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 over $26.1 billion of assets under management (AUM), Vanguard Canada is one of the pioneers of ETF investing in Canada.
Warren Buffett has stated that after his death, he plans on investing 90% of his assets into index funds that track the S&P 500.
Vanguard VFV is one of the most popular ETFs in Canada. In this VFV review, let’s look closely at this ETF and see why so many investors have chosen this product.
S&P500 ETF for Canadians
Vanguard VFV is an ETF for Canadians that tracks the S&P 500 index.
- Low cost
- Tracks the S&P 500 closely
- Simple and effective way to get exposure to some of the best companies in the world
- Is heavily reliant on the tech sector for performance
What is the Vanguard VFV ETF?
VFV is a low-cost index fund that has been offered by Vanguard Canada since November 2, 2012.
The ticker is displayed as TSE: VFV if you’re searching for the VFV stock price.
Currently, it’s trading at around $119.29.
VFV Key Facts
As of Oct 11, 2023:
- Ticker Symbol: VFV.TO
- Exchange: Toronto Stock Exchange
- Assets Under Management: $8.89 B Billion
- MER: 0.09%
- 12-Month Trailing Yield: 1.28%
- Currency Traded: CAD
- Eligible Accounts: Most registered (such as the TFSA and RRSP) and non-registered available
VFV MER
The VFV Management Expense Ratio (MER) is very low, at 0.09%.
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.
VFV Dividends and History
- 12-month trailing yield:1.29%
- Distribution yield: 1.23%
- Dividend schedule: Quarterly
VFV Performance
No surprises here; VFV tracks the benchmark S&P 500 return very closely, and there is very little variance. Note that VFV is not hedged against the Canadian dollar, so currency fluctuations are relevant here.
As of Aug 31, 2023:
| Fund Type | Month End | YTD | 1YR | 3YR | 5YR | 10YR | Since Inception |
|---|---|---|---|---|---|---|---|
| VFV (Market Price) | +7.66% | +18.28% | +18.73% | +11.41% | +11.51% | +15.22% | +16.28% |
| VFV (NAV) | +7.64% | +18.30% | +18.88% | +11.52% | +11.51% | +15.24% | +16.28% |
| Benchmark | +7.71% | +18.28% | +18.98% | +11.57% | +11.61% | +15.35% | — |
Go to the Vanguard website for real-time performance numbers of VFV.
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 of 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 Portfolio Characteristics
Here are some of the ratios and other fundamental characteristics of VFV. Note that there are slightly more than 500 stocks because it includes additional share classes of certain companies. In total, it will still be 500 companies overall.
As of 31 Aug 2023:
| Fundamentals | Fund |
|---|---|
| Number of Stocks | 505 |
| Median Market Cap | $192.6 B |
| Price / Earnings Ratio | 25.7 x |
| Price / Book Ratio | 3.5 x |
| Return on Equity | 19.6% |
| Earnings Growth Rate | 14.3% |
VFV Market Capitalization
VFV is comprised of mostly large and medium-sized companies
As of Aug 31 2023:
| Capitalization | Fund |
|---|---|
| Large | 79.10% |
| Medium/Large | 4.72% |
| Medium | 13.21% |
| Medium/Small | 2.81% |
| Small | 0.16% |
| Total | 100.00% |
VFV Market Allocation
VFV is entirely invested in U.S. companies.
As of Aug 31 2023:
| Country | Region | Fund |
|---|---|---|
| United States of America | North America | 100.0% |
| Other | Other | 0.0% |
| Total | 100% |
VFV 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 of many different sectors.
Contrast this with the Canadian stock market, which is heavily weighted in only three main sectors: Energy, Real Estate, and Mining, and it’s a large reason why I think that the U.S. market is much more dynamic.
As of Aug 31, 2023:
| Sector | Fund |
|---|---|
| Information Technology | 28.23% |
| Health Care | 13.17% |
| Financials | 12.42% |
| Consumer Discretionary | 10.62% |
| Communication Services | 8.81% |
| Industrials | 8.43% |
| Consumer Staples | 6.56% |
| Energy | 4.43% |
| Materials | 2.46% |
| Real Estate | 2.44% |
| Utilities | 2.43% |
| Total | 100.00% |
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.
