The best Canadian ETFs to buy for $1,000 on the TSX today

There are currently thousands of exchange-traded funds (ETFs) available, and many of them focus on Canadian stocks. You can keep it simple with a broad market fund that follows something like the following S&P/TSX capped composite indexor you can zoom in on specific sectors, such as energy or financial services.

If you want to narrow it down even further, the Canadian financial sector includes ETFs that focus only on the big six banks, which remain extremely popular among income-oriented investors thanks to their above-average returns and monthly payout schedules. Below are two higher risk, higher return options from Hamilton ETFs and Global X Canada that stand out.

1.25X used Canadian banks

Hamilton Enhanced Canadian Bank ETF (TSX:HCAL) offers investors a way to increase exposure to Canadian banks through registered accounts, where you normally can’t borrow on margin.

The ETF processes leverage internally. For every dollar invested, you get about $1.25 of exposure to an equally weighted portfolio of the Big Six banks. Because Hamilton can borrow at institutional rates, the cost of leverage is typically much lower than what retail investors would pay using margin.

This structure increases both return and risk. Your income goes up because you’re actually investing more in dividend-paying bank stocks, and your capital growth potential also increases during strong markets. But during a recession, losses can be greater, so it’s not a free lunch.

Currently, the ETF pays a 4.65% yield with monthly distributions, and the added leverage has helped it outperform most Canadian bank ETFs with a total annualized return of 24.29% over the past five years.

1.25X Canadian banks with covered calls

For an even higher income option, Global X Enhanced Equal Weight Canadian Banks Covered Call ETF (TSX:BKCL) takes the same 1.25x bank exposure and adds a covered call overlay.

Covered calls involve selling call options on the underlying stock to generate immediate income. The trade-off is less positive because you are giving up some potential profits today in exchange for a higher cash payout.

Thanks to both the leverage and the call premium, the current return is 13.56%, paid out monthly. This makes the ETF attractive to investors who value cash flow over long-term growth.

Just keep expectations realistic. Higher yields come with trade-offs, and the stock price may not rise much due to constant call writing and regular ex-dividend declines. It is designed for investors who put income first and understand these risks.