A guide to the best Canadian ETFs for 2023

Best Canadian ETFs

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BMO Monthly Income ETF

Canadians are wading through a lot of uncertainty, which is why there has been so much interest in fixed income ETFs, says Erin Allen, vice president for ETF online distribution for BMO Global Asset Management.

The BMO Monthly Income ETF has a fixed income that comes from bonds, dividend ETFs and covered call ETFs, adding in corporate bonds as well.

TD Q Canadian Dividend ETF

For those worried about fixed income, the TD Q Canadian Dividend ETF might be an excellent option.

With a distribution yield at 3.87% at the time of writing, the ETF focuses on companies that provide dividend growth, as well as long-term profitability. It invests primarily in Canada, with a mix of sectors including financial services, energy, basic materials, industrial services and telecoms.

Jonathan Needham, Vice President of ETF Distribution for TD Asset Management anticipates that this Canadian-focused ETF may outperform other dividend equities in 2023.

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iShares Core MSCI Canadian Quality Dividend Index ETF

Due to inflation, 2022 was particularly hard on retirees who need fixed income as part of their regular income stream.

Investors in this scenario could turn to the iShares Core MSCI Canadian Quality Dividend Index ETF, which offers a defensive position and consistent income, currently with a 4.01% yield at the time of writing.

“We see investors pivot to a more defensive stance,” said Helen Hayes, head of iShares Canada at BlackRock.

Vanguard Global Aggregate Bond Index ETF

Now of course if you’re considering fixed income, we need to talk about bond ETFs. Bonds had a bad year in 2022, as interest rates climbed. But experts across the board are saying that “bonds are back,” especially with a long-term investment strategy in mind.

If you are in it for the long haul, Vanguard Global Aggregate Bond Index ETF is a good option. With a benchmark of 25,000 bonds, the ETF covers whole global bonds, with an average maturity of 10 years.

D’Angelo sees the benefit of using a long-term investment strategy this year.

“None of our views are tactical in nature, with more of a 10-year outlook,” D’Angelo said. “Having said that, what we’ll propose will work really well next year as we’re forecasting a recession.”

iShares Core Canadian Universe Bond ETF

A potential recession creates more risk for investors. That’s why another timely recommendation for 2023 is iShares Core Canadian Universe Bond ETF. Here you get an ETF with a Silver rating for its diversified exposure to Canadian bonds.

Bryan Armour, Director of Passive Strategies Research, North America at Morningstar likes this option for those who have a portfolio full of stocks. That’s because this ETF has an overweight holding of government bonds, which can help balance your portfolio.

TD Canadian Aggregate Bond Index ETF

With so many unknowns on the horizon many investors are looking to stick with a defensive investment strategy in 2023. The TD Canadian Aggregate Bond Index ETF will have you covered with 70% investment in government bonds and 30% in corporate bonds. You can look into this ETF using a low cost trading platform today.

The ETF is both conservative and defensive for those wanting to gain back control of their portfolio in the next year.

“With equity markets revised lower it’s a good time to be defensive and capture a good yield if you will,” Needham says.

Vanguard FTSE Developed All Cap ex North America Index ETF

Experts also anticipate that the global market should do well coming out of a recession next year.

The Vanguard FTSE Developed All Cap ex North America Index ETF (VIU) is a solid option, giving you global exposure with 58% in Europe, 40% Pacific and 0.70 in the Middle East.

TD International Equity Index ETF

Canadian investors tend to have a home bias, which is why it can be important to look outside the North American market to broaden your portfolio.

Armour agrees with D’Angelo that the broader market is a great place to be coming out of a recession.

TD International Equity Index ETF is an affordable option that’s made up of 97% international equity.

BMO Low Volatility Canadian Equity ETF

For those wanting to add even more conservative protection to their portfolio, the BMO Low Volatility Canadian Equity ETF is a stable option. While you likely won’t see it soar, it probably won’t crash either.

In a rocky market, low volatility is a natural place to look and this ETF gives access to blue-chip companies with relatively steady performance.

“This lower volatility approach to investing is going to be a good theme to run with in 2023 with the market uncertainty,” Needham says.

iShares MSCI Minimum Volatility USA Index ETF

This challenging environment during the next year is exactly why you might consider a low volatility option. iShares MSCI Minimum Volatility USA Index ETF covers steady sectors such as utilities.

Safety is key going into a recession, Hayes says. Especially after the interest rates and inflation we’ve seen through 2022.

“When we look at the post-pandemic world and all the inflationary shock at the moment…the rate has moved from 0.25% to 4.5% in the span of four months…and the result of that is a sell off,” Hayes says. “Investors should be prepared for a positive real rate environment.”

Final thoughts

Even with the possibility of a recession looming, now is not the time to panic. Check in with your financial advisor to see whether these ETFs are a good fit for your portfolio and align with your goals.

Some of Canada's top investing platforms have excellent research tools available and low trading fees, so you can make sure you're making the right play.