Can I Invest in S&P 500 from Canada Using My TFSA or RRSP?
October 13, 2025
Many Canadians want to know the answer to the question “Can I invest in S&P 500 from Canada?”. A major US stock market index, using their registered accounts like the Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP). The good news is that it’s definitely possible, and it can be a smart move for long-term growth. This guide will walk you through how to do it, what to consider, and the potential benefits and drawbacks.
Canada offers some pretty sweet deals when it comes to saving and investing, mainly through registered accounts like the Tax-Free Savings Account (TFSA) and the Registered Retirement Savings Plan (RRSP). Think of them as special accounts where the government lets you grow your money without taking a big cut in taxes. It’s a pretty big advantage compared to what folks in other countries might have.
So, what’s the deal with each?
The main difference boils down to when you get the tax break: TFSA offers tax-free withdrawals, while RRSP offers an upfront tax deduction.
It’s important to know that while these accounts shield you from Canadian taxes, there can be some U.S. withholding taxes on dividends from U.S. stocks, even within these registered accounts. We’ll get into the specifics of that later, but for now, just know that both accounts are powerful tools for Canadians looking to invest in markets like the S&P 500. Understanding which account suits your current financial situation and future goals is key to making the most of your investments. For instance, if you’re saving for your first home, the First Home Savings Account (FHSA) offers a unique blend of TFSA and RRSP benefits, allowing tax-deductible contributions and tax-free growth.
So, you want to get your money into the S&P 500 from Canada. That’s a solid goal. The S&P 500 isn’t something you can buy directly, like a single stock. Instead, it’s a list, a benchmark really, of the 500 biggest companies in the United States. Think of it as the major league of American business. When people say the S&P 500 is doing well, it means these large, influential companies are generally performing strongly.
Why is this important for you? Because it’s the backbone of what’s called index investing. This approach takes the guesswork out of picking individual stocks. Instead, you’re essentially investing in the overall progress of the U.S. stock market as a whole. It’s like buying into the success of the entire farm rather than trying to find one prize-winning cow. By syncing your portfolio’s growth with the market’s, you aim to capture those broad market returns. Studies show that most professional money managers actually fail to beat the S&P 500 over the long haul, which is why index investing is a popular strategy for many Canadians aiming for long-term growth.
To actually invest in the S&P 500, you’ll typically use an Exchange Traded Fund (ETF) or a mutual fund that tracks this index. You can hold these within various Canadian registered accounts, including your TFSA or RRSP. This gives you exposure to a wide range of top U.S. companies without needing to research and buy each one separately. It’s a simple way to get broad market exposure.
Here’s a look at how you can get started:
Investing in the S&P 500 through an index fund or ETF offers diversification. This means your investment is spread across many companies, reducing the risk associated with any single company’s performance. It’s a straightforward way to participate in the growth of the U.S. economy.
When you decide to invest in the S&P 500 from Canada, you’ll generally come across two main ways to do it: Exchange-Traded Funds (ETFs) and mutual funds. Both can give you exposure to the same big U.S. companies, but they work a bit differently.
ETFs are like baskets of stocks that trade on an exchange, similar to individual stocks. You can buy and sell them throughout the trading day whenever the market is open. This flexibility is great if you like to react to market movements. Mutual funds, on the other hand, are typically bought and sold only once a day, after the market closes, at their net asset value (NAV). This means you don’t get that same intraday trading ability.
Here are some key differences to consider:
For most Canadian investors looking to track the S&P 500, ETFs usually present a more cost-effective and flexible option.
It’s worth noting that the specific S&P 500 companies held by ETFs and mutual funds will be very similar, if not identical, as they aim to replicate the same index. For instance, top holdings often include giants like Microsoft, Apple, and Amazon. The choice often boils down to how you prefer to trade and your sensitivity to fees over the long term.
When you invest in U.S. companies or U.S.-focused Exchange Traded Funds (ETFs) within your registered accounts, you might run into something called a withholding tax on dividends. This is a tax that the U.S. government applies to income paid to non-U.S. residents. It’s a bit of a curveball, especially when you’re trying to keep things tax-efficient.
The U.S. generally imposes a 15% withholding tax on dividends paid by U.S. companies to non-U.S. residents. This tax is applied directly by the U.S. government before the dividend even reaches your account.
Here’s how it typically plays out:
It’s important to note that this withholding tax usually only applies to dividends. Capital gains, which are profits you make from selling an investment for more than you paid for it, are generally not subject to this U.S. withholding tax, regardless of whether they are in a TFSA or RRSP. This is a key reason why many investors focus on capital appreciation rather than dividend income when investing in U.S. assets within a TFSA.
When considering investments that generate dividends, especially from U.S. sources, the account type you use can significantly impact your net returns due to these withholding taxes. Understanding this difference is key to making informed decisions about where to hold different types of investments.
