Looking for an easy way to invest in a broad range of Canadian companies? Then take a look at perhaps buying an all-cap Canadian ETF.
ETFs like Vanguard VCN simplify investing for Canadians.
Let’s take a closer look at this Vanguard VCN review to see if it would be a good fit for you.
Pros
- Low-cost Exchange-Traded Fund (ETF)
- Simple and effective ETF
- Excellent Canadian diversification
Cons
- Does not offer exposure to international companies
Vanguard VCN Investment Strategy
Vanguard VCN is a low-cost index fund that Vanguard Canada started offering on August 2, 2013. It is one of Canada’s most popular ETFs.
Vanguard VCN employs a passively managed strategy, aiming to replicate the index’s performance cost-effectively and efficiently.
This approach allows investors to benefit from the overall performance of Canadian companies without the need for active stock selection.
The fund’s investment strategy provides diversification across all sectors of the Canadian economy, making it a suitable choice for those seeking exposure to various market capitalization ranges within Canada.
VCN.TO is currently trading at close to $41.945.
VCN Key Facts
As of August 31, 2023:
- Ticker Symbol: VCN.TO
- Exchange: Toronto Stock Exchange
- Assets Under Management: $5.41 Billion
- MER: 0.05%
- 12-Month Trailing Yield: 3.05%
- Currency Traded: CAD
- Eligible Accounts: Most registered (TFSA, RRSP, etc) and non-registered available
VCN Vanguard FTSE Canada All-Cap Index ETF MER
Vanguard VCN has a very low Management Expense Ratio (MER) of 0.05%. It is a very impressive figure, considering that the average mutual fund fees can be higher than 2%. VCN also has a lower MER compared to many other ETFs like VFV, which has an MER of 0.09%.
The low MER is a very good reason why so many Canadians leave the longstanding mutual fund products and migrate to ETFs as the preferred hands-free investment tool.
VCN Vanguard FTSE Canada All-Cap Index ETF Dividend
As of close August 31, 2023:
- 12-Month Trailing Yield: 3.05%
- Distribution Yield: 2.98%
- VCN Dividend schedule: Quarterly
Vanguard VCN offers a decent overall dividend yield that it disburses in quarterly payments to investors.
VCN Vanguard FTSE Canada All-Cap Index ETF Performance
Vanguard VCN tracks the benchmark FTSE Canada All-Cap Index very closely through its passively managed strategy.
The benchmark does not offer the geographical diversity in VCN that many other ETFs can provide, but it provides investors with decent returns.
Here is a look at its performance as of October 06, 2023.
Showing 31 Aug 2023:
| Fund Type | 1Month | 3Month | YTD | 1YR | 3YR | 5YR | 10YR | Since Inception |
|---|---|---|---|---|---|---|---|---|
| VCN (Market Price) | −3.21% | −2.05% | +3.85% | +10.00% | +34.13% | +41.28% | +102.46% | +106.46% |
| VCN (NAV) | −3.24% | −2.05% | +3.80% | +9.97% | +34.14% | +41.22% | +102.51% | +106.41% |
| Benchmark | −3.28% | −2.08% | +3.80% | +9.99% | +34.22% | +41.44% | +103.85% | +107.73% |
Go to the Vanguard website for real-time performance numbers of VCN.
What Does Vanguard FTSE Canada All-Cap Index ETF Invest in?
Vanguard VCN is a fund that seeks to track the performance of a broad Canadian equity index called the FTSE Canada All-Cap Domestic Index. VCN uses its funds to directly or indirectly invest in large, mid, and small-market capitalization stocks of companies operating domestically in Canada.
The fund employs a passively managed strategy that tries to fully replicate, to the extent possible, the performance of Canadian companies. It uses cost-effective and efficient index management techniques to track performance.
Vanguard VCN is an excellent passive investing solution for investors who want to leverage domestic Canadian companies’ performance across various market capitalization ranges.
It provides diversification across all sectors of the Canadian economy. Its performance depends on the overall performance of large-, mid-, and small-capitalization companies.
The FTSE Canada All-Cap Domestic Index that Vanguard VCN tracks are considered to be an excellent measure of how the performance of Canadian large-, mid-, and small-capitalization companies.
Vanguard uses a rigorous process to screen, evaluate, and select its benchmarks to provide best-in-class ETFs.
Vanguard VCN has a diversified portfolio of equities, but it has a significant weighting of companies in the financial sector.
VCN Market Allocation
As of August 31, 2023:
| Country | Region | Fund | Benchmark |
|---|---|---|---|
| Canada | North America | 100.0% | 100.0% |
| Total | 100.0% | 100.0% |
VCN Portfolio Characteristics
As of August 31, 2023:
| Fundamentals | Fund | Benchmark |
|---|---|---|
| Number of Stocks | 178 | 174 |
| Median Market Cap | $49.5 B | $49.5 B |
| Price / Earnings Ratio | 15.1 x | 15.1 x |
| Price / Book Ratio | 1.8 x | 1.8 x |
| Return on Equity | 12.4% | 12.4% |
| Earnings Growth Rate | 10.8% | 10.8% |
VCN Market Capitalization
As of August 31, 2023:
| Capitalization | Fund | Benchmark |
|---|---|---|
| Large | 79.86% | 79.86% |
| Medium/Large | 2.00% | 2.00% |
| Medium | 10.85% | 10.84% |
| Medium/Small | 4.51% | 4.51% |
| Small | 2.78% | 2.78% |
| Total | 100.00% | 100.00% |
VCN Vanguard FTSE Canada All-Cap Index ETF Sector Weighting
In this section of my Vanguard VCN review, I will discuss the weighting of the fund. While many benchmarks include assets diversified across sectors and different countries, Vanguard VCN follows the FTSE Canada All-Cap Index. Therefore, VCN comprises of only Canadian companies.
There is a good mixture of companies across various sectors in this ETF, from financials to health care. Here is a look at how Vanguard VCN allocates the funds.
As of August 31, 2023:
| Sector | Fund |
|---|---|
| Financials | 31.86% |
| Energy | 17.66% |
| Basic Materials | 11.82% |
| Industrials | 10.72% |
| Technology | 8.18% |
| Consumer Discretionary | 6.62% |
| Utilities | 5.25% |
| Telecommunications | 3.34% |
| Consumer Staples | 2.2% |
| Real Estate | 2.19% |
| Health Care | 0.16% |
| Total | 100.0% |
As you can see from the weighting above, VCN allocates almost a third of its funds to the financial sector. The basic materials and oil & gas sectors come after that.
The healthcare sector gets the least weightage in the fund with a meagre 0.4% allocation of Vanguard VCN funds. Besides being more inclined towards the finance industry, Vanguard VCN offers plenty of diversity to investors in different sectors.
VCN Vanguard FTSE Canada All-Cap Index ETF Holdings
The top 10 holdings of Vanguard VCN show a decent level of diversity in the companies across various sectors.
As of August 31, 2023:
| Holding Name | % of Market Value | Sector