Best Index Funds in Canada 2026: Low-Fee Canadian Index Funds Ranked

How We Ranked: MER First, Then Coverage and Fit

There is no single "best" index fund for everyone, because the right equity/bond split depends on how close you are to needing the money. But within each risk band, the funds are close enough in everything except cost that fee is the cleanest way to rank them. The management expense ratio (MER) is the annual percentage skimmed off your balance, and it is the one variable that reliably predicts how much you keep over decades. We ranked on three criteria, weighted in this order:

• MER (cost): the all-in annual fee deducted from fund assets. Lower is better, and the gap compounds. This is the primary ranking lever.
• Coverage and diversification: how many stocks, across how many countries, and whether the fund rebalances itself. An all-in-one fund that holds thousands of stocks across Canada, the US, and international markets beats a single-country index fund for a core holding.
• Fit: who the fund actually suits — the equity/bond split that matches a real investor's time horizon and tolerance for a bad year.

We focused on the all-in-one (asset-allocation) index ETFs because, for the typical Canadian investor, buying one ticker that holds the whole world is the right default. We note the index-mutual-fund route (TD e-Series) for steady automatic contributors. All MERs below are as of May 2026 and are set by the fund company — they can change, so confirm the current figure on the issuer's fund page before you buy. Once you have picked a fund, the harder question is which account to hold it in; that decision moves more money than the fee gap, and we cover it below.

The Ranking: 6 Index Funds Compared Head-to-Head

The fee spread across all six is just 7 basis points — roughly $70 per year on a $100,000 portfolio. That is the whole point: among credible all-in-one index funds, the cost differences are tiny, the holdings are nearly identical, and the fund you pick matters far less than the account you hold it in and your discipline to leave it alone. Rates are as of May 2026; MERs are set by the fund company and confirmed on the issuer's fund page.

Pick #1: XBAL / VBAL — Cheapest, and the Right Fit Near Retirement

The iShares XBAL and Vanguard VBAL balanced funds tie for the lowest MER on this list at 0.17% — $170 a year on $100,000. Both hold a 60% equity / 40% bond split, which means shallower drawdowns than an all-equity fund in a bad year and a smoother ride into and through retirement. The trade-off is a lower long-run return: the 40% bond allocation drags on growth during a long bull market, which is exactly the cost of the smoother ride.

Who it suits: investors within roughly five years of needing the money, retirees drawing down a portfolio, and anyone who has learned the hard way that they cannot watch a balance fall 35% without selling. The bond allocation is the seatbelt, and the 0.17% fee makes it the cheapest seatbelt available.

Pick #2: XEQT — Lowest-Cost All-Equity, the Default for Long Horizons

The iShares Core Equity ETF Portfolio (XEQT) is the workhorse of Canadian index investing: one ticker, 100% equity, thousands of stocks across Canada, the US, and international developed and emerging markets, rebalanced automatically, all for a 0.20% MER. On $100,000 that is $200 a year. The all-equity structure means it can fall 30% to 40% in a severe downturn, but it carries the highest long-run expected return of the funds here.

XEQT holds roughly 25% Canadian equity, a deliberate home-country tilt that is higher than Canada's share of the global market but lower than VEQT's. For a single core holding that you intend to own for a decade or more, this is the fund most Canadian DIY investors land on.

Who it suits: long-horizon investors (10-plus years) who will not panic-sell in a downturn and want the cheapest single-ticket route to a globally diversified all-equity portfolio.

Pick #3: ZEQT — BMO's All-Equity Twin to XEQT

BMO's ZEQT is functionally the same product as XEQT: 100% equity, globally diversified, self-rebalancing, and a matching 0.20% MER. It exists mainly to give BMO a competitor in the all-in-one space, and the holdings overlap almost completely with XEQT. There is no meaningful reason to choose between ZEQT and XEQT on cost or coverage — they are within a rounding error of each other.

Who it suits: the same long-horizon, all-equity investor as XEQT, with a marginal edge if you already bank with BMO and want everything under one roof, or if your brokerage's commission-free list happens to favour the BMO fund.

Pick #4: XGRO — The 80/20 Middle Ground

The iShares Core Growth ETF Portfolio (XGRO) sits between all-equity and balanced: 80% equity, 20% bonds, at a 0.20% MER. The 20% bond sleeve takes some of the sting out of a bad year while keeping most of the long-run upside of an all-equity fund. It is the "I want growth but I would like to sleep" option.