As of 31 Aug 2023:
| Holding Name | % of Market Value | Sector |
|---|---|---|
| Apple Inc. | 7.32% | Computer Hardware |
| Microsoft Corp. | 6.42% | Software |
| Amazon.com Inc. | 3.24% | Diversified Retailers |
| NVIDIA Corp. | 3.21% | Semiconductors |
| Alphabet Inc. | 2.13% | Consumer Digital Services |
| Alphabet Inc. | 1.85% | Consumer Digital Services |
| Tesla Inc. | 1.83% | Automobiles |
| Meta Platforms Inc. | 1.72% | Consumer Digital Services |
| Berkshire Hathaway Inc. | 1.69% | Diversified Financial Services |
| Exxon Mobil Corp. | 1.18% | Integrated Oil and Gas |
Risk Assessment of VFV
| Risk Type | Description | Mitigation Strategy |
| Market Risk | The performance of VFV depends on the broader market movements, as it tracks the S&P 500. This means if the index performs poorly, VFV will reflect this drop. | Diversify investments across various assets and regions, ensuring not all assets are susceptible to the same market conditions. |
| Currency Risk | Since VFV isn’t hedged against the Canadian dollar, fluctuations in CAD/USD exchange rates can influence returns. | Consider a diversified investment approach, combining hedged and non-hedged funds, or consider funds like VSP, which are CAD-hedged. |
| Sector Concentration | The S&P 500, while diverse, has heavy concentrations in certain sectors like Information Technology. A downturn in these sectors can influence VFV’s performance. | Ensure that the entire investment portfolio isn’t heavily concentrated in a single sector, and stay updated with sector performance trends. |
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. You can still purchase VOO as a Canadian investor, but be aware you’ll be hit with currency conversion fees as you must purchase it with U.S. dollars.
You can lower the currency fees by using a strategy such as Norbert’s Gambit though.
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. Other than that difference, VSP is virtually identical to VFV in what it invests in.
VFV vs IVV
IVV is the 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 a very similar performance to 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.
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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. If you want to learn more, check out this list of the best Vanguard ETFs in Canada.
Hi Chris,
I am a big fan of VOO and hold it in my TFSA and RRSP accounts using Norbet’s Gambit. Now I have a RESP account for my 18 month old child, and till now I’ve already invested ~$5K USD worth of VOO in it. One thing I only recently realized was that Questrade charges a flat $5 commission per day while trading US Securities in RESP account ( plus 15% tax on dividends you mentioned above). I know $5 might be not like a seem big amount if I only trading VOO 3-4 times per year but now I’m considering trading VFV instead of VOO on this RESP account moving forward. Just wanted to get your thought on this please ?
Thanks for your help and the article.
If you already setup Norbert’s Gambit and are comfortable with it, I think over the long-term of 18 years that you will have until you withdraw will make it worth it to stick with VOO. The fees are slightly lower than VFV so that should make up for the commission fees and then some
Hi Chris
Do you know if I can purchase vfv.to in my LIRA
Appreciate your help
Regards
Chris Harrington
Yes you can! I have some in it myself
Hi Christopher, I’m looking to start investing and I am persuaded that ETF’s are the best way to go for long term investments. That being said, I am unsure if I should invest in VOO or VFV through my TFSA. As far as I can tell, VOO would only have an advantage over the VFV in that it has lower MER fees. Am I correct in my assumption? (And this question is assuming that I’m using Norberts gambit to purchase VOO) Also, if I believe that CAD will be even weaker, in say, 40 years from now, would I be better off buying VOO because of the USD growing in value against CAD? Or is that not something to factor into the decision making process when deciding which ETF to go with? Lastly, if I buy VOO or VFV through my TFSA, either one would be subject to the US withholding tax, but only on the quarterly dividend, right? Like there wouldn’t be any US/Canadian taxes to pay when I sell my VFV or VOO ETFs 40 years from now?
Thanks in advance:)
I actually get this question a lot! Yes, VOO has lower MERs, and if you’re using Norbert Gambit’s you can lower the cost of the currency exchange. It’s hard to say what the USD/CAD will look like 4 years from now, let alone 40 years from now! I wouldn’t factor it in much personally. You’re correct about the TFSA and taxes, you won’t be subject to taxes when you sell as the withholding tax is deducted at source. I would recommend purchasing VOO in your RRSP though, as you won’t have any withholding tax then: See this here for more info on that https://www.vanguardcanada.ca/documents/impact-of-withholding-taxes.pdf
In all, if you’re willing to go through the hassle of Norbert’s Gambit, VOO is probably the better choice
Hi Chris,
I’m afraid you’re mistaken on VFV being exempt from the 15% withholding tax in your RRSP. Only US-listed ETFs are exempt when held in your RRSP. VFV will have a non-recoverable tax regardless of where it’s held. VOO on the other hand will not have the 15% withheld in your RRSP, and is recoverable in non-registered accounts, but is non-recoverable in your TFSA or RESP.
See Vanguard’s own documentation on this here:
https://www.vanguardcanada.ca/documents/impact-of-withholding-taxes.pdf
Correction to my own comment – VFV’s withholding tax IS recoverable, but only in a non-registered account. The 15% is still withheld and not recoverable in any registered account, including RRSPs.
Another great guide to withholding taxes can be found on the PWL Capital site:
https://www.pwlcapital.com/wp-content/uploads/2018/06/2016-06-17_-Bender-Bortolotti_Foreign_Withholding_Taxes_Hyperlinked.pdf
Hey Anna you are totally right, to answer the last question where you probably realized my mistake I had skimmed through this document but the poor PDF format made me make an error on my answer: https://www.blackrock.com/ca/individual/en/literature/brochure/withholding-tax-reference-guide-en-ca.pdf
You’re absolutely right though, all three of those sources state that for both the TFSA and RRSP, withholding taxes apply on U.S stocks bought with Canadian ETFs. Thanks for point this out!
chris: great reviews as always, kudos!
what of if you have an RRSP ..better to hold voo so you won’t be taxed $15% on dividends by uncle sam?
or would vfv be ok in a regular cdn acct (say WS personal) and you can fill out forms each yr to claim the 15% withholding taxes?
