How To Invest In Index Funds In Canada? - Kalkine Media

April 04, 2021 01:20 PM AEST | By Team Kalkine Media
Follow us on Google News:

Source: Freedomz, Shutterstock


  • Investment in an index fund is the best option for those who are limited by direct investment complications.
  • Canadian index funds are usually low-cost.
  • In the long run, an index fund investor can outperform an active investor.

Warren Buffett, one can say the Shakespeare of the investment world, with a net worth of more than US$82 billion and who has been outperforming the market for decades now, has advised that low-cost index funds are the smartest investment choice that people can make.

For a first-time investor, investing in index funds is often considered a safe option to begin with. 

What is an index fund?

You must have come across the term mutual fund (MF) or exchange-traded fund (ETF), that holds all or is a representative sample of stocks offer specific index (say S&P Midcap 500).

The goal is to match the performance of the benchmark index with that of the representative stocks with which the fund is created, as much as possible. 

Who can invest in index funds?

Though it does not require you to be an expert in the financial market, investment in an index fund is usually preferred by individual investors who have time, skill, or patience constraints to manage a portfolio of stocks.

Often termed as a passive mode of investment, index funds are relatively low cost and offer better diversification options as compared to stocks. And given the patience level, a passive investor can outperform an active investor over the long term.

(Source: Pixabay) 

How does an index fund work?

In an index fund, each stock is allotted a certain weight. For example, if you invest in a specific investment fund where company A is allotted 10% weight and Company B holds 5% weight, the index fund will also mirror the same investment pattern to these companies.

The performance of the index will have a direct impact on the performance of the index fund.

What are the Index funds available in Canada?

For a Canadian investor you have some great index funds that are available for investment:

  1. Vanguard S&P 500 ETF (VOO) - Tracks S&P 500 index.
  2. SPDR S&P 500 ETF (SPY)
  3. Fidelity ZERO Large Cap Index (FNILX)
  4. iShares Core S&P 500 ETF (IVV)
  5. Schwab S&P 500 Index Fund (SWPPX) 

Bottom line:

Index funds come with a lot of pros such as:

  • Low fees.
  • Lower exposure to tax.
  • Passive management tends to outperform the benchmark index.
  • Offers broad diversification.

Though it has minor flaws, such as no downside protection and lack of taking advantage of opportunities, the pros outweigh the cons keeping in mind that in the long run, it is the investor who is going to reap the benefits.


The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.

Top ASX Listed Companies

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK