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Sorting out Canadian-listed ETFs vs USA-listed ETFs

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We were asked what the big difference was between Canadian-listed ETFs vs USA-listed ETFs. We'll explain...

Most Canadian investors looking to build a portfolio of low-cost index ETFs will use products that trade on Canada’s main stock exchange – the TSX. But these Canadian-listed ETFs don’t just invest in the Canadian market. Indeed, you can build a globally diversified portfolio using ETF providers like Vanguard, iShares, and BMO, that track all major stock indexes around the world.

Canadian-listed ETFs are an excellent and affordable way for Canadians to invest for the long term. But they’re not the only way to invest in ETFs. Cost-conscious investors can find products with lower fees and can reduce or avoid foreign withholding taxes by investing in U.S.-listed ETFs.

This article explains the difference between Canadian-listed ETFs and U.S.-listed ETFs. We’ll also look at when and why an investor would want to use U.S.-listed ETFs in their portfolio.

Canadian-listed ETFs explained

ETFs are traded on an exchange just like individual stocks and can track a wide variety of securities and market indices, from Canadian, U.S., and International equities, to corporate or government bonds. A recent trend is to combine all of those asset classes and geographical regions into one balanced ETF, called an asset allocation ETF. 

Top 10 Canadian-listed ETFs

ETF name
Assets (millions)
Asset class
BMO S&P 500 Index ETF
U.S. equity
iShares S&P/TSX 60 Index ETF
Canadian equity
iShares Core S&P/TSX Capped Composite Index ETF
Canadian equity
BMO Aggregate Bond Index ETF
Fixed income
iShares Core S&P 500 Index ETF (CAD-Hedged)
U.S. equity
iShares Canadian Universe Bond Index ETF
Fixed income
iShares Core MSCI EAFE IMI Index ETF
International equity
BMO S&P/TSX Capped Composite Index ETF
Canadian equity
International equity
Vanguard Canadian Aggregate Bond Index ETF
Fixed income

Current performance of Canadian ETFs

As you can see, investors can build a globally diversified, risk-appropriate portfolio using Canadian-listed ETFs. Such a portfolio might include the following ETFs:

  • Canadian equity – XIC
  • S. equity – ZSP
  • International equity – XEF
  • Canadian bonds – ZAG

An investor would weight each ETF according to the percentage of equities and bonds they’d prefer in their portfolio. In the above case, making a traditional 60/40 balanced portfolio could mean: 20% Canadian, 20% U.S., 20% International & 40% bonds.

Keep in mind that most of us get paid in Canadian dollars and spend Canadian dollars. We put Canadian dollars in our investment accounts. Therefore, it’s no surprise that our investment purchases – including Canadian-listed ETFs – are also in Canadian dollars.

You can easily buy and sell Canadian-listed ETFs using an online brokerage. We recommend Questrade because it’s Canada’s low-cost leader. A Wealthsimple self-directed investment account is also a good option because you can buy and sell stocks and ETFs on any North American exchange – free of charge. 

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Buying U.S. ETFs in Canada

Just like Canadian-listed ETFs are traded on the TSX, U.S.-listed ETFs are traded on an American stock exchange like the New York Stock Exchange (NYSE). Indeed, that’s where Canadian investors will find U.S.-listed ETFs from similar providers such as Vanguard and iShares. To access (or invest in) a U.S.-listed ETF, a Canadian investor simply needs to open an account with a discount brokerage like Questrade or Wealthsimple Trade. From there, you’ll have access to stocks and ETFs traded on both Canadian and U.S. stock exchanges.

While that’s a simple way to buy U.S.-listed ETFs, it’s not the most cost-conscious way to do it. That’s because U.S.-listed ETFs trade in U.S. dollars and a Canadian investor is likely using Canadian dollars. Any discount broker like Questrade will execute your trade, perform the currency conversion, and charge a fee (typically 2.5%) on top of the conversion. Those fees can add up quickly if you’re making a sizeable trade.

Instead, Canadian investors looking to trade U.S.-listed ETFs should open a USD investment account that they can fund with their own U.S. dollars. That way you’re performing trades in the same currency and can avoid additional fees from your broker when converting CAD to USD (or vice versa).