Hey Joe, so it’s actually the TFSA that has the 15% withholding tax on dividends, not the RRSP. So you should actually hold it in your RRSP if you want to avoid it. You don’t need to fill out any forms, the 15% withholding tax is deducted before it even reaches you.
You have to remember with VOO there will be currency exchange fees since it must be purchased in USD. Unless you want to go through the hassle of Norbert’s Gambit, I don’t usually recommend it for that reason.
My mistake Joe, I double-checked with this document here https://www.blackrock.com/ca/individual/en/literature/brochure/withholding-tax-reference-guide-en-ca.pdf but Anna below corrected me. Yes, both the TFSA and RRSP would have a 15% withholding tax on dividends deducted. However, I would still caution against using VOO due to the currency exchange fees, when you both buy and sell. Weigh it out carefully, if you have a large enough sum of money it may be worth the hassle to do VOO with Norbert’s Gambit though to save on currency exchange fees – Check out how to do that here: https://wealthawesome.com/noberts-gambit-questrade/
You mentioned Canadians should not buy VOO?
I bought VOO using US dividends from other US holding that I have.
If one has US$, isn’t VOO a good idea?
Secondly, is VFV ok for a TFSA? Would one be subject to the 15% withholding taxes and not be able to claim a tax credit?
I know VFV is great for an RRSP or RIF, but I am not sure about TFSA
Thanks
Yes if you already have a US$ account, it makes it a lot easier and cost-effective to buy VOO. You’ll still need to convert it to CAD eventually, unless you plan on using your US dollars in the U.S, so either way you’ll be hit with a currency conversion fee.
You are also correct that VFV would be subject to a 15% withholding tax, which will be deducted before you receive the money. Be aware that it is only for the dividend gains, not the entire amount, so it’s not the worst thing. But yes, I would recommend holding it in a RRSP over a TFSA if you have the choice for either.
What do you mean by- understand the risks involved with purchasing a 100% equity fund – if i only invest in VFV bad idea? Is it medium risk ETf?
It means that if you’re only going to invest in equities, be aware your investments could be quite volatile. Try doing this free questionnaire if you’re not sure about your risk tolerance and asset allocation mix: https://www.vanguardcanada.ca/individual/questionnaire.htm
Hey, Chris nice work!
I’m 28 and I plan to hold my ETF for 10-15 years. Would you recommend VFVF-VGRO in my case? I will max out my TFSA and hold those ones for a long time.
What would you advise me?
Hey those are two quite different ETFs. VGRO is 80% worldwide equity with 20% fixed income, and VFV is 100% U.S equity. It depends a lot on your risk tolerance also. I would do the Vanguard investor questionnaire to start to figure out your proper asset mix first.
Yeah, my risk tolerance is high, already checked but I wanted to know your opinion on having the VFV and VGRO together to have a nice mix. I know you are not an advisor but I know you have quite knowledge about these Canadians ETFs.
Since my goal is to make my portfolio growth i was wondering if it is a good adiea to have these two in order to achieve it
Thanks
VFV and VGRO are ok if they’re held in separate accounts (ex. one is in your TFSA, and other is in your RRSP), because VGRO is meant to be your entire portfolio holding for a single account. It doesn’t make sense to combine the two in one account. But if you want to weight more towards America, then holding those two ETFs is a good choice.
Hi Christopher,
I have 5K that I would like to invest into either a Growth ETF (VGRO) or VFV. The 5K will be invested into a TSFA account. What would you suggest for a 37 year old? Additionally, I would like to invest another 5K into a REIT ETF … any suggestions there?
Thanks!
Hey Marshall I would recommend doing the Vanguard investor questionnaire, it might help you out with your choice there. For REIT ETFs check out this article: https://wealthawesome.com/best-reit-etfs-in-canada/
I would like to invest in VFV but within a more diverse ETF. Do you know any ETFSs what hold a % of VFV?
Hey Ryan check out Vanguard VCN it’s the U.S total market index ETF
Hi Chris,
For CAD 5,000 to invest in a TFSA account, which ETFs would you recommend? With the intention of keeping the investment for at least 5 years.
Many thanks!
Hi Ned, it really depends on your investment goals and risk tolerance levels. Maybe you can tell me a little more about your situation?
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
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.
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!
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
Hi Christopher, great website, just came across your blog.
I am wondering if you would know the difference in outperformance of vfv and voo since 2012. The difference is vfv has outperformed voo by 75% during this time
But when you look at currency conversion, the currency has only gained by about 25% (1.00 to 0.78 cad). Why such a massive difference in performance ?
Hey DJ, so they should be almost the same performance. VFV is not hedged to the US Dollar. VOO is the American version of VFV, so it is also not hedged. See this https://finance.yahoo.com/quote/VOO/performance/ and this https://finance.yahoo.com/quote/VFV.TO/performance/ the 5-year performances are very similar. I think you may have calculated incorrectly.