Who it suits: investors roughly five to fifteen years from needing the money who want most of the equity upside with a modest cushion. Vanguard's VGRO is the equivalent at a slightly higher 0.24% MER.

Pick #5: VEQT — Higher Canadian Tilt, 4 Basis Points More

Vanguard's All-Equity ETF Portfolio (VEQT) is XEQT's closest rival: 100% equity, globally diversified, self-rebalancing. Its management fee is 0.17%, but the all-in MER of 0.24% (which includes operating costs and taxes) puts it 4 basis points above XEQT — $40 a year on $100,000. The other distinction is a higher home-country weighting, historically around 30% Canadian equity versus XEQT's 25%.

Who it suits: the all-equity investor who specifically wants a heavier Canadian tilt and is comfortable paying $40 a year more on $100K for it. If you have no strong view on Canadian weighting, XEQT is the cheaper pick.

Pick #6: VGRO — Vanguard's 80/20 Growth Fund

VGRO is Vanguard's 80/20 growth fund, the direct counterpart to XGRO. Same 80% equity / 20% bond structure, same use case, at a 0.24% MER versus XGRO's 0.20%. The 4-basis-point premium buys you Vanguard's slightly higher Canadian weighting; otherwise the funds are interchangeable.

Who it suits: the same five-to-fifteen-year investor as XGRO who prefers Vanguard's home-country tilt or already holds other Vanguard funds and wants to keep the family consistent.

The Index Mutual Fund Route: TD e-Series

Not everyone wants to place a trade. The TD e-Series funds are index mutual funds you buy directly through TD with no commission, and they support a pre-authorized purchase plan that buys partial units automatically every payday. You build the portfolio from separate Canadian, US, and international index funds rather than one ticker, and the MER runs higher than the all-in-one ETFs — typically in the 0.30% to 0.50% range depending on the funds you combine.

The case for e-Series is behavioural, not mathematical: automatic, commission-free, partial-unit buying is the most reliable way for a small, steady contributor to actually invest every payday without thinking about it. The extra 0.15% to 0.25% of MER over an all-in-one ETF is the price of that automation. Once your balance grows or you are comfortable placing a trade, switching to a 0.20% ETF is the upgrade.

The Account Decision Matters More Than the Fund Decision

The fee spread across the six funds above is 7 basis points. The tax difference between holding your index fund in the right account versus the wrong one is far larger over a career. Here is the priority order for a Canadian index investor in 2026:

The practical rule: a Canadian-listed all-in-one ETF like XEQT or VEQT sidesteps the US withholding-tax complication entirely, so you can hold it in any account without worrying about the 15% treaty mechanics that apply to US-listed funds. Fill the FHSA first if you are buying a first home, then the RRSP if you are in a high bracket, then the TFSA, then the non-registered account. This sequencing keeps more money than any fund-selection decision on this page.

What About a Halal or Values-Screened Index Portfolio?

The funds in this ranking are conventional broad-market index funds — they hold every sector, including the Canadian banks and insurers that make up a large share of the TSX. If you need a Shariah-compliant portfolio, these funds will not pass screening, because conventional financials earn interest income and breach the AAOIFI debt and impermissible-income tests. The screened alternatives are purpose-built halal ETFs rather than the broad-market funds above. For the ranked comparison of those, see our guide to the best halal ETFs in Canada, which applies the AAOIFI screen and ranks the compliant options by fee.

Three Errors to Avoid With Index Funds in Canada

1. Comparing XEQT and VEQT for an hour to save $40

The two are within 4 basis points and a few percentage points of Canadian weighting. The hour you spend agonizing is worth more than the $40 difference on $100K. Pick the cheaper one (XEQT) or the higher-Canadian one (VEQT), buy it, and move on to the decision that matters: how much you contribute and which account it goes in.

2. Picking 100% equity, then selling in the first crash

An all-equity fund can fall 35% in a severe downturn. If that loss would make you sell at the bottom, you are not a 100%-equity investor regardless of your age. A 60/40 fund like XBAL that you hold through the storm beats a 100%-equity fund you abandon at the worst moment. Match the allocation to the behaviour you can actually sustain.

3. Holding US-listed index funds in a TFSA

The 15% US withholding tax on dividends is waived in an RRSP under the Canada-US tax treaty but not in a TFSA. If you want US exposure inside a TFSA, a Canadian-listed all-in-one ETF (which holds US stocks but is itself Canadian-domiciled) avoids the worst of this drag. Reserve US-listed funds for the RRSP, where the treaty benefit applies.