For Canadian-listed ETFs that hold U.S. stocks, the situation can be a bit more complex. If the ETF holds U.S. stocks directly, the withholding tax may still apply to the dividends paid by those underlying U.S. companies, even if the ETF itself is Canadian-domiciled. However, some Canadian ETFs are structured to mitigate this. For instance, some ETFs might use derivatives or hold U.S. stocks through a Canadian subsidiary to try to avoid or reduce the withholding tax. It’s always a good idea to check the specific ETF’s prospectus or fact sheet to understand how it handles U.S. dividend withholding tax.
When you decide to invest in the S&P 500 from Canada, you’ll run into a choice: should you buy an ETF listed on a Canadian exchange or one listed directly on a U.S. exchange? Both investment options give you exposure to the same index, but there are some key differences to consider.
Canadian-listed S&P 500 ETFs, like Vanguard’s VFV, trade in Canadian dollars and are bought and sold on Canadian stock exchanges. This can feel simpler because you don’t have to worry about currency conversion when you buy or sell. However, these ETFs often hold a U.S.-listed ETF (like VOO) as their underlying asset. This means there’s an extra layer of management, which can sometimes translate to slightly higher management fees compared to their U.S. counterparts.
On the other hand, U.S.-listed S&P 500 ETFs, such as Vanguard’s VOO, trade in U.S. dollars on U.S. exchanges. Buying these directly means you’ll need to convert your Canadian dollars to U.S. dollars, which involves currency exchange fees and potential fluctuations. However, you might find that these ETFs have lower management expense ratios (MERs). You also need to be aware of the U.S. dividend withholding tax, which is generally 15% on dividends paid by U.S. companies. This tax is automatically withheld, but as we’ll discuss later, it can be avoided if held within an RRSP.
Here’s a quick look at some common considerations:
Choosing between a Canadian and a U.S.-listed ETF often comes down to your comfort level with currency exchange and your preference for dealing with different tax implications. For many, the slight difference in fees or the simplicity of staying within Canadian markets makes one option more appealing than the other.
Some specialized ETFs, like certain corporate class or swap-based ETFs, aim to minimize or avoid distributions altogether. While these structures can be tax-efficient in non-registered accounts, they often come with higher fees, swap fees, and the risk of counterparty default. They also carry the possibility that tax laws could change how these structures are treated in the future.
So, you’ve decided to invest in the S&P 500 from Canada using your TFSA or RRSP. Great! Now, how do you actually do it? You’ll need a brokerage account. Think of this as your gateway to the stock market. Many Canadian banks offer brokerage services, but there are also online discount brokerages that often have lower fees. Some popular choices include Questrade, Wealthsimple Trade, and CIBC Investor’s Edge. When you’re picking one, look at things like the fees they charge for buying and selling ETFs, whether they offer research tools, and how easy their platform is to use.
Now, let’s talk about currency. Since the S&P 500 is made up of U.S. companies, you’ll be dealing with U.S. dollars. If you buy a U.S.-listed S&P 500 ETF directly, you’ll need to convert your Canadian dollars to U.S. dollars. This usually involves a currency conversion fee, often around 1% to 1.5%, depending on your broker. Some investors choose to hold U.S. dollars in their accounts to avoid this fee on every transaction.
Alternatively, you can buy Canadian-listed ETFs that track the S&P 500, like Vanguard’s VFV or BMO’s ZSP. These ETFs are bought and sold in Canadian dollars, and the fund manager handles the currency conversion internally. This can simplify things, but it’s worth noting that these Canadian-listed ETFs might have slightly higher management fees than their U.S. counterparts.
Here’s a quick look at what to consider:
When choosing a brokerage, it’s not just about the lowest price. Think about the overall experience and what makes you feel comfortable making investment decisions. A slightly higher fee might be worth it if the platform is user-friendly and provides helpful resources.
Ultimately, the best choice depends on your personal preferences and how actively you plan to trade. For most people just starting, a Canadian-listed ETF bought through a discount brokerage is a straightforward way to get started.
It’s easy to let your registered account contribution room, whether for your TFSA or RRSP, sit unused. Sometimes, people hesitate because markets, like the S&P 500, are at high points. The thought of investing right before a potential dip can be unsettling. However, remember that broad market indexes like the S&P 500 represent a wide range of companies, not just a single stock. Historically, these indexes have shown resilience over the long term.
If you’re unsure about investing a large sum at once, consider spreading your contributions out over time. This strategy, known as dollar-cost averaging, can help reduce the impact of market volatility on your overall investment. Instead of trying to time the market perfectly, you invest a fixed amount at regular intervals. This approach can also help manage the emotional aspect of investing, making it easier to stick with your plan even when markets fluctuate.
