche products designed to target specific market segments, such as the new CLO (secured loan obligation) ETFs.
Bruinsma perceives this trend as a business strategy, where banks and investment firms are keen on creating unique products designed to draw in investor funds. There’s a shift toward more aggressively managed ETFs, possibly because they allow companies to charge higher fees and, well, earn more in the long run.
To help investors get started, Bruinsma suggests a more passive approach by choosing ETFs that track established market indices like the S&P 500, TSX, and EAFE. While many options exist, she believes it’s simpler to focus on “boring, plain vanilla ETFs,” making the decision-making process much more manageable.
She also cautions that jumping into aggressively managed ETFs can introduce unnecessary risks. With a proactively managed fund, the question arises: are you truly confident in the choices being made?
“No one has a crystal ball,” she emphasizes. The unpredictability of the stock market makes it tough to know which investments will perform best.
Some investors may, for instance, consider putting the majority of their funds into niche ETFs, like those focused on U.S. technology. Yet, Bruinsma asserts that diversifying with various ETFs that track broader market indices like the S&P 500 mitigates risk.
Common Pitfalls for New Investors
However, new investors frequently make mistakes, like acquiring too many ETFs, which can result in overlapping investments, according to Jason Heath, managing director at Objective Financial Partners in Markham, Ontario.
He suggests that potential investors take a closer look at the leading ETF companies in Canada, such as iShares, BMO, and Vanguard. These firms offer ETFs that track the S&P/TSX cap composite indexes, including the iShares S&P/TSX Cap Composite Index ETF (XIC.TO) and the BMO S&P/TSX Cap Composite Index ETF (ZCN.TO). Vanguard’s offering, the Vanguard FTSE Canada All Cap Index ETF (VCN.TO), monitors a closely related index.
Interestingly, the top eight holdings in these ETFs are quite similar. Heath notes their performances over the past decade—8.96%, 8.96%, and 8.87%, respectively—as of May 31. His point is straightforward: if your ETFs are largely invested in the same assets, you may not need such a wide range to achieve diversification.
Investors can opt for a single ETF that includes Canadian, U.S., and international stocks, or even consider an all-in-one allocation ETF. It’s tempting to focus on the strong performance of the U.S. market, especially recently, but Bruinsma warns against becoming overly invested in U.S.-centric ETFs.
For instance, some might buy an S&P 500 ETF, add a Nasdaq-100 ETF, and then also include a global ETF with significant U.S. exposure, thereby stacking several U.S.-based funds. But Bruinsma reminds us that while the U.S. market has excelled recently, that’s not a consistent trend. Other markets like Canada and Europe can perform well at different times, and ignoring market cycles could lead to sacrificing potential returns.
Bruinsma suggests that a downturn could be on the horizon for the country. “It’s important to ensure you’re diversifying your investments to avoid exposure to specific economic shifts,” she advises.
