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Stop Paying High Fees: The Smart Canadian's Guide to Index ETFs

Unlock your financial potential with low-cost ETFs through Wealthsimple. This guide simplifies everything you need to know to start building wealth efficiently.

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The Old Way vs. The Smart Way

The Problem: High-Fee Active Mutual Funds Investment funds managed by professionals who try to outperform the market by picking stocks they believe will perform well. Often come with high fees.

  • High fees significantly reduce your returns.
  • Majority underperform Fail to match or exceed the returns of a benchmark index, like the S&P/TSX Composite, over the long term. their benchmarks.
  • Often lack transparency in holdings and costs.
  • Hidden trading expenses Costs incurred when buying or selling securities within the fund, further reducing overall returns. add up.

The Hard Truth: SPIVA Data

The SPIVA Canada Year-End 2023 report reveals a stark reality: over 10 years, a vast majority of active funds failed to beat their benchmarks:

  • 97% of Canadian Equity funds
  • 98% of Canadian Focused Equity funds
  • 98% of U.S. Equity funds

The Solution: Low-Cost Index ETFs Exchange-Traded Funds that track a specific market index (like the TSX or S&P 500). They offer broad diversification at a very low cost.

  • Keep significantly more of your money with ultra-low fees.
  • Instant diversification Spreading your investment across many companies and regions to reduce risk. Don't put all your eggs in one basket! across global markets.
  • Track market performance consistently over time.
  • Simple and transparent – know what you own.
"By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals."

- Warren Buffett

All-in-One ETFs: Investing Made Simple

All-in-One ETFs (also known as Asset Allocation ETFs) are the easiest way to get a fully diversified global portfolio with a single purchase. They automatically manage the mix of stocksShares of ownership in companies, aiming for growth. and bondsLoans to governments or companies, aiming for stability and income. for you.

Why Choose All-in-One ETFs?

  • Instant global diversification (stocks & bonds).
  • Automatic rebalancingMaintaining your desired stock/bond mix automatically over time. – no manual adjustments needed.
  • Extremely low Management Expense Ratios (MERs).
  • Buy and sell easily like a stock (ideally commission-free!).
  • Perfect for beginners and hands-off investors.

Choosing Your Risk Level

Your mix depends on your investment timeline and comfort with volatilityHow much an investment's price might swing up or down..

  • More Stocks: Higher potential growth, higher volatility (Good for long-term: 10+ years).
  • More Bonds: Lower potential growth, lower volatility (Good for shorter-term or lower risk tolerance).

Need help? Try the Vanguard Investor Questionnaire.

Popular Canadian All-in-One ETFs

Leading providers include Vanguard, iShares (BlackRock), and BMO. Here are common options based on stock/bond mix:

Comparisons use VGRO/XGRO/ZGRO vs. RBF459 (sample bank fund) as of Aug 24, 2024. *Max 5-year performance shown due to ZGRO's Feb 2019 inception.

Fees Drain Your Wealth: See the Impact

Key Fees Explained

Management Expense Ratio (MER)

Annual fee charged by the ETF provider (e.g., 0.20%). Deducted automatically. Example: 0.20% MER costs $20/year per $10,000 invested. A 2% mutual fund MER costs $200!

Commissions (Trading Fees)

Fee paid to the brokerage per trade (buy/sell).
• Wealthsimple Trade: $0 for stocks & ETFs.
• Banks/Others: Often $5-$10 per trade. These small fees add up quickly, especially if you invest regularly. $10/trade twice a month is $240/year gone!

Fee Impact Calculator

How Fees Erode Your Growth (7% Annual Return Assumed)

After 25 years:

Low-fee ETF:

$0

ETF + Commissions:

$0

Mutual Fund:

$0

Difference (Low-fee ETF vs Mutual Fund):

$0 more!

(0% more growth)

*Assumes twice-monthly purchases/commissions where applicable.

Accounts & Getting Started with Wealthsimple

Choosing the Right Account

Invest within tax-advantaged accounts first!

  • TFSA (Tax-Free Savings Account)

    Invest after-tax dollarsMoney you've already paid income tax on., all growth and withdrawals are tax-free. Flexible contribution roomStarts at age 18, limit changes annually ($7,000 for 2024). Unused room carries forward. Check CRA My Account for your limit.. Often the best starting point.

    Learn more at Wealthsimple →

  • RRSP (Registered Retirement Savings Plan)

    Contributions are tax-deductibleReduces your taxable income now., growth is tax-deferred. Withdrawals are taxed. Good for higher earners aiming for retirement savings. Contribution roomBased on 18% of previous year's income, up to a max ($31,560 for 2024 tax year). Check your Notice of Assessment. depends on income.

    Learn more at Wealthsimple →

  • FHSA (First Home Savings Account)

    Combines TFSA & RRSP benefits for a first home purchase. Tax-deductible contributions, tax-free growth & withdrawals for home purchase. Contribution room$8k/year limit, $40k lifetime max. Can carry forward $8k unused room. Max 15 years. limited.

    Learn more at Wealthsimple →

  • Non-Registered Account

    Use after maxing out registered accounts. No contribution limitsInvest as much as you want., but capital gainsProfits from selling investments. and dividendsPayments from companies to shareholders. are taxable.