Here are the top 10 largest U.S. listed ETFs:

ETF Name
Assets (millions)
Asset class
U.S. equity
iShares Core S&P 500 ETF
U.S. equity
Vanguard S&P 500 ETF
U.S. equity
Vanguard Total Stock Market ETF
U.S. equity
Invesco QQQ
U.S. equity (NASDAQ 100)
iShares Core U.S. Aggregate Bond ETF
Fixed income
Vanguard Total Bond Market ETF
Fixed income
iShares Russell 1000 Growth ETF
U.S. equity
Vanguard Growth ETF
U.S. equity
iShares iBoxx $ Investment Grade Corporate Bond ETF
Fixed income

Current performance OF U.S ETFs

Difference between Canadian-listed ETFs and U.S.-listed ETFs

Aside from being listed on different stock exchanges, and being traded in different currencies, the main reason for a Canadian investor to use a U.S.-listed ETF is to save on fees.

Canadian investors pay some of the highest investment fees in the world, typically thanks to our expensive mutual funds that charge a 2% management expense ratio (MER) or more. Our Canadian-listed ETFs are much cheaper than mutual funds, but Canadian investors still get short-changed on fees compared to our U.S. counterparts.

Read more: Index Funds vs. Mutual Funds.

If you want to cut your fees to the bone, you’ll want to eventually add U.S. listed ETFs to your portfolio to save on MER and on foreign withholding taxes (which I’ll get to later in the article).

Take the Vanguard Total World Stock ETF (VT), which comes with an MER of just 0.08%. With just this one ETF, an investor can get exposure to more than 8,400 stocks from all over the world. Compare that to one of the only all-in-one global stock ETFs available on a Canadian exchange – Vanguard’s VEQT – which comes with an MER of 0.25%. That’s more than three times the cost of the U.S.-listed ETF.

Foreign withholding taxes

Most investors should be perfectly content with building a portfolio of Canadian-listed ETFs. After all, you can keep things extraordinarily simple by purchasing one asset allocation ETF, such as VBAL, VGRO, or VEQT, and getting global diversification and automatic rebalancing with just one product.

But investors should know that there are other costs in addition to the management expense ratio or MER that are incurred inside any ETF that’s tracking the U.S. or International stock index. This is called foreign withholding taxes, and it’s essentially a 15% tax on dividends paid to foreign investors.

Let’s go back to Vanguard’s All Equity ETF (VEQT). It comes with an MER of 0.25% but also an estimated foreign withholding tax of 0.22% – bringing the total cost to 0.47%.

This doesn’t make much of a difference for new investors starting out with a few thousand dollars, or, even for portfolios valued at less than $200,000. But at $200,000+ these fees can start to add up in a hurry – totalling $500 or more each year.

Foreign withholding taxes are not recoverable inside an RRSP or TFSA, but they are recoverable inside a taxable (or non-registered) account by filing for a foreign tax credit using Schedule 1.

However, these taxes are recoverable in an RRSP if an investor holds U.S.-listed ETFs. And for that reason, many Canadian investors choose to hold U.S.-listed ETFs inside their RRSPs to not only save on foreign withholding taxes but to save on MER as well.

Norbert’s Gambit

Savvy investors who want to trade in U.S. dollars get around the currency conversion fees imposed by their discount brokerage through a manoeuvre called Norbert’s Gambit. It’s the cheapest way to convert USD and CAD currency at a discount brokerage.

The process can vary widely between brokers. First, you’ll need the ability to open a USD account. You’ll also want to know how long it will take for the currency conversion trade to settle. Some brokers take 2-3 business days, while others (like RBC Direct) can do the entire Gambit on the same trading day.

To perform Norbert’s Gambit, you need to buy, journal, and then sell shares of a security that is traded in both USD and CAD dollars. The specific ETF used for Norbert’s Gambit is called the Horizons US Dollar Currency ETF. It trades in Canadian dollars as DLR.TO, and in U.S. dollars under DLR.U.TO.

An investor looking to convert CAD to USD would buy DLR in their Canadian investment account, convert it to DLR.U in their U.S. dollar account, and then sell the ETF to receive USD. Reverse the process to go from USD to CAD.

The higher the dollar amount exchanged, the larger benefit you’ll receive from performing Norbert’s Gambit.

