6 Best S&P 500 ETFs in Canada (Sep 2022): Invest in The U.S

Are you looking to add exposure to one of the most well-known market indices in the world, the S&P 500 index?

Between 1957 and 2021, this index offered investors an excellent average annualized return of 11.88% (since adopting 500 stocks):

The S&P 500 is commonly used as a benchmark to compare a portfolio’s performance, although most of the time, it is incorrectly used as a comparison tool.

We will cover the best S&P 500 ETFs below, as well as any potential differences in their features.

Understanding S&P 500 ETFs

While an ETF tracking an index like the S&P 500 may seem fairly straightforward, there are several things to know about both these ETFs as well as the underlying index.

The S&P 500 index is a grouping of the 500 largest US companies by market cap, branded by Standard and Poor’s. A market index like the S&P 500 cannot be invested in directly but can be the basis for what a fund or ETF invests in.

An S&P 500 index ETF is a fund that simply aims to give investors the same return as the index (minus any fees). Index ETFs, by their definition, are passive investments and do not have any active portfolio manager involvement.

Here is the performance of the S&P 500, broken down by major market events between 1952 – 2021:

Pros and Cons of Investing in S&P 500 ETFs

The S&P 500 index has had excellent long-term performance and is usually a good component in the portfolio of most investors that can stomach the risk of investing in equities. 

More specifically, S&P 500 ETFs have their pros and cons.

Despite the pros and cons of the S&P 500 index (and therefore S&P 500 ETFs), ETFs tracking this index remain a sound long-term investment in most cases.

Pros
  • Very inexpensive MERs when compared to other funds and ETFs
  • Good one-ticket diversification across 500 individual equities
  • Excellent long-term index performance 
Cons
  • Heavy weighting towards larger companies (by market cap) in the index
  • No active portfolio manager involvement
  • The index will likely have large allocations to specific sectors (like tech)
  • Your investment becomes concentrated in large US companies

The Best S&P 500 ETFs in Canada

1. Vanguard VFV S&P 500 ETF

Vanguard Logo Transparent
  • Ticker: VFV.TO
  • Currency Hedged Ticker: VSP.TO
  • Inception Date: November 2, 2012
  • Assets under Management: $6.83 Billion
  • Management Expense Ratio: 0.09%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: Quarterly
  • Distribution Yield: 1.20%
  • Stock Price: $90.36
  • YTD Return: -13.98%

Among the most inexpensive ETFs on our list is VFV offered by Vanguard. The VFV offers investors exposure to the S&P 500 ETF, including any currency impacts from fluctuations between the US dollar and the Canadian dollar.

If you are looking to eliminate currency impacts, VSP is the currency-hedged version of VFV. Over a longer period of time, VFV has significantly outperformed VSP.

Both ETFs passively track the S&P 500 index, meaning that your investment will be concentrated in US large-cap stocks.

With regards to fees, VFV and VSP are tied for the most inexpensive Canadian ETF tracking the S&P 500. Relative to most other ETFs and mutual funds, the MER of VFV is extremely low.

VFV has a long performance track record and is a massive ETF in terms of assets under management. These are great characteristics when deciding to invest in an ETF or fund.

The ETF offers a low yield with distributions paid to investors on a quarterly basis. From a risk perspective, VFV is rated medium risk, which is in line with most equity investments.

With Vanguard being a very reputable name in the investment world and VFV being offered at the lowest MER, the ETF is a top choice to consider as an S&P500 ETF. 

I wrote a full Vanguard VFV review, and video here:

2. BMO ZSP S&P 500 ETF

BMO
  • Ticker: ZSP.TO
  • Currency Hedged Ticker: ZUE.TO
  • Inception Date: November 14, 2012
  • Assets under Management: $9.13 Billion
  • Management Expense Ratio: 0.09%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: Quarterly
  • Distribution Yield: 1.38%
  • Stock Price: $55.68
  • YTD Return: -13.95%

Tied for the most inexpensive S&P 500 ETF in Canada is ZSP offered by BMO Global Asset Management. ZSP gives investors exposure to the underlying stocks in the S&P 500 and includes currency impacts between the Canadian dollar and the US dollar. 

If you are looking to eliminate currency impact on your investment return, ZUE is a similar ETF offered with a currency hedging overlay. Similar to the situation with Vanguard’s funds, ZSP has significantly outperformed ZUE over a long period of time.

BMO’s ETFs track the S&P 500 ETF, investing your money only in the largest publicly-traded US companies.

