ETFs

By Tony Dong, MSc, CETF on January 30, 2026
Estimated reading time: 10 minutes

By Tony Dong, MSc, CETF on January 30, 2026
Estimated reading time: 10 minutes

Both products promise upside participation with downside protection, but come with unique trade-offs and costs investors should be aware of.

The first month of a new year tends to bring a familiar checklist for Canadian investors. There is fresh tax-free savings account (TFSA) contribution room to use. For 2026, that number is $7,000. There is also the annual rush to finish topping up registered retirement savings plan (RRSP) contributions within the first 60 days for the prior tax year.

Bank advisors know this rhythm well. If you have cash sitting idle, there is a good chance you have received a call inviting you to review your financial plan or come into a branch. The objective is usually the same: get that cash invested into one of the bank’s in-house products.

For older clients, or those flagged through the know-your-client process as having a lower risk tolerance, the conversation often shifts toward market-linked guaranteed investment certificates (GICs). These products are typically presented as a way to participate in stock market gains while keeping your principal protected.

That pitch has worked for decades. But in 2026, market-linked GICs are no longer the only way to get that type of payoff. Exchange-traded funds (ETFs) have entered the same territory with products commonly called buffer ETFs. Like market-linked GICs, buffer ETFs are designed to limit downside risk while offering some participation in market gains.

As a retail investor, it is reasonable to be cautious here. Added complexity often comes with higher costs, more fine print, and a steep learning curve. When investors own products they do not fully understand, it becomes harder to stay invested through normal market ups and downs, regardless of how the product is designed to work.

Here is what you need to know about buffer ETFs and market-linked GICs in 2026. That includes the key trade-offs, the costs that are easy to overlook, and my honest take on whether either option makes sense for risk-averse investors, beginners and veterans alike.

A market-linked GIC’s principal is protected if you hold the investment to maturity, and it is typically eligible for Canada Deposit Insurance Corporation (CDIC) coverage, subject to the usual limits. The difference shows up in how your return is calculated.

Instead of earning a fixed interest rate for the full term, the return on a market-linked GIC depends on the performance of a specific market benchmark. That benchmark could be a stock index or another predefined group of securities. If the benchmark performs well, your return increases. If it performs poorly, your return falls back to a guaranteed minimum.

To see how this works in practice, consider the market growth GICs offered by TD Bank. One option is linked to a basket of major........

© MoneySense