Looking to invest in the US stock market without having to spend a lot of time picking your stocks?
This BMO ETF might be the right choice for you to get easy access to the S&P 500.
Let’s go over this BMO ZSP ETF review to see if it’s the right choice for you.
Invest In The US Stock Market
Gain diversified exposure to the performance of the US stock market through an ETF that tracks the performance of the S&P 500 Index.
- Diversified exposure to the US stock market
- Low-risk asset class
- Low-cost and high liquidity
- Holds the constituent securities directly
- Does not invest in fixed-income securities
- Does not offer geographical diversification outside the US
What Is BMO ZSP ETF?
BMO ZSP ETF is a fund managed by BMO Global Asset Management, and it is designed to replicate, to the extent possible, the performance of the S&P 500 Index, net of expenses.
The fund was launched on November 14, 2012, and it is one of the largest ETFs in Canada in terms of market cap.
ZSP.TO is currently trading at close to $56.34.
ZSP Key Facts
As of July 15, 2022:
- Ticker Symbol: ZSP.TO
- Exchange: Toronto Stock Exchange
- Assets Under Management: $9.1 Trillion (as of July 26, 2022)
- MER: 0.09%
- Annualized Distribution Yield: 1.45%
- Currency Traded: CAD
- Eligible Accounts: Most registered (TFSA, RRSP, etc) and non-registered available
BMO ZSP MER And Fees
The management fee for the fund is 0.08%, and the Management Expense Ratio (MER) does not exceed 0.09%. It is one of the lowest-cost ETFs you can find on the stock market, and it charges considerably lower fees than mutual fund products with similar benefits and features.
BMO ZSPs dividend yield as of July 15, 2022:
- Annualized Distribution Yield: 1.45%
- Dividend schedule: Quarterly
Here’s a hypothetical performance of $10,000 since the inception of BMO ZSP:
As of June 30, 2022:
|1 Year||2 Year||3 Year||5 Year||10 Year||Since Inception|
What Does BMO ZSP Invest In?
BMO ZSP ETF invests exclusively in equity securities held in the same proportion as in the S&P 500 Index, which comprises of the 500 largest companies in the US
BMO ZSP ETF invests entirely in US equities:
BMO ZSP ETF Top Holdings
As of July 25, 2022, its most significant holding is Apple Inc., with a 7.02% allocation. Its second-most significant holding is Microsoft Corp. accounting for 5.78% of its fund allocation, and Amazon.com Inc. is its third-most significant holding at 3.17%.
|Weight (%)||Name||Bloomberg Ticker|
|1.55%||BERKSHIRE HATHAWAY INC||BRK/B|
|1.49%||UNITEDHEALTH GROUP INC||UNH|
|1.36%||JOHNSON & JOHNSON||JNJ|
BMO ZSP Sector Weighting
As of June 30, 2022, it has allocated 27% of its portfolio towards the information technology sector. It has allocated 15.05% of its funds to the health care sector and 10.82% to the financials sector.
BMO ZSP Risk Rating
BMO ZSP has a medium risk rating.
Is ZSP ETF Hedged?
Currency hedging is a strategy employed by fund managers to offset any losses created by the price movement of the assets held by the fund. BMO ZSP ETF is not a hedged fund. However, the fund comes with a twin fund called BMO ZUE that is hedged to the Canadian dollar.
BMO ZUE ETF also tracks the S&P 500 Index and has the same holdings as BMO ZSP. The only difference is that the performance of the fund is hedged to the Canadian dollar. It means that if the US dollar weakens against the Canadian dollar, it could affect the returns for BMO ZSP.
Investing in BMO ZUE would mitigate the adverse impact of a weakened US dollar in such a scenario. However, the US dollar tends to remain strong against the Canadian dollar, and it might be better to hold BMO ZSP instead of BMO ZUE in the long run.
BMO ZSP ETF Alternatives
Besides the currency-hedged version of the ETF (BMO ZUE), there are several other ETFs trading on the TSX that track the performance of the S&P 500 Index like BMO ZSP ETF, including:
ZSP Vs. VFV
Vanguard VFV ETF is another low-cost ETF designed to track the performance of the S&P 500 Index. The fund manager rebalances the fund’s constituent securities to reflect the proportion in which they are held by the underlying index, much like BMO ZSP ETF.
Like BMO ZSP, Vanguard VFV ETF holds the underlying securities directly, and it comes with the same MER of 0.09% as BMO ZSP ETF’s 0.09%. Vanguard VFV could be a viable alternative to BMO ZSP if you want to gain exposure to the US equity market.
Check out my Vanguard VFV ETF review to find out more about this fund.
Vanguard VSP ETF is also a low-cost ETF designed to track the performance of the S&P500 Index. It is also a passively managed fund, much like BMO ZSP. The fund is effectively a twin of Vanguard VFV ETF, but with the difference of being hedged to the Canadian dollar.
Vanguard VSP comes at a similar cost to BMO ZSP, with an MER of 0.09%. However, its annualized distribution yield is lower at 1.32% than BMO ZSP ETF’s distribution yield of 1.45%.
If you want your investment to be hedged against the Canadian dollar and US dollar exchange rates, VSP might be a good alternative for you to consider.
ZSP Vs. XUS
BlackRock iShares XUS ETF is a fund designed to track the performance of the same underlying index as BMO ZSP ETF. However, iShares XUS differs from BMO ZSP ETF because one of its primary holdings is iShares IVV, the US version of the ETF tracking the S&P 500 Index.
iShares IVV accounts for 96.63% of its holdings (as of June 30, 2022), while the rest is divided across the equity securities held by the underlying index.
iShares XUS is also a passively managed fund that comes at a low cost. However, it charges you a slightly higher fee than BMO ZSP ETF. The fund’s management fee is 0.09%, with an MER capped at 0.10%. It also has a slightly lower annualized distribution yield of 1.08% than 1.45% for BMO ZSP ETF.
Check out my BlackRock iShares XUS ETF review to find out more about this fund.
|Wealthsimple Trade||Get $25 Signup Bonus|
|Questrade||Get $50 Free Stock Trades|
To learn more, check out my full breakdown of the best trading platforms in Canada here.
Our Final Verdict: Is BMO ZSP A Good Investment For You?
BMO ZSP ETF is one of the best ETFs available to Canadians who want to track the S&P 500 Index and gain exposure to the performance of the US stock market. It is a passively managed fund with a significant AUM.
If you want to learn more S&P 500 ETF options, check out this article.