To invest in index funds in Canada, you open a self-directed brokerage account, fund it and buy an index ETF, a fund that tracks a whole market, such as XEQT, VFV or XIC. The whole process takes about 20 minutes at an online brokerage. This guide walks through each step, compares three widely held index ETFs and shows what their fees cost in dollars, so you can decide which account, broker and fund fit you. It is general education, not financial advice.
Index funds in Canada at a glance
| Feature | XEQT | VFV | XIC |
|---|---|---|---|
| What it tracks | A global mix of stock index ETFs (Canada, US, international, emerging) | The S&P 500 (US large companies) | The S&P/TSX Capped Composite (Canadian market) |
| Management expense ratio (MER) | 0.19% | 0.08% | 0.06% |
| Stocks held | 8,296 worldwide | About 500 US companies | 217 |
| Commission at Wealthsimple | $0 (better on this row) | $0 (better on this row) | $0 (better on this row) |
| Trading currency | Canadian dollars (TSX) | Canadian dollars (TSX) | Canadian dollars (TSX) |
Sources: iShares fund pages for XEQT and XIC, Vanguard Canada's VFV page and Wealthsimple's ETF page, checked September 29, 2026; the iShares pages were re-checked October 8, 2026 (XEQT and XIC holdings counts as of October 6, 2026).
Per the iShares fund page checked on October 8, 2026, XEQT’s MER is 0.19% and it holds 8,296 stocks through a handful of underlying iShares ETFs. Vanguard Canada lists VFV’s MER at 0.08%, and iShares lists XIC’s at 0.06% with 217 holdings as of October 6, 2026. All three trade in Canadian dollars on the TSX, and Wealthsimple charges $0 commission to buy or sell any of them.
What is an index fund?
An index fund is a fund that holds the stocks in a market index, such as the S&P 500 or the S&P/TSX Composite, instead of paying a manager to pick winners. Because the fund simply copies the index, its costs are low and its return closely follows the market it tracks, minus the MER.
That is the whole appeal: you get the market’s return, you don’t have to research individual companies, and you pay a small annual fee. For XIC, that fee is 0.06% a year.
Are index funds and ETFs the same thing?
Not quite: an index fund can be a mutual fund or an ETF, and most Canadians now buy index funds as ETFs through a brokerage. The difference is in how you buy them, not what they hold.
- Index ETFs trade on the TSX like a stock. You buy them through a brokerage account, the price changes during the day, and many brokerages charge no commission. XEQT, VFV and XIC are all index ETFs.
- Index mutual funds are usually bought through a bank or fund company, priced once a day after the market closes, and usually carry a higher MER than the largest index ETFs. Check the MER in the fund facts document before buying one. The guide to mutual funds in Canada compares index mutual funds with ETFs on cost.
- Not every ETF is an index fund. Some ETFs are actively managed. The fund’s name or fact sheet will say which index it tracks, if any.
The rest of this guide covers index ETFs, since that is how most Canadians invest in index funds today.
Step 1: Open a self-directed brokerage account
You need a self-directed (do-it-yourself) brokerage account to buy an index ETF. Two widely used online brokerages:
- Wealthsimple : $0 commission on Canadian and US stocks and ETFs, no account minimum, and dollar-amount orders from $1.
- Questrade : $0 to buy and sell Canadian and U.S.-listed stocks and ETFs, fractional shares on hundreds of eligible Canadian and US stocks and ETFs, from $1, commission-free, in any self-directed account, and dual-currency accounts (free — every account can hold both Canadian and US dollars).
Then pick the account type. The account decides how the investment is taxed, not what you can buy inside it:
- TFSA: growth and withdrawals are tax-free. The 2026 dollar limit is $7,000, and unused room carries forward. See how the TFSA works.
- RRSP: contributions are deductible from your income now, and withdrawals are taxed later. Useful if your tax rate is higher today than you expect it to be in retirement.
- FHSA: for a first home. Contributions are deductible and a qualifying home withdrawal is tax-free; the annual limit is $8,000.
- Non-registered: no contribution limit, but dividends and capital gains are taxable each year.
Wealthsimple’s self-directed accounts cover TFSA, RRSP, FHSA, RESP, LIRA, RRIF, non-registered (cash and margin), and corporate accounts. For a walkthrough of opening one, see how to open a TFSA, and for the broker choice itself, the Wealthsimple vs Questrade comparison.
Step 2: Fund the account
Once the account is open, move money in from your bank:
- Bank transfer (EFT): link your bank account and set an amount. This is the standard method at every brokerage and usually takes a few business days to clear.
- Interac e-Transfer: faster where the brokerage accepts it.
- Instant deposits: Wealthsimple lets you invest a deposit before the bank transfer clears. Its instant-deposit limit is up to $50,000 for Core clients and up to $250,000 for Premium and Generation clients.
If you already hold investments at a bank brokerage, you can transfer the account instead of withdrawing cash. At Wealthsimple, transfer-out fees charged by the other institution are reimbursed on transfers of $25,000 or more, up to $150 per account.
Step 3: Which index fund do beginners usually buy first?
Most first-time index investors choose between an all-in-one global ETF and one or more single-market ETFs. Which fits depends on whether you want one ticker or several.
Option A: one all-in-one global ETF
An all-in-one ETF holds several index ETFs inside it and rebalances them for you. XEQT is the example used throughout this guide: about about 46% US stocks, about 25% Canadian, about 24% international developed and about 5% emerging markets, for a 0.19% MER. Vanguard’s VEQT is the closest alternative; the XEQT vs VEQT comparison covers the differences.
Option B: single-market index ETFs
If you’d rather set your own mix, you can combine single-market index ETFs:
- VFV (Vanguard S&P 500 Index ETF): US large companies, 0.08% MER.