    Learn more at Wealthsimple →
TFSA vs RRSP vs FHSA Flowchart →

Why Wealthsimple Trade is Ideal

  • $0 Commission trading for stocks & ETFs.
  • Clean, intuitive app and web platform.
  • Fast and easy signup process.
  • Automatic Dividend Reinvestment (DRIP). Automatically buys more shares with the dividends you receive, compounding your growth effortlessly.
  • Recurring investment setups (Auto-Invest).
  • CIPF Protection up to $1 million per account type.

Buying Your First ETF on Wealthsimple

  1. Sign Up for Wealthsimple (Use the link for a $25 bonus!). Choose "Trade stocks and ETFs" (Self-Directed Investing). Wealthsimple offers 'Managed Investing' (robo-advisor) and 'Self-Directed Investing' (Trade). This guide focuses on Self-Directed for buying ETFs yourself to minimize fees.
  2. Fund Your Account (Link bank account, e-Transfer, etc.).
  3. Search for the ETF ticker (e.g., "XGRO", "VGRO"). Check it's CAD & TSX. Ensure the ETF is listed on the TSX and in Canadian dollars (CAD) to avoid currency conversion fees. Wealthsimple usually shows this clearly. Example showing CAD currency and TSX exchange on Wealthsimple
  4. Select "Buy". Choose order type: MarketBuys immediately at the best current price. Simple but price might fluctuate slightly. Wealthsimple requires a 5% cash buffer for market orders. or LimitSet a maximum price you're willing to pay per share. Order only fills at your price or better. Allows investing your full cash balance without a buffer..
  5. Enter amount (dollars or shares).
  6. Review and confirm your trade.
Start Trading with Wealthsimple

Bonus: Level Up Your Banking with Wealthsimple Cash

Wealthsimple Cash isn't just for investing; it's a powerful everyday spending and saving account that often beats traditional banks. It integrates seamlessly with your investments.

Feature Wealthsimple Cash Typical Big Bank
Interest on Balance 1.75% - 2.75%* ? Base rate is 1.75% (as of Mar 17, 2025). Can increase to 2.25% (Premium/Core+Boost) or 2.75% (Generation/Premium+Boost) based on client status & qualifying direct deposits. Rates subject to change. *Not promotional rates. ~0.01% - 1%
Cash Back on Spending 1% Often 0% (Debit)
Monthly Fees $0 $0 - $30+
ATM Withdrawals Fee Reimbursement ? Wealthsimple reimburses ATM operator fees (up to $5 each, unlimited times/month). Reimbursement typically occurs within 4 business days after the transaction settles. Standard ATM fees (~$3) may appear initially. Often limited/charged

Key Banking Features

  • Bill payments & pre-authorized debitsAutomatic payments set up to come out of your account on scheduled dates (e.g., bills, subscriptions)..
  • Free Interac e-Transfers®.
  • Physical & virtual Mastercard® prepaid cards. Get a physical card for tapping and a separate virtual card number for online security. Lock instantly in the app if needed.
  • Direct deposit setup.

Consider Complementary Banking

While Wealthsimple Cash covers most needs, for occasional services like bank drafts or cash deposits, consider a free account with Simplii Financial™ (CIBC network) or Tangerine® (Scotiabank network).

  • Bank drafts / money orders.
  • Physical cash/cheque deposits via parent bank ATMs.

(Referral links provided may offer bonuses)

Explore Wealthsimple Cash

Stay the Course & Keep Learning

Keys to Long-Term Success

  • Be Consistent: Set up regular, automatic investments (e.g., every payday).
  • Be Patient: Investing is a marathon, not a sprint. Think long-term (5-10+ years).
  • Stay Calm: Don't panic sell during market dips. Stick to your plan.
  • Minimize Fees: Stick to CAD-listed ETFs on commission-free platforms like Wealthsimple.
  • Know Your Timeline: Only invest money you won't need for at least 5 years. Markets fluctuate. A longer timeline gives your investments time to recover from potential downturns and benefit from growth. For short-term savings (under 5 years), consider High-Interest Savings ETFs like CASH.TO or HISA/PSA funds within Wealthsimple.
  • Seek Advice (If Needed): Consider fee-only financial adviceAn advisor you pay directly for their time/plan, not one who earns commissions selling you products. This avoids conflicts of interest. from a fiduciarySomeone legally obligated to act in your best interest. planner for complex situations.
"The stock market is a device for transferring money from the impatient to the patient."

- Warren Buffett

Recommended Resources

Continue your learning journey:

Pro Tip: Automate!

Set up recurring investments in Wealthsimple ('Auto-Invest'). This enforces discipline and leverages dollar-cost averagingInvesting a fixed amount regularly, buying more shares when prices are low and fewer when high, potentially lowering your average cost over time.. Even small amounts add up significantly over time due to compounding!

Ready to Take Control of Your Financial Future?

You've learned the power of low-cost ETF investing and how simple it can be with the right tools. Wealthsimple offers the commission-free trading, user-friendly platform, and features like DRIP and Auto-Invest to make this strategy effortless. Stop paying high fees and start building wealth the smart way.

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Disclaimer: This website provides educational information only and is not financial advice. Investing involves risk. Past performance doesn't guarantee future results. Do your own research and consider consulting a qualified, fee-only financial advisor before making investment decisions. The site owner uses Wealthsimple and may receive a bonus if you sign up through the provided referral links, at no extra cost to you. You are free to sign up directly.

Contact: contact@icaninvest.ca