This tax shelter makes compounding even more powerful. Decades from now, the difference in not having to pay taxes on your profits will be enormous.
And while many investors typically consider stocks as their TFSA first, ETFs continue to grow in popularity because they make long-term investing simple and reliable.
One of the biggest advantages of ETFs is that they provide investors with immediate insight diversification across dozens or hundreds of stocks, spreading your risk across many different companies.
That’s why ETFs are some of the best tools for TFSA investors who want steady growth and income with minimal effort or hassle.
So with that in mind, if you’re looking for high-quality Canadian ETFs that you can buy in your TFSA and hold for decades to come, here are three top picks.
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One of the best ETFs to buy for exposure to the Canadian economy
There is no doubt that one of the most popular ETFs among Canadian investors is the ETF iShares S&P/TSX 60 Index ETF (TSX:XIU).
The XIU ETF is the easiest way to gain exposure to some of Canada’s largest and most trusted stocks. That means exposure to major banks, energy producers, railroads, telecom companies, utilities and other essential businesses.
So the ETF not only offers exposure to different stocks, but also offers diversification across multiple sectors.
That’s why it’s one of the best Canadian ETFs to buy and hold forever. Exposure to reliable blue chip stocks across multiple sectors not only mitigates a lot of risk for investors, but also offers significant long-term growth potential, especially if you hold them in a TFSA.
A smart way to gain exposure to Canada’s major banks
In addition to the XIU, there’s another high-quality Canadian ETF you can buy and hold for the long term: the BMO Equal Weight Banks Index ETF (TSX:ZEB).
The ZEB ETF tracks an equally weighted index of Canada’s six major banks. So instead of weighting them by their market capitalization, where the fund would give investors more exposure to the largest banks, the equal-weight setup gives each bank the same allocation. This is crucial as it helps to balance exposure and avoid over-reliance on the biggest players.
The main reason ZEB is one of the best ETFs to buy now and hold for years is that Canadian banks are among the most stable and profitable companies in the world.
They operate in a regulated industry with strong balance sheets, consistent profits and a long history of paying and growing dividends, even during recessions.
A top choice for income investors who want global exposure
In addition to the XIU and ZEB ETFs, there is a choice that tends to fly more under the radar: the BMO Global High Dividend Covered Call ETF (TSX: ZWG).
The ZWG ETF invests in a portfolio of global companies with high dividends. However, in addition, it also uses a covered call strategy to generate additional income and increase the returns it can offer to investors.
Because the company already owns dividend-paying stocks from around the world, the covered call strategy it employs significantly increases total distribution returns without adding significant risk.
In fact, the only trade-off is limited upside if stocks rise hard. But in a sideways or moderate growth environment, the higher dividend yield more than offsets that small risk.
So while the XIU and ZEB ETFs offer returns of 2.3% and 2.9% respectively, the ZWG ETF offers a current yield of around 6%.
If you’re a dividend investor, there’s no doubt that ZWG is one of the best Canadian ETFs to buy for the long term.
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