What is the difference between a US-listed S&P 500 ETF and a Canadian-listed S&P 500 ETF?

Canadian-listed ETFs that track the S&P 500 include BMO’s ZSP, Vanguard’s VFV, and iShares XUS. These funds are super cheap, with the average MER hovering around 0.09% for each ETF.

Similarly, Canadian investors can find ETFs tracking the S&P 500 on the NYSE. These products include SPDR’s SPY, iShares’ IVV, and Vanguard’s VOO. The MER of these products is slightly cheaper, with VOO at 0.03%, IVV at 0.04%, and SPY at 0.09%.

Besides cost, the main difference between a U.S.-listed S&P 500 ETF and a Canadian-listed S&P 500 ETF is the currency used to invest. It takes USD to invest in U.S.-listed ETFs, while investors would purchase Canadian-listed ETFs in CAD.

The only reason for a Canadian investor to hold the U.S.-listed version of an S&P 500 ETF is to save on foreign withholding taxes inside his or her RRSP (as described in the section above).


A savvy investor looking for an S&P 500 ETF will notice that Vanguard’s VOO comes with a cost savings of 0.05% over its Canadian version (VFV). It’s not a big enough difference to bother with unless you have a sizeable RRSP portfolio. That’s because by putting VOO in your RRSP you’ll not only save on MER but also on foreign withholding taxes.

MER fees on Canadian vs. U.S. ETFs

Most investors can get away with holding a portfolio of 1-4 broadly diversified, Canadian-listed ETFs and enjoy the incredible savings and expected future returns that these products have to offer.

However, it does make sense for investors with sizeable RRSP accounts ($200,000+) to consider using U.S.-listed ETFs for their U.S. and international equity exposure. The savings on MER can be significant on larger portfolios, while there’s also the obvious benefit of avoiding foreign withholding taxes.

Here’s a comparison of U.S. equity ETFs that are traded in Canadian and U.S. markets. You can see the difference in MER and in foreign withholding taxes inside an RRSP:

ETF name
iShares Core S&P Total U.S. Stock Market ETF
iShares Core S&P U.S. Total Market Index ETF
Vanguard Total Stock Market ETF
Vanguard U.S. Total Market Index ETF

And here’s a comparison of international equity ETFs that are traded in Canadian and U.S. markets. Again, there’s a significant difference in MER and in foreign withholding taxes inside an RRSP:

ETF name
iShares Core MSCI EAFE ETF
iShares Core MSCI EAFE IMI Index ETF
Vanguard FTSE Developed Markets ETF
Vanguard FTSE Developed AC ex NA Index ETF
Vanguard Total International Stock ETF

Final word

Canadian investors can access both Canadian and U.S.-listed ETFs through their discount brokerage accounts. While the vast majority of investors will only ever need to purchase Canadian-listed ETFs to build their portfolios, it does make sense for investors with sizeable RRSP accounts to consider U.S.-listed ETFs for their U.S. and international equity exposure.

U.S.-listed ETFs typically come with lower fees (MER) than their Canadian-listed counterparts. They also reduce, and in some cases eliminate, the additional 15% withholding tax imposed on foreign dividends when held inside an RRSP.

You can easily dive into ETF investing by using an online brokerage like Questrade or Wealthsimple Trade account. Debating between the two platforms? Read our in-depth comparison of Questrade vs. Wealthsimple Trade.

If you decide to give it a go, take a look at The Best ETFs in Canada for Young Canadian Investors first. We scrutinized more than 700 ETFs and narrowed down the list to five of the best Canadian ETFs on the market. That’ll help kick off your portfolio!

However, if DIY investing or understanding ETFs feels too complicated, go with a robo-advisor. A robo-advisor like Wealthsimple will build you a risk-appropriate, diversified personalized portfolio comprised of low-cost ETFs and index funds, and will do the work of rebalancing your portfolio. See our Wealthsimple review for all the details about what makes it so stellar. In the meantime, learn how to start investing and how to buy stock, and then try an online brokerage once you’ve got the basics under your belt. Then, set up automatic contributions and invest for the long-term.

Robb Engen is a leading expert in the personal finance realm of Canada and is also the co-founder of Boomer & Echo, an award-winning personal finance blog.


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