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.
S&P500 ETF for Canadians
- Low cost
- Tracks S&P 500 closely
- Simple and effective
- Could be overly tech sector weighted
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 largest 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 is heavily weighted in only three main sectors: Energy, Real Estate, and Mining
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.
Vanguard VFV Dividend
As of Feb 29, 2019:
- 12-Month Trailing Yield: 1.64%
- Distribution Yield: 1.56%
- VFV Dividend schedule: Quarterly
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:
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, but only in US dollars. It’s also a fantastic option, with an even lower MER of 0.04%, and should have very similar performance with VFV. But you’ll have to be careful of the conversion fees, and for this reason I would recommend VFV over IVV, unless you’re willing to do Norbert’s Gambit to save on FX fees.
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.
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!