From a fee perspective, ZSP and ZUE are both tied with Vanguard’s ETFs as the most inexpensive S&P 500 available in Canada. This MER is much lower than the fees on most funds and ETFs available in Canada.

ZSP has a similar inception date to VFV (a long performance track record) and is even more massive in terms of assets under management. ZSP’s large size usually places it in the top three largest Canadian ETFs by assets. 

The ETF offers a marginally higher yield than VFV and pays distributions on a quarterly basis. ZSP is rated medium risk, which is fairly standard for an equity ETF.

While being almost identical in terms of features to Vanguard’s S&P 500 ETF offering, BMO is a great choice if you are looking to support a Canadian company (BMO) instead of a US one (Vanguard).

3. iShares XUS Core S&P 500 ETF

ishares logo
  • Ticker: XUS.TO
  • Currency Hedged Ticker: XSP.TO
  • Inception Date: April 10, 2013
  • Assets under Management: $4.38 Billion
  • Management Expense Ratio: 0.10%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: Semi-Annual
  • Distribution Yield: 1.06%
  • Stock Price: $63.07
  • YTD Return: -13.55%

The next most inexpensive option as a Canadian S&P 500 ETF is XUS offered by Blackrock’s iShares. XUS invests your money in the S&P 500 index constituents while also including a currency impact from changes in the USD/CAD exchange rate.

XSP is the same ETF offered by iShares, adding a currency hedge to remove the impact of changes in exchange rates. Like in the previous examples, the currency unhedged version (XUS) has substantially outperformed its currency hedged counterpart (XSP)

Investing in the XUS or XSP will concentrate your money across large US companies.

XUS and XSP fall just behind BMO and Vanguard’s ETFs in terms of cost. iShares’ ETFs are marginally more expensive by one basis point (0.01%), which is insignificant in the long term.

XUS has a slightly shorter performance track record than the ETFs offered by Vanguard and BMO. In terms of assets, XUS is also relatively smaller. When compared to other Canadian funds and ETFs, XUS is still a massive ETF.

XUS offers a low yield (lower than the ETFs from BMO and Vanguard) and pays distributions on a more scattered basis (only semi-annually).

Although marginally less competitive than the ETFs from BMO and Vanguard, XUS is still a top choice for a Canadian S&P 500 ETF.

4. Horizons HXS S&P 500 ETF

horizons logo
  • Ticker: HXS.TO
  • Currency Hedged Ticker: HSH.TO
  • Inception Date: November 30, 2010
  • Assets under Management: $2.43 Billion
  • Management Expense Ratio: 0.10%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: None
  • Distribution Yield: 0%
  • Stock Price: $50.74
  • YTD Return: -14.01%

Another large fund tracking the S&P 500 index in Canada is offered by Horizons. Horizons places a large focus on tax-efficient strategies, offering ETFs that do not pay regular distributions in order to reduce investors’ tax liability (especially in non-registered accounts).

HXS (unhedged) and HSH (hedged) are both ETFs tracking the S&P 500 ETF through a swap strategy. This means that instead of holding the underlying stocks in the index, Horizon purchases a swap on the total return of the S&P 500 index. This allows Horizons to avoid paying distributions.

The currency unhedged version of Horizons’ S&P 500 ETF (HXS) has outperformed its hedged counterpart (HSH) by a substantial amount over time.

Although not directly invested in large-cap US companies, the swap-based ETFs will offer an identical return and concentration.

Similar to iShares’ S&P 500 ETF offer, Horizons’ is more expensive than BMO’s and Vanguard’s by one basis point. Horizons’ ETFs also come with an additional swap fee.

HXS has a longer track record than its competitors but is also smaller in terms of assets under management. 

Both ETFs’ lack of yield comes with pros and cons for investors. Investors who value having some sort of yield from their investments will prefer other options on our list. Those looking for tax efficiency (especially in non-registered accounts) and that don’t care about yield will find Horizons’ ETFs invaluable.

With excellent features, Horizons’ S&P 500 ETFs will be very attractive for investors looking for tax efficiency from their ETFs.

5. Invesco ESG S&P 500 ESG Index ETF

Invesco logo
  • Ticker: ESG.TO
  • Currency Hedged Ticker: ESG.F.TO
  • Inception Date: February 14, 2020
  • Assets under Management: $136.5 Million
  • Management Expense Ratio: 0.17%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: Quarterly
  • Distribution Yield: 1.35%
  • Stock Price: $26.52
  • YTD Return: -13.96%

Investors concerned with responsible investing (or ESG investing) will be thrilled to know that an S&P 500 ESG index exists. The S&P 500 ESG index is similar to the regular S&P 500 index, with minor differences based on ESG scores.

