3 Canadian ETFs to Buy and Hold Forever in Your TFSA

There is no single correct way to invest inside a Tax-Free Savings Account (TFSA). Some investors want broad blue-chip exposure. Others prioritize passive income. Some focus on lowering volatility and reducing portfolio drawdowns during weaker markets.

Part of that comes down to where you are in your investing journey. Younger investors may care more about long-term growth and maximizing compounding. Retirees or income-focused investors may prioritize steady cash flow instead. Meanwhile, more conservative investors may simply want a portfolio they can realistically stick with during market downturns without panic selling.

Fortunately, the Canadian exchange-traded fund (ETF) market now offers products tailored toward all three approaches. Here are three Canadian ETFs that can work well as long-term TFSA holdings depending on what type of investor you are.

iShares S&P/TSX 60 Index ETF

The iShares S&P/TSX 60 Index ETF (TSX:XIU) focuses specifically on a subset of Canada’s largest blue-chip companies.

The ETF includes many of the country’s dominant banks, pipelines, railways, insurers, telecoms, and energy firms. These companies tend to generate substantial cash flow and often pay relatively stable dividends.

For investors looking for core Canadian equity exposure centered around established large-cap businesses, XIU remains one of the most widely used ETFs in the country. The ETF currently offers a trailing 12-month yield of 2.2% while charging an expense ratio of 0.18%.

Vanguard FTSE Canadian High Dividend Yield Index ETF

The Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY) is geared more toward passive income investors.

The ETF focuses specifically on higher-yielding Canadian dividend stocks, with meaningful exposure to sectors like banks, pipelines, utilities, telecoms, and energy infrastructure.

That sector mix naturally creates a portfolio tilted toward income generation rather than pure growth. VDY currently carries a trailing 12-month yield of 3.3% with an expense ratio of 0.22%%. Inside a TFSA, those dividends can continue compounding tax-free over time.

BMO Low Volatility Canadian Equity ETF

For investors more concerned about portfolio stability, the BMO Low Volatility Canadian Equity ETF (TSX:ZLB) offers a different approach.

Instead of simply weighting companies by market capitalization, ZLB focuses on lower-volatility Canadian stocks that have historically experienced smaller price swings (lower beta) than the broader market.

The strategy tends to favour less cyclical businesses with more defensive characteristics, which can sometimes help reduce portfolio volatility during market downturns while still remaining invested.

ZLB currently offers an annualized yield of 1.9% while charging an expense ratio of 0.39%. For more conservative TFSA investors who still want equity exposure but with potentially smoother performance over time, ZLB may be worth considering.

The post 3 Canadian ETFs to Buy and Hold Forever in Your TFSA appeared first on The Motley Fool Canada.

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More reading

• TFSA Investors: Here’s the Only Time Using a Taxable Account Is a Better Choice
• New to Investing? 2 Easy ETFs Any Canadian Can Start With
• The Canadian ETFs That Are Flying Under the Radar — but Probably Shouldn’t Be
• 3 Canadian ETFs Worth Tucking Into a TFSA and Holding for the Long Haul
• 2 Canadian ETFs to Consider Buying and Holding Now in Your TFSA

Fool contributor Tony Dong has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.