- XIC (iShares Core S&P/TSX Capped Composite Index ETF): the Canadian market, 0.06% MER.
- XEF (iShares Core MSCI EAFE IMI Index ETF): developed markets outside North America.
- VEE (Vanguard FTSE Emerging Markets All Cap Index ETF): emerging markets.
- VAB (Vanguard Canadian Aggregate Bond Index ETF): Canadian bonds.
A mix of single-market ETFs means you choose the weights and rebalance them yourself. Check each fund’s MER on its issuer page before buying. For a wider list, see the best Canadian ETFs, and for the two most-compared funds, VFV vs XEQT.
Step 4: How do you buy an ETF on Wealthsimple or Questrade?
You search the ticker, enter a dollar amount or number of units, choose the order type and confirm. On a heavily traded index ETF, the order usually fills within seconds during market hours.
On Wealthsimple
- Open the app and tap the search bar.
- Type the ticker, for example XEQT.
- Tap Buy and choose the account (TFSA, RRSP, FHSA or non-registered).
- Enter a dollar amount (fractional shares) or a number of units.
- Choose a limit order at or slightly above the current ask, or a market order.
- Review and confirm. Commission is $0.
The step-by-step Wealthsimple trading guide shows each screen, and there are fund-specific walkthroughs for buying XEQT on Wealthsimple and buying VFV on Wealthsimple.
On Questrade
- Log in to the Questrade app or web platform.
- Search the symbol, for example XEQT.TO for the TSX listing.
- Choose Buy, then the account.
- Enter the number of units, or a dollar amount if the ETF is eligible for fractional shares.
- Choose market or limit, then submit. Questrade lists $0 to buy and sell Canadian and U.S.-listed stocks and ETFs.
Should you use a market order or a limit order?
A limit order caps the price you pay, while a market order fills immediately at whatever the best available price is. For index ETFs, a limit order at or just above the current ask gives you control without slowing the trade down.
- Market order: fills right away. If the gap between the bid and ask prices widens for a moment, you pay the wider price.
- Limit order: sets the highest price you’ll pay. If the price moves above it, the order waits instead of filling.
Spreads on large index ETFs such as XEQT and VFV are usually narrow, but they tend to be wider right after the open and just before the close. At Wealthsimple, eligible ETFs can also trade 24 hours a day, 5 days a week; outside regular hours, a limit order matters more.
Step 5: Automate with recurring investments and dividend reinvesting
Automating the next purchase is what turns one trade into an index-investing habit. Two settings do most of the work:
- Recurring investments: Wealthsimple can buy your chosen ETF on a weekly, bi-weekly or monthly schedule, at $0 commission each time.
- Dividend reinvesting (DRIP): at Wealthsimple, dividend reinvesting is available for eligible ETFs. Distributions then buy more units of the same fund instead of sitting as cash.
As an example, spreading the 2026 TFSA limit of $7,000 evenly across the year works out to about $583.33 a month, or about $269.23 every two weeks if you match a bi-weekly paycheque.
How much money do you need to start investing in index funds?
At Wealthsimple you can start with $1, because dollar-amount orders buy fractional shares of eligible ETFs. At brokerages without fractional shares, the minimum is the price of one unit.
The amount matters less than the fee. Because the MER is a percentage, here is what it costs in dollars on a $10,000 balance held for one year:
- XEQT at 0.19%: about $19 a year.
- VFV at 0.08%: about $8 a year.
- XIC at 0.06%: about $6 a year.
The fee scales with the balance, so the same MERs on $100,000 cost ten times as much. A fund charging a higher MER costs proportionally more every year, which is why the MER is the first number to compare between two funds that track the same index. The walkthrough on how to invest $10,000 in Canada covers account choice, funds and fees for a balance of that size.
Common index-fund investing mistakes
- Paying a high MER for a fund that tracks the same market. Two funds tracking the same index deliver nearly the same return before fees, so the cheaper MER keeps more of it.
- Assuming a TFSA shelters US dividends. The Canada–US tax treaty caps US tax on dividends paid to Canadian investors at 15%, and dividends paid to a TFSA could be subject to foreign withholding tax, per the CRA's TFSA guide. The TFSA can’t recover that tax. An RRSP holding US-listed ETFs directly is treated differently; the guide to buying US stocks in Canada explains how.
- Paying currency fees you don’t need to. Buying a US-listed ETF from a Wealthsimple CAD account costs 1.5% on the conversion. Canadian-listed index ETFs trade in Canadian dollars with no conversion.
- Owning overlapping funds. XEQT already holds about about 46% US stocks and about 25% Canadian stocks, so adding VFV and XIC on top mostly doubles up on the same companies.
- Trading index ETFs often. Index funds are built for buying and holding. Frequent trading in a TFSA can also draw CRA attention as business income.
- Leaving distributions as cash. Without dividend reinvesting turned on, payouts sit uninvested until you buy more units yourself.
Who index funds suit (and who they don’t)
Index funds suit you if you want the market’s return at a low fee, you’re investing for years rather than months, and you’d rather automate a monthly purchase than research individual stocks.
They may not suit you if you need the money within a year or two (stock index funds can fall sharply in a short period), you want someone to build and manage the portfolio for you (a managed account such as a robo-advisor does that for an extra fee; see managed vs self-directed investing), or you want to pick individual companies.
To see how regular contributions could add up over time, try the investment calculator. For everything else about the platform used in the examples above, see our complete Wealthsimple guide.
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Keep reading
- Best Canadian ETFs: the wider index ETF list
- XEQT review: the all-in-one global index ETF in detail
- VFV review: the S&P 500 index ETF in detail
- How to open a TFSA: getting the account set up
- Wealthsimple vs Questrade: the broker comparison