3 Canadian ETFs Worth Tucking Into a TFSA and Holding for the Long Haul

The Tax-Free Savings Account (TFSA) remains one of the best investing tools Canadians have access to. Capital gains are tax free. Dividends are tax free. Withdrawals are tax free. Unlike an RRSP, withdrawals also do not increase taxable income later in retirement.

Yet despite all those advantages, many Canadians still leave cash sitting idle inside their TFSA earning next to nothing as a quasi-savings account. That is a missed opportunity because the TFSA is incredibly versatile.

You can use it for growth investing, passive income, broad diversification, or long-term compounding. The key is actually putting the account to work. Here are three Canadian exchange-traded funds (ETFs) worth considering for a long-term TFSA portfolio.

iShares Core S&P/TSX Capped Composite Index ETF

The iShares Core S&P/TSX Capped Composite Index ETF (TSX:XIC) is one of the simplest ways to get broad exposure to the total Canadian stock market at a very low cost.

The ETF tracks the S&P/TSX Composite Index and provides exposure to hundreds of Canadian companies across sectors like financials, energy, industrials, telecoms, and utilities. That diversification matters because it reduces dependence on any one stock or industry generating returns.

The fund also remains very affordable with an expense ratio of 0.06% while offering a trailing 12-month yield of 2.1%. For TFSA investors focused on long-term compounding and simplicity, broad-market index ETFs like XIC remain hard to beat.

iShares S&P/TSX 60 Index ETF

For investors who prefer focusing specifically on Canada’s largest blue-chip companies, the iShares S&P/TSX 60 Index ETF (TSX:XIU) is another strong option.

The ETF tracks the S&P/TSX 60 Index, meaning it primarily holds Canada’s largest and most liquid public companies. That includes many of the country’s dominant banks, railways, pipelines, insurers, and telecom firms.

Compared to broader market ETFs, XIU tends to be slightly more concentrated in mega-cap Canadian businesses. Some investors prefer that because these firms often generate more stable cash flow and stronger dividends.

XIU currently carries an expense ratio of 0.18% alongside a higher trailing 12-month yield of 2.3%. Inside a TFSA, those dividends can compound tax-free for decades.

iShares S&P/TSX Composite High Dividend Index ETF

If your focus leans more toward passive income, the iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI) may deserve a closer look.

The ETF focuses specifically on higher-yielding Canadian dividend stocks, with significant exposure to sectors like banks, pipelines, utilities, and telecoms. Those industries have historically formed the backbone of Canada’s dividend market.

The result is a portfolio designed more around income generation than pure growth. XEI currently offers a trailing 12-month yield of 3.7% while charging an expense ratio of 0.22%.

For TFSA investors looking to build a growing stream of tax-free dividend income over time, income-focused ETFs like XEI can be particularly attractive.

The post 3 Canadian ETFs Worth Tucking Into a TFSA and Holding for the Long Haul appeared first on The Motley Fool Canada.

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More reading

• 3 Canadian ETFs I’d Hold in a TFSA and Never Sell
• How to Build a Retirement Portfolio That Generates $2,000 a Month
• What the Average Canadian TFSA Balance at 60 Can Teach Us
• 3 Canadian ETFs I’d Tuck Into a TFSA and Never Consider Selling
• Why Canadian Dividend ETFs Could Be the Simplest Way to Defend Your Portfolio

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.