Invesco offers an unhedged version (ESG) and hedged version (ESG.F) of an ETF tracking the S&P 500 ESG index. The unhedged version will add the impact of currency fluctuations to your overall total return.

The unhedged version of Invesco’s S&P 500 ESG ETF has outperformed its hedged version since inception.

As a passive, inexpensive ETF, the level of ESG due diligence will likely be less thorough than for funds or ETFs that go beyond ESG scoring or that use active management.

When compared to peers on the list, Invesco’s ESG ETFs are significantly more expensive in terms of MERs. Relative to other Canadian mutual funds and ETFs, ESG and ESG.F are still very inexpensive.

Invesco’s S&P 500 ESG Index ETF comes with a very short performance track record and is much smaller in terms of assets. 

The ETF pays a low yield on a quarterly basis. It has an identical risk rating of medium, like the other S&P 500 funds on our list.

For investors that wish to have some level of ESG consideration across their investments, Invesco’s ESG ETF is a good choice to consider for S&P 500 exposure.

6. Invesco EQL S&P 500 Equal Weight ETF

Invesco logo
  • Ticker: EQL.TO
  • Currency Hedged Ticker: EQL.F.TO
  • Inception Date: May 16, 2018
  • Assets under Management: $213.8 Million
  • Management Expense Ratio: 0.25%
  • Management Style: Passive
  • Risk Rating: Medium
  • Distributions: Quarterly
  • Distribution Yield: 1.47%
  • Stock Price: $27.38
  • YTD Return: -9.71%

Invesco offers an interesting twist on investing in the S&P 500 to Canadians – an equally balanced approach. The traditional S&P 500 index is capitalization-weighted, meaning that larger companies have a higher allocation than smaller companies.

EQL and EQL.F are the unhedged and hedged versions of Invesco’s equally balanced S&P 500 ETF. Within these ETFs, each of the 500 companies within the S&P 500 has an equal weight, leading to increased diversification and better balance. 

The unhedged version of the ETF will add the impact of currency fluctuations to your total return over time.

In terms of fees, EQL comes with the highest MER out of all of the S&P 500 ETFs on our list. When compared to broader equity mutual funds and ETFs in Canada, it is still fairly inexpensive.

Invesco’s EQL ETF comes with a short performance track record and is much smaller than most of the alternatives on our list. The ETF offers a slightly higher yield than its peers and pays distributions to investors on a quarterly basis.

The EQL ETF is rated medium risk.

One of the drawbacks of investing in an ETF tracking the regular S&P 500 index is that the largest companies in the US receive significant allocations in your portfolio. A balanced approach to investing could reduce concentration risk and help to avoid large drawdowns.

If you are concerned with having a well-diversified portfolio and don’t mind paying slightly more in fees, Invesco’s EQL ETF is a great choice to consider as a Canadian S&P 500 ETF.

Should you Invest in an S&P 500 ETF?

US equities are typically a substantial portion of most investment portfolios, especially if an investor’s risk tolerance allows for it. The largest US companies typically have a strong grasp over their market share and likely have had profitable operations for some time.

In a lot of cases, an S&P 500 ETF can complement stock picking fairly well. The ETF holding can be a core position in the portfolio while the stock picking, if done properly, could generate additional returns while giving an investor more control over the portfolio.

Investors should consider investing in an S&P 500 ETF if:

  • A portfolio is small and is difficult to properly diversify
  • Your risk tolerance is at least “medium,” making stocks appropriate investments
  • You are looking to keep your fees as low as possible
  • You don’t have any objectives outside of total investment returns (ESG, income, etc.)

Should you Currency Hedge your S&P 500 Investment?

Investing in the S&P 500 index stocks through an ETF invests you in US companies. These companies have to be purchased in US dollars, exposing Canadian investors to an additional risk: currency fluctuations between the Canadian dollar and the US dollar.

Once you are invested in a US company, any appreciation in the US dollar against the Canadian dollar helps your investment returns down the road. This is because you are able to buy back more Canadian dollars once you sell your USD investment.

An unhedged investment means that currency fluctuations will impact your total return, while a hedged investment removes currencies from the equation. Hedging typically comes with additional costs but can reduce volatility.

The VSP and VFV ETFs offered by Vanguard both track the S&P 500 ETF, with the VSP being hedged to the Canadian dollar. The difference in performance between the two is due to currency fluctuations.

