Exchange-traded funds can offer an easy, inexpensive way to gain stock market exposure, but there’s a dizzying array of Canadian names to choose from. To help investors find ETFs focused on Canadian stocks, we’ve screened the 150 ETFs in Morningstar’s Canadian equity category for those with Gold, Silver, or Bronze Medalist Ratings, meaning our analysts expect them to outperform their categories’ index or median over the long term.

For this story, we highlight the best seven Canadian stock ETFs as evaluated by Morningstar analysts:

• Vanguard FTSE Canada All Cap ETF VCN
• Vanguard FTSE Canada ETF VCE
• BMO S&P/TSX Capped Composite ETF ZCN
• iShares MSCI Minimum Volatility Canada ETF XMV
• BMO Low Volatility Canadian Equity ETF ZLB
• iShares Core S&P/TSX Capped Composite ETF XIC
• iShares S&P/TSX 60 ETF XIU

Screening for the Best Canadian Stock ETFs

We screened Canadian equity funds for ETFs with Gold, Silver, or Bronze Medalist Ratings that are 100% assigned by Morningstar analysts (rather than indirectly or quantitatively assigned). All but one of the seven names that made it through the screen are index funds. Two track versions of the FTSE Canada Index, two track the S&P/TSX Composite Index, and two track other indexes. The one actively managed fund is the C$320 million BMO Low Volatility Canadian Equity ETF.

Here’s a closer look at these ETFs. A table with their recent performance is at the end of this article.

Vanguard FTSE Canada All Cap ETF

• Morningstar Medalist Rating: Gold
• Morningstar Rating: Four Stars

The C$9.6 billion Vanguard FTSE Canada All-Cap ETF tracks a market-cap-weighted index of Canadian stocks across company sizes. It holds 158 stocks, with an average size of C$53 billion for its holdings. “Vanguard FTSE Canada All Cap ETF offers broad exposure to the Canadian stock market at a low price, a simple formula that few have been able to beat in the long run,” says Ryan Jackson, manager research analyst, passive strategies for Morningstar.

Vanguard FTSE Canada ETF

• Morningstar Medalist Rating: Gold
• Morningstar Rating: Five Stars

The C$2.3 billion Vanguard FTSE Canada ETF holds a market-cap-weighted index focusing on large- and mid-cap stocks. It holds 49 holdings and with the stocks it holds averaging a market cap of C$80 billion. “Vanguard FTSE Canada ETF offers market-cap-weighted exposure to the Canadian large- and mid-cap stock market at a low price, a simple formula that should be hard to beat in the long run,” explains Jackson.

iShares MSCI Minimum Volatility Canada

• Morningstar Medalist Rating: Silver
• Morningstar Rating: Five Stars

This C$4.9 billion strategic beta fund follows an index based on a mathematical model that creates the lowest-volatility portfolio it can using stocks from the MSCI Canada Index while remaining within certain restrictions.

“These restrictions hold sector weightings within 5 percentage points of their parent index allocation. Stocks cannot exceed their parent index weighting by 1.5 percentage points or 20 times, whichever is lower,” says Jackson. “The index also limits one-way turnover to 10% at each semiannual rebalance and controls exposure to nontargeted risk factors to prevent an incidental value or growth bias or meaningful factor tilt.” Overall, he describes the fund as “a well-designed low-volatility strategy whose ability to weather drawdowns should continue to drive a stellar risk/reward profile.”

BMO Low Volatility Canadian Equity ETF

• Morningstar Medalist Rating: Bronze
• Morningstar Rating: Five Stars

This C$4.9 billion fund is the only actively-managed fund on the list, and aims to invest in a less risky portfolio of Canadian stocks.

“This exchange-traded fund selects 45 stocks from the largest Canadian companies based on their sensitivity to market movements,” says Brendan McCann, associate analyst at Morningstar. “The fund calculates a stock’s sensitivity over the prior five years and gives more weight to recent years.”

The stocks are picked from the S&P/TSX Composite Index. The fund has a 10% weighting cap for any individual stock and a 35% cap on sector weightings.

BMO S&P/TSX Capped Composite ETF

• Morningstar Medalist Rating: Silver
• Morningstar Rating: Four Stars

iShares Core S&P/TSX Capped Composite ETF

• Morningstar Medalist Rating: Silver
• Morningstar Rating: Four Stars

These ETFs track the S&P/TSX Capped Composite Index, which follows the benchmark S&P/TSX Composite Index while trying to increase diversification by limiting any individual stock to a 10% weighting. Jackson describes both as offering “broad exposure to the Canadian stock market at a low price—a simple formula that few have been able to beat in the long run.”

iShares S&P/TSX 60 ETF

• Morningstar Medalist Rating: Silver
• Morningstar Rating: Four Stars

This C$16.7 billion fund tracks the S&P/TSX 60 Index, which focuses on large-cap Canadian stocks. “iShares TSX/S&P 60 ETF offers market-cap-weighted exposure to the Canadian large- and mid-cap market at a low price,” says Jackson. “That simple formula breeds a top-heavy portfolio, but it should be hard to beat long term.”

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.