VFV Review (2020): Vanguard S&P500 ETF For Canadians

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Last updated Oct 20, 2020

If you’re looking to branch out of investing in just Canadian stocks, the Vanguard S&P 500 ETF (VFV) could be the right solution for you.

Passive investing has taken the world by storm. With $26.1 billion of assets under management (AUM), Vanguard Canada is one of the pioneers of ETF investing in Canada.

Vanguard VFV is one of the most popular ETFs in Canada. With this VFV ETF review, let’s take a close look and see why so many investors have chosen this product.

Warren Buffett has stated that after his death, he plans on investing most of his assets into index funds that track the S&P 500. 

Review of: Vanguard VFV ETF

Use: ETF






Wealthawesome Score: 5/5

Summary: Vanguard VFV is an ETF for Canadians that tracks the S&P 500 index.

Low-fee ETF

What is Vanguard VFV ETF?

VFV is a low-cost index fund that is offered by Vanguard Canada since November 2, 2012. VFV is one of Vanguard’s most popular funds, with $2.245 billion in total value as of March 31, 2020

The ticker is displayed as TSE: VFV if you’re searching for the VFV stock price.

 

What does Vanguard VFV Invest in?

VFV tracks as closely as possible the S&P 500, which is a broad U.S equity index. The S&P 500 is a market-cap weighted index of the 500 publicly-traded companies in America.

The S&P 500 is widely regarded as the best measure for how large-cap U.S equities are performing.

VFV invests in stocks of U.S equities and should track the S&P 500 very closely, net of any fees and expenses.

VFV Vanguard Sector Weighting

The great thing about the U.S stock market is the diversity of the companies. As you can see from the sector weightings below, you get a nice weighted mix from Information Technology down to Consumer Staples.

Contrast this with the Canadian stock market, which top three sectors are: Financials, Materials, and Energy.

Vanguard VFV MER

The VFV Management Expense Ratio (MER) is very low, at 0.08%.

Compare this with extremely high mutual fund fees that can average higher than 2%, and you can see why Canadians are flooding into ETFs in large numbers.

Buy VFV for free with Questrade

Vanguard VFV Dividend

As of Feb 29, 2019:

  • 12-Month Trailing Yield: 1.64%
  • Distribution Yield: 1.56%
  • VFV Dividend schedule: Quarterly

VFV Performance

No surprises here, VFV tracks the benchmark S&P 500 return very closely. Since the inception of the fund, VFV has performed slightly higher than the benchmark return:

Buy VFV for free with Questrade

VFV Holdings

The top 10 holdings of VFV match up well with the sector weightings above. There is a nice diverse range of companies from big tech names, banking and finance, and consumer goods.

Vanguard vs Other Funds

VFV vs VOO

Many people get confused by VOO vs VFV.

VOO is simply the S&P 500 index fund offered by the main Vanguard U.S. It is not offered by Vanguard Canada, and should not be purchased by Canadian investors.

If you want to passively track the S&P 500 index, use VFV and not VOO.

VFV vs VSP

VSP is the Canadian dollar hedged version of the VFV. If you want your investment to be hedged against the CAD/USD exchange rates, VSP might be a good choice for you.

VFV vs IVV

IVV is iShares version of an S&P 500 index fund that is available to Canadians. It’s also a fantastic option, with an even lower MER of 0.04%, and should have very similar performance with VFV.

VFV vs XUU

iShares XUU vs VFV is like comparing apples to oranges because they don’t track the same benchmark.

XUU tracks the U.S total market index, including small and mid-cap stocks, so it isn’t a good comparison to VFV which only tracks large-cap.

VFV vs VUN

Vanguard’s VUN also tracks the U.S total market index, including small and mid-cap stocks. VFV only tracks large-cap.

You Should Buy Vanguard VFV if:

  • You want a low-fee passive investing solution that tracks the U.S large-cap stock market
  • You understand the risks involved with purchasing a 100% equity fund and are using it in combination with your overall investment strategy.
  • You understand that if you’re using it in combination with other fixed-income funds, you should rebalance your asset-mix at set time intervals.

Buy VFV for free with Questrade

How to Buy Vanguard VFV ETF 

There are many ways to buy VFV, but the cheapest way is generally by using a discount broker.

I have been using the discount broker Questrade for all my stock and ETF trading for the past eight years. You can buy all Canadian ETFs like VFV for free on the platform.

Get $50 in free stock trades with this offer when you open an account at Questrade.

Conclusion

VFV ETF is a simple and effective fund from Vanguard that does as advertised: it tracks the S&P 500. It is an effective option for passive investors.

I’m a big fan of VFV, because I feel that American companies are more diverse and international than Canadian ones.

I hope you’ve learned something from this VFV ETF review. Let me know in the comments below if you’ll give it a try!

If you liked this article…

<a href="https://wealthawesome.com/author/christopher-liew/" target="_self">Christopher Liew, CFA</a>

Christopher Liew, CFA

Creator of Wealth Awesome

A Canadian 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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4 Comments

  1. RG

    Hi Christopher,

    Great article. Concise and to the point!

    Have a question for you, I have around $15k in RRSP to be invested. Was looking at 80/20 ratio for VFV-VGRO. Or maybe XUS-XGRO. Not sure between Vanguard and iShare.

    Additionally, I also want to transfer $10k from TD mutual funds to invest in ETF. Can I just invest in VFV/VGRO to keep it simple. I understand there is foreign withholding tax but read some articles that it does not matter for small investments?

    I also plan to invest around $1k every month in non-reg account. Again will VFV/VGRO type of investment work?

    I plan to just invest for now and maybe withdraw later to buy a house (first time home buyer)

    Please provide your comments and advise. I will surely come back to your site to read on more articles. They look great for a investor like me with limited financial knowledge.

    Keep up the great work!

    Cheers!

    Reply
    • Christopher Liew, CFA

      Hi Rahul,

      Thanks for your reply. Have you maxed out your TFSA? I believe that’s an important piece of the puzzle that you haven’t mentioned yet. If you haven’t, make sure to max it out before investing in a non-reg account.

      If you need the money for a house in the near future, I actually wouldn’t put so much into equities, since there is a higher risk of the assets dropping. A High-Interest Savings Account or more of a bond allocation would be wiser.

      Disclaimer: I am not a licensed financial advisor and the previous answer is my opinion only. Please see my disclosure for more details.

      Chris

      Reply
  2. Santiago Bohorquez

    Hi Christopher

    Great article! Very clear and very concise as to how VFV is different from VOO.
    I am a Canadian investor looking to invest mainly in US companies.
    I already bought some shares of VOO and I was planning on acquiring VFV in Canadian dollars just for diversification.
    Do you think VOO is still a good investment for Canadians? I bought it because it is one of the most popular S&P 500 ETFs and because my bank does not charge for currency transactions.
    Also, if I maxed out my TFSA balance, is my Investments account a good option to buy and hold ETFs?

    My plan would be to hold it for at least the next 10 years

    Thanks in advance

    Reply
    • Christopher Liew, CFA

      Hi Santiago,

      Thanks for the comment! May I ask what bank does not charge for currency transactions? It is highly likely that your bank will charge you once sell your VOO and you convert that USD back to CAD, I’m not aware of any bank that doesn’t.

      Sure, your Investments account or RRSP would be a good alternative to your TFSA if you’ve maxed it out. If you have a spouse you can give them money to contribute to their TFSA also.

      Disclaimer: I am not a licensed financial advisor and the previous answer is my opinion only. Please see my disclosure for more details.

      Reply

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