Why Simplicity Wins
Most investors start out thinking they need to find the next big stock. But even professionals rarely beat the market consistently.
Index investing flips that idea on its head — instead of betting on individual winners, you own them all.
It’s simple, it’s low-cost, and it works. You’re not trying to outsmart the market; you’re matching it and letting time do the heavy lifting.
If you’ve ever felt overwhelmed by stock picking or market timing, this approach will change how you invest. In fact, you’ll get a lot of time back to enjoy life instead of stressing about investing.
What Is Index Investing?
Index investing means buying an ETF (Exchange-Traded Fund) that tracks a stock market index.
An index is a list of companies, like the S&P 500 (largest U.S. companies) or the S&P/TSX 60 (top Canadian stocks). There are many indexes but each country usually has a few dominant indexes such as one that tracks all the stocks and one that track the top companies.
Instead of buying each company, you buy one ETF that holds them all in the same proportions as the index.
VFV.TO → Tracks the S&P 500 index (The 500 largest companies in the US)
XIU.TO → Tracks the S&P/TSX 60 index (The 60 largest companies in the Canada)
Each time you invest, you’re instantly diversified across dozens or hundreds of companies.
💡 Did You Know?
Most Canadian equity ETFs are index-based, and a large share of new ETF money flows into index strategies.
Why It Works — The Power of Market Returns
Markets rise over time because companies grow, innovate, and generate profits. By owning the market, you capture that long-term growth.
Historically, broad stock markets have returned about 8–10% per year on average.
Using the Rule of 72, your money doubles roughly every 7–9 years at those rates.
Example:
A $10,000 investment compounding at 9% annually becomes over $50,000 after 20 years — without picking a single stock.
And because index ETFs charge very low fees, you keep more of that growth.
Growth Only | Growth + $1,000 annually | Growth + $5,000 annually | |
|---|---|---|---|
Year 1 | $10,000 | $10,000 | $10,000 |
Year 2 | $10,900 | $11,900 | $15,900 |
Year 3 | $11,881 | $13,971 | $22,331 |
Year 4 | $12,950 | $16,228 | $29,340 |
Year 5 | $14,115 | $18,688 | $36,981 |
Year 6 | $15,386 | $21,370 | $45,309 |
Year 7 | $16,771 | $24,294 | $54,387 |
Year 8 | $18,280 | $27,480 | $64,282 |
Year 9 | $19,925 | $30,954 | $75,068 |
Year 10 | $21,718 | $34,739 | $86,824 |
Year 11 | $23,673 | $38,866 | $99,638 |
Year 12 | $25,804 | $43,364 | $113,605 |
Year 13 | $28,126 | $48,267 | $128,830 |
Year 14 | $30,658 | $53,611 | $145,424 |
Year 15 | $33,417 | $59,436 | $163,513 |
Year 16 | $36,424 | $65,785 | $183,229 |
Year 17 | $39,703 | $72,706 | $204,720 |
Year 18 | $43,276 | $80,250 | $228,144 |
Year 19 | $47,171 | $88,472 | $253,677 |
Year 20 | $51,416 | $97,435 | $281,508 |
📚 ADDITION TO YOUR LIBRARY
A little more knowledge can add to your life journey.
This Book Changed my Approach to Retirement
Society and culture has a funny way to define standards and life models. It’s easy to no question anything and just go with the flow.
This book will have you think differently. Do yourself a favour to consider that other retirement model.
Benefits of Index Investing
a) Low Fees 💰 = Higher Returns
Many index ETFs charge 0.03%–0.25% MER. That tiny difference compounds,
On a $100,000 portfolio over 30 years at 7% return:
→ 0.25% MER → ≈ $640,000
→ 0.05% MER → ≈ $708,000
→ Difference: ≈ $68,000 — just from lower fees.
b) Diversification 🌐 Without Effort
By holding hundreds of companies, one bad stock barely matters. You automatically capture global leaders and reduce single-company risk.
c) Predictability and Peace of Mind 🧘
No need to chase headlines or earnings reports. Your portfolio grows with the market — quietly and consistently.