The currency unhedged version (VFV) has currently outperformed the VSP significantly since inception.

Using the S&P 500 as an Investment Benchmark

Investors today are frequently quoting the performance of the S&P 500 index as a proxy for excellent investment returns.

Comparing the performance of a fund or portfolio to that of the S&P 500 index is often not an apples-to-apples comparison. Remember that the S&P 500 index invests only in the largest US stocks, while a robust portfolio typically includes global stocks as well as other asset classes such as bonds.

The S&P 500 is a good benchmark to use if you are looking to assess the performance of an active portfolio manager versus the broad US market (for US active strategies).

For a lot of investor portfolios, investing only in an S&P 500 Index fund or ETF will not provide an appropriate level of diversification or risk management.

What is the Best ETF to Invest in the S&P 500?

The best approach to investing in the S&P 500 is likely to choose the most inexpensive ETF with a long track record and significant assets. BMO’s ZSP and Vanguard’s VFV are near identical top choices across these criteria.

How do I buy an S&P 500 Index Fund in Canada?

An S&P 500 Index fund or ETF can be purchased in three main ways. These include:

  • In a self-directed, discount brokerage account
  • Through a robo-advisor
  • With the help of an investment or financial advisor

Conclusion

If you are looking to add US stocks to your portfolio, purchasing an S&P 500 ETF is one of the easiest and most robust ways to go about it.

While most of the S&P 500 ETFs available to Canadian investors are virtually identical, small differences remain between them.

If you are looking to invest outside of just large US stocks, make sure to consider other fantastic ETF options available to Canadians.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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15 thoughts on “6 Best S&P 500 ETFs in Canada (Sep 2022): Invest in The U.S”

  1. Good day Christoper,
    Iam a new permanent resident in Canada.I wanted to invest in s&p 500 through my RRSP for at least 10 years.Can You advice an ETF for me to invest?
    Thank you
    Regards
    R.Balaji

    Reply
  2. Hello Christopher,
    I am new in the investment area. I need your advice. I plan to use TFSA or RRSP to buy the Vanguard VFV. My questions are, is it safe to buy only from Vanguard? What if Vanguard goes into bankruptcy? Do I loose all my investment? Or should I split my investment into different S&P 500 index such as VFV, XSP, ZUE, etc?
    Is our investment protected under any Canadian law? If yes, what is the protected amount?
    Thank you for your help!
    Morgan

    Reply
  3. Hi Chris,

    Where do you recommend holding VFV? I currently have it in my non registered account since the dividend yield is 1.24% on average. Would it be more wise to place in an RRSP or TFSA for future reference? The issue having it in RRSP is there may be clawbacks in OAS pension once any money is withdrawn.Is that true?

    Reply
    • Hey Jacky,

      If you know you’re holding it long-term and you have room in your TFSA or RRSP, I would consider putting into that instead of your non-registered account. Your dividend gains will be taxed every year in your non-reg account. Also, you’re slightly misunderstanding the OAS clawback. Any income is used for calculation of the OAS clawback, and if you’re over a specific amount then that will start getting clawed back. So if you buy your VFV for $10,000 at age 30 in your non-registered account and it’s worth $80,000 by the time you’re 65 and you decide to sell it, that still counts as income on the gain that you made. See this article for more info on the OAS clawback: https://wealthawesome.com/13-simple-ways-to-avoid-the-oas-clawback/

      Reply
  4. Norbert’s gambit isn’t difficult, and Questrade will walk you through the process on the phone. On even a $20000 conversion, NG could save you $150 or so compared to doing the usual Forex transaction through a bank. At some point in the future, everyone should know how to perform NG in their trading account.

    Reply
  5. What about VOO with a .03% expense ratio, where would this rank compared to the mentioned ETF’s? Thanks for the great content!

    Reply
      • Amazing thank you for the response. I trade on wealthsimple Trade for my TSF as opposed to Questrade, and I see that Walthsimple does not offer the US version of cross listed securities and thus I could not do the norberts gambit. Do you feel the lower MER of VOO is worth opening a second TFSA with Questrade to be able to do the NG, or is it better to simply go with VFV in my current Wealthsimple Trade account? Again thank you for the info, I have passed on your blog and PERSONAL
        FINANCE RESOURCES FOR CANADIANS to my staff and family, glad to have found you!

        Reply
        • Hey Stephen, thanks for the kind words! Unless the amount you’re planning to buy of VOO is quite large (50,000 or more) I wouldn’t bother with Norbert’s Gambit, it’s complicated and I think investing should be as simple as possible.

          Reply

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