How to Evaluate ETFs: Insights From a Veteran Finance Journalist

There’s no stopping the rapid growth in exchange-traded funds (ETFs) in Canada, which at the end of 2025 held $735.1 billion in assets – a year-over-year increase of 37.5%.¹

While ETFs offer investors increased product choice, the option to trade during the day and potentially lower fees, the explosion of available funds has also made it more difficult for investors to know what to purchase.

If there’s anyone who can help navigate the ETF space, it’s personal finance legend Rob Carrick. The longtime finance columnist created an ETF Buyer’s Guide for the Globe and Mail for over a decade. He’s evaluated thousands of funds and has some thoughts for Canadians on what to look for in an ETF. We spoke to Rob to get the scoop.

How to choose ETFs

There is no shortage of ETFs to choose from. In Canada, there are 1,472 Canadian-listed funds, 255 more than a year ago. Add global options and the number of choices gets closer to 14,000.²

The increase in ETFs has made it that much more important for investors to do their due diligence when selecting funds. Just like with any investment, the ETFs you pick should align with your financial goals and your risk tolerance levels. It’s easy to get caught up in a fad and buy a niche fund, says Carrick, and while that may be fine for those who can stomach more risk, chasing a trend that doesn’t suit your needs could have a negative impact on your portfolio

How to evaluate ETFs

Everyone will need to evaluate which ETFs align with their goals and personal financial situations, but Carrick bases his evaluation on several key factors. Here are three main considerations:

1. What’s inside the fund
   Take a close look at the investments in the fund itself, explains Carrick, and the index the ETF is based on. Is it an authoritative index with stocks that he’s familiar with, for example. Or, are the holdings companies he’s never heard of or in niche sectors that he doesn’t know much about? Being familiar and comfortable with the ETF investments is a key consideration.
   
   
2. Size matters
   For Carrick, size and liquidity of the fund matter.  He considers the assets under management of the fund, whether you can buy and sell at competitive prices and whether the ETF is liquid enough to trade.
   
   
3. Cost of the ETF
   Costs are important, as fees ultimately cut into overall return. An example of a fee is the MER (Management Expense Ratio), which can be found on the prospectus. There are also trading fees to consider. Many of the core products – the ETFs that track popular benchmarks – come with low fees, while actively managed ETFs (constructed by a professional manager) and more niche offerings may come with higher fees.

How to build an ETF portfolio

There are many ways to build a portfolio with ETFs (see your options here), but one common approach is “core and explore.” Core, says Carrick, are the ETFs that follow the most popular benchmarks, like an S&P 500–tracking fund or one that replicates the S&P/TSX Composite Index.

Explore funds are the more niche products, like an AI or robotics fund. For many investors, these won’t make up the main part of a portfolio, but they could be peppered into one if someone wants exposure to a specific sector.

Still, the same things Carrick looks for in an ETF should be considered when researching a thematic or sector-specific fund: costs, size, liquidity and familiarity with holdings.

What's next for ETFs? 

Whether you’re already an ETF investor or are getting to know this market segment, now might be a good time to take a look at your options and find what works for you. There’s no doubt that ETFs will continue to grow, says Carrick.