Here’s a look at typical contribution limits for 2025:
Don’t let the fear of market timing prevent you from using your registered accounts. Consistent investing over time, rather than trying to predict short-term market movements, is often a more effective strategy for long-term wealth building. Focus on your long-term goals and maintain a disciplined approach to contributions.
Many investment platforms allow you to set up automatic contributions and recurring ETF purchases. This can be a hands-off way to consistently invest, helping you maximize your contribution room without needing to actively manage each transaction. By setting up these automatic investments, you can ensure your money is put to work regularly, taking advantage of compounding growth over time.
Deciding where to park your investments, especially when aiming for broad market exposure like the S&P 500, really comes down to your personal financial situation and goals. It’s not a one-size-fits-all answer, and often, using both your TFSA and RRSP makes the most sense.
Think about your TFSA as your go-to for tax-free growth. Any capital gains or dividends you receive within your TFSA are completely shielded from taxes, both now and when you withdraw them. This makes it ideal for long-term growth investments like an S&P 500 ETF, where you’re looking for appreciation over time. Plus, if you’re investing in U.S.-listed ETFs that hold U.S. stocks, you’ll still face that 15% U.S. dividend withholding tax, but it doesn’t impact your tax situation in Canada. It’s a small price to pay for tax-free growth on the Canadian side.
Your RRSP, on the other hand, offers tax-deferred growth. You get a tax deduction when you contribute, which can lower your taxable income today. The investments grow tax-sheltered, meaning you don’t pay tax on dividends or capital gains until you withdraw the money in retirement. This is particularly beneficial if you’re in a higher tax bracket now than you expect to be in retirement. Similar to the TFSA, U.S. dividend withholding tax still applies to U.S. stocks or ETFs held within an RRSP, but Canada’s tax treaty with the U.S. means you generally can’t recover it. However, the tax deferral benefit can be quite significant over many years.
Here’s a quick look at how they stack up for S&P 500 investments:
| Feature | TFSA | RRSP |
| Contribution | After-tax dollars | Pre-tax dollars (tax-deductible) |
| Growth | Tax-free | Tax-deferred |
| Withdrawals | Tax-free | Taxable as income |
| U.S. Dividend Tax | 15% withholding (cannot be recovered) | 15% withholding (cannot be recovered) |
| Best for | Long-term growth, tax-free withdrawals | Tax deferral, reducing current taxable income |
So, when should you choose one over the other, or both? If you’re early in your career and expect your income to rise, maximizing your TFSA first might be smart. You get that tax-free growth without needing a tax deduction now. As your income increases and you move into higher tax brackets, using your RRSP becomes more attractive because the tax deduction is worth more. Many Canadians find a balanced approach works best, filling up their TFSA for tax-free growth and then using their RRSP to benefit from tax deferral and deductions. It’s about using each account’s strengths to build the most efficient portfolio for your future. Remember, you can hold Canadian-listed S&P 500 ETFs in either account, simplifying currency conversions and avoiding some of the complexities of holding U.S.-listed securities directly, which can be especially helpful when looking at how ETFs are taxed in non-registered accounts.
It’s often beneficial to contribute to both registered accounts if you have the room. This strategy allows you to take advantage of the unique tax benefits each account offers, creating a more robust and tax-efficient investment plan over the long haul. Don’t let unused contribution room go to waste; put it to work for you.
The S&P 500 is like a report card for the 500 biggest and most important companies in the United States. When people say the S&P 500 is doing well, it means these major companies are generally performing strongly. It’s a popular way to see how the U.S. stock market is doing overall.
Yes, absolutely! You can invest in the S&P 500 through your Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP). These accounts are great for holding investments like S&P 500 index funds or Exchange Traded Funds (ETFs) because they offer tax advantages.
Both ETFs and mutual funds can help you invest in the S&P 500. ETFs are like stocks; you can buy and sell them throughout the day at changing prices. Mutual funds are usually bought or sold only once a day after the market closes. ETFs often have lower fees and no minimum investment, making them a popular choice.
When U.S. companies pay dividends, the U.S. government usually takes a 15% tax. However, this tax is waived if your investment is inside an RRSP. In a TFSA, this tax is applied, but because the S&P 500 doesn’t pay very high dividends, the impact on your overall long-term earnings is usually quite small.
You have options! You can buy ETFs that trade in Canadian dollars (like VFV) or those that trade in U.S. dollars (like VOO). ETFs traded in Canada are easier because you don’t have to worry about converting currency. Both types track the S&P 500, but currency changes can slightly affect your returns over time, though these effects often balance out for long-term investors.
All investing has some level of risk, and the stock market goes up and down. However, the S&P 500 has historically shown a strong ability to recover from tough times and grow over the long run. Investing in an index like the S&P 500 is a strategy to ride out short-term ups and downs and benefit from that long-term growth.