Common Index Types (with Canadian ETF Examples)
Index Type | Description | Example ETFs |
|---|---|---|
🇨🇦 Canadian Market | Top Canadian companies | XIU.TO, ZCN.TO |
🇺🇸 U.S. Market | Largest U.S. companies | VFV.TO, XUS.TO |
🌍 Global Market | Worldwide diversification | XAW.TO, VEQT.TO |
🏦 Bonds | Fixed-income exposure & stability | ZAG.TO, XBB.TO |
You can mix these building blocks yourself or choose an all-in-one ETF that does it for you (e.g., XEQT, VGRO, VBAL).
How to Start Index Investing
Aside from picking a trading platform with low fees, you’ll want to do the following steps to get started. Please avoid opening a margin account - it’s an account to borrow money and it’s not needed.
Choose your account — TFSA, RRSP, FHSA, or Non-Registered.
TFSA for tax-free growth
RRSP for tax deferral
FHSA if saving for a first home
Select your ETF(s) — Many beginners start with one all-in-one ETF matching their risk level (e.g., XEQT, VGRO, VBAL). Personally, I favor the S&P500 index (VFV) but it’s more concentrated.
Automate contributions — set monthly or bi-weekly transfers and buy automatically.
Stay invested — ignore market noise and let time compound your wealth.
🔧 Tip: Start small. Even $100 per month builds momentum. The habit matters more than the amount.
Regular Contributions — Your Secret Weapon
One of the biggest advantages of index investing is how consistent contributions smooth out volatility and help you capture all market movements.
Instead of guessing when to invest, set a regular schedule — monthly or, better yet, bi-weekly to match your paycheque. Pay yourself first is a powerful strategy when saving money.
This approach, called dollar-cost averaging, means:
You buy more units when prices are low, and
Fewer units when prices are high.
Over time, this lowers your average cost and keeps you invested through bull and bear markets.
📅 Example: Invest $500 bi-weekly into an ETF like XEQT. You’ll buy on 26 different days per year — capturing every dip and rebound the market throws your way.
Index Investing vs. Stock Picking
Index investing delivers market-level returns with minimal stress — and that’s already better than what most investors achieve.
Factor | Index Investing | Stock Picking |
|---|---|---|
Diversification | Broad (100s of stocks) | Concentrated |
Time Required | Minimal | High |
Potential Upside | Matches market | Could outperform (rarely sustained) |
Stress Level | Low | High |
Many investors will blend the two by building a foundation in index investing and then seeking higher returns through some stock picking.
Either way, index investing is popular, it works, and should be the foundation for everyone.
The Emotional Advantage
The hardest part of investing isn’t math — it’s behaviour. Have a read on what risk is with investing to truly capture the impact of emotions.
Many investors sell low when markets fall and buy high when excitement returns.
Index investing helps you stay disciplined through dollar-cost averaging — investing a fixed amount regularly regardless of market conditions.
📈 Remember: Time in the market beats timing the market.
The Role of Index Investing in Your Portfolio
Index ETFs can be your entire portfolio or the core foundation you build around.
Investor Type | Example ETF | Allocation Style |
|---|---|---|
🌱 New Investor | XEQT | 100% equity growth |
🪴 Achiever | XEQT | 100% equity growth |
🌳 Financial Independence | VGRO | 80/20 equity/bond |
🌴 Retired Investor | VBAL | 60/40 balance |
As your comfort and goals evolve, your mix can too — without leaving index investing.
Index investing isn’t flashy, but it’s consistent. It lets you build wealth quietly while you focus on life, career, and family.
You don’t need to predict or react — just participate. Let the market reward your patience.
💬 A Smart Investing Philosophy: Earn more, work less, and let the market do the heavy lifting.