Passive Income in Canada: Build Wealth While You Sleep with XEQT
Build Passive Income: Earn Money While You Sleep
Passive income isn't just for the wealthy. With the right strategy, anyone can build an investment portfolio that generates income—without picking individual stocks or constantly monitoring the market.
Here's how to build real passive income in Canada using XEQT and commission-free investing on Wealthsimple.
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Start Investing FreeWhat is Passive Income?
Passive income is money you earn without actively working for it. Instead of trading your time for money, your money works for you—generating returns while you sleep, work, or enjoy life.
For investors, passive income typically comes from:
- Dividends from stocks and ETFs
- Interest from bonds and GICs
- Capital appreciation (growth) that you can eventually withdraw
The dream? Build enough passive income to cover your expenses, giving you financial freedom to work because you want to—not because you have to.
Financial Freedom
Build an income stream that doesn't depend on your job. Whether you want to retire early or just have a safety net, passive income provides options.
Compound Growth
Reinvest your passive income to buy more shares, which generates more income, which buys more shares. This snowball effect accelerates wealth building.
Inflation Protection
Unlike a savings account, investments grow over time. A diversified portfolio typically outpaces inflation, preserving your purchasing power.
Tax Advantages
Hold your investments in a TFSA and your passive income is completely tax-free. Even in an RRSP, you defer taxes until retirement.
Time Freedom
Set up your investments once, contribute automatically, and let them grow. No constant monitoring, no trading, no stress.
Generational Wealth
Build a portfolio that can support your family for generations. The earlier you start, the more time compound growth has to work.
The Truth About Passive Income Investing
Before we dive into strategies, let’s clear up some common misconceptions:
Passive Income Myths vs Reality
Myth: You need to chase high-dividend stocks for passive income.
Reality: Total return (growth + dividends) matters more than dividend yield alone. A stock paying 8% dividends but declining in value isn't building wealth.
Myth: Dividend investing is the only way to get passive income.
Reality: Growth investing builds wealth that you can withdraw from. $1M in XEQT growing at 7% produces $70,000 in value annually—whether it comes as dividends or growth.
Myth: You need a huge portfolio to earn meaningful passive income.
Reality: Everyone starts somewhere. Even $100/month invested consistently becomes substantial over time. The key is starting.
The best passive income strategy? Invest consistently in low-cost, diversified funds—and let time do the heavy lifting.
Why XEQT is the Ultimate Passive Income Builder
Here’s the insight that changed how smart investors think about passive income: Total return matters more than dividend yield.
XEQT provides passive income through two channels:
- Quarterly Dividends – XEQT pays dividends (~2% yield) from the thousands of companies it holds
- Capital Growth – The value of your shares grows over time (~5-7% historically)
Combined, this gives you a total expected return of ~7-9% annually—far better than chasing high-yield stocks that might not grow.
XEQT Dividend Income
XEQT holds over 12,000 stocks globally, including dividend-paying giants like Apple, Microsoft, Royal Bank, and more. You receive quarterly dividend payments automatically deposited into your account.
Sample XEQT Dividend Income
| Portfolio Value | Annual Dividends (~2%) | Quarterly Payment |
|---|---|---|
| $10,000 | ~$200 | ~$50 |
| $50,000 | ~$1,000 | ~$250 |
| $100,000 | ~$2,000 | ~$500 |
| $250,000 | ~$5,000 | ~$1,250 |
| $500,000 | ~$10,000 | ~$2,500 |
| $1,000,000 | ~$20,000 | ~$5,000 |
Pro Tip: In a TFSA, these dividends are completely tax-free. In an RRSP, they grow tax-deferred. Use registered accounts to keep more of your passive income.
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Get Your $25 BonusGrowth: The Hidden Passive Income
Here’s what many investors miss: Growth IS passive income—you just access it differently.
The Power of Total Return
Let's compare two approaches to generating $40,000/year in passive income:
Approach A: High-Dividend Strategy (5% yield)
Portfolio needed: $800,000
Risk: Often concentrated in specific sectors (banks, utilities, REITs)
Approach B: Total Return Strategy (4% withdrawal from XEQT)
Portfolio needed: $1,000,000
Benefit: Globally diversified, growth potential keeps pace with inflation
But here's the key insight: The total return portfolio grows over time, while many high-dividend portfolios stagnate. After 20 years, the total return approach typically leaves you with MORE wealth AND more income.
The 4% Rule: Withdraw 4% annually from a diversified portfolio and historically, your money lasts 30+ years.
Building Passive Income Over Time
Here’s what happens if you invest $500/month in XEQT at a 7% average return:
| Years Invested | Total Contributed | Portfolio Value | Annual Dividends (~2%) | Potential 4% Withdrawal |
|---|---|---|---|---|
| 5 years | $30,000 | ~$36,000 | ~$720 | ~$1,440 |
| 10 years | $60,000 | ~$87,000 | ~$1,740 | ~$3,480 |
| 15 years | $90,000 | ~$158,000 | ~$3,160 | ~$6,320 |
| 20 years | $120,000 | ~$260,000 | ~$5,200 | ~$10,400 |
| 25 years | $150,000 | ~$405,000 | ~$8,100 | ~$16,200 |
| 30 years | $180,000 | ~$610,000 | ~$12,200 | ~$24,400 |
Use our compound interest calculator to run your own scenarios.
The Magic of Time: Notice how the portfolio grows faster in later years? That's compound growth in action. The earlier you start, the more time your money has to snowball.
XEQT vs High-Dividend ETFs
Should you choose XEQT or a dedicated dividend ETF? Here’s the honest comparison:
XEQT vs Dividend ETFs
| Feature | XEQT | Dividend ETFs (XEI, VDY, etc.) |
|---|---|---|
| Dividend Yield | ~2% | ~4-5% |
| Expected Growth | ~5-7% annually | ~2-4% annually |
| Total Expected Return | ~7-9% | ~6-9% |
| Diversification | 12,000+ global stocks | ~50-100 Canadian stocks |
| Sector Concentration | Globally balanced | Heavy in banks, energy, utilities |
| Geographic Exposure | Canada, US, International | Mostly Canada |
| MER (Fees) | 0.20% | 0.20-0.50% |
| Best For | Long-term wealth building | Current income needs |
Our Recommendation: For most Canadians building passive income long-term, XEQT's total return approach wins.
When XEQT is better:
- You’re investing for 10+ years
- You want global diversification
- You’ll reinvest dividends to compound growth
- You prefer simplicity (one fund does it all)
When dividend ETFs might be better:
- You need current income NOW (already retired)
- You want higher quarterly cash flow
- You’re comfortable with Canadian market concentration
Beware the Dividend Trap: A high dividend yield can be a red flag. If a stock yields 8% while the market yields 2%, ask why. Often it's because the stock price has fallen (company struggles) or the dividend is unsustainable.
The Simple Passive Income Strategy
Building passive income doesn’t need to be complicated. Here’s the strategy:
The 3-Step Passive Income Plan
- Step 1: Open a TFSA — Your first passive income should be tax-free. Max out your TFSA ($7,000/year) before using other accounts.
- Step 2: Buy XEQT Consistently — Set up automatic contributions. Buy the same amount every month, regardless of market conditions.
- Step 3: Reinvest Everything — Don't withdraw dividends. Use DRIP (Dividend Reinvestment Plan) or manually reinvest to accelerate compounding.
That's it. No stock picking. No market timing. No complex strategies. Just consistent investing in a diversified fund, letting time and compounding do the work.
The earlier you start, the more powerful this strategy becomes.
Start Your Passive Income Journey
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Claim Your $25 BonusBest Platform for Building Passive Income
To maximize your passive income, you need a platform that doesn’t eat into your returns with fees.
Why Wealthsimple is Perfect for Passive Income
Wealthsimple lets you build passive income without commission fees eating into your returns:
Traditional banks charge $9.95 per trade. If you invest $500/month, that's $120/year in fees—money that should be compounding in your portfolio.
Over 3 million Canadians trust Wealthsimple with their investments.
Learn more about why Wealthsimple is the best platform for Canadian investors.
Start Building Passive Income (5 Minutes)
-
Click Our Referral Link
Use this link to sign up for Wealthsimple and get $25 towards your first investment. -
Open a TFSA
Choose Tax-Free Savings Account for tax-free passive income. All dividends and growth are yours to keep. -
Fund Your Account
Link your bank and set up automatic deposits. Even $100/month compounds significantly over time. -
Buy XEQT
Search for "XEQT" and purchase. Consider enabling DRIP to automatically reinvest dividends. -
Set Up Recurring Purchases
Automate your investing so you're building passive income every month without thinking about it.
Your passive income machine is now running. Time to let it grow.
Frequently Asked Questions
How much do I need to live off passive income?
Using the 4% rule: To generate $40,000/year, you need ~$1,000,000 invested. For $60,000/year, ~$1,500,000. But remember—you don't need to fully retire to benefit from passive income. Even $500/month in investment income provides options and security.
Should I focus on dividends or growth?
For most people building wealth, focus on total return (dividends + growth). XEQT provides both. Once you're retired and need current income, you might shift toward higher-dividend options—but even then, total return often wins.
How are dividends taxed in Canada?
In a TFSA: completely tax-free. In an RRSP: tax-deferred until withdrawal. In a taxable account: Canadian dividends get a tax credit (effectively lower tax rate), while foreign dividends are taxed as regular income.
What's DRIP and should I use it?
DRIP (Dividend Reinvestment Plan) automatically reinvests your dividends to buy more shares. For wealth building, yes—use it. For income needs, no—take the cash. Wealthsimple offers DRIP for free.
How long until I see meaningful passive income?
It depends on how much you invest. With $500/month at 7% returns, you'd have ~$87,000 after 10 years (generating ~$1,700/year in dividends). After 20 years, ~$260,000 (generating ~$5,200/year). Patience is key.
Is passive income really "passive"?
With index investing, yes. You set up automatic contributions, buy XEQT, and let it grow. No stock research, no rebalancing, no active management. Maybe 10 minutes of "work" per month to check your account.
What if the market crashes?
Keep investing. Crashes are actually opportunities—you're buying more shares at lower prices. XEQT's dividends tend to be relatively stable even during downturns, and historically the market always recovers.
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The Bottom Line
Building passive income isn’t complicated. You don’t need to pick individual stocks, time the market, or chase high-yield investments. You need:
- A commission-free platform like Wealthsimple
- A diversified investment like XEQT
- Consistent contributions automated monthly
- Time to let compounding work its magic
Every month you wait is growth you’re missing out on. Every dollar spent on trading fees is a dollar that could be compounding.
Open your account. Buy XEQT. Start building passive income.
Learn More
- TFSA Guide - Hold your passive income investments tax-free
- RRSP Guide - Tax-deferred passive income for retirement
- Start Here - Complete guide to getting started with XEQT
- Wealthsimple Guide - Why it’s the best platform for Canadians
- Compound Interest Calculator - See how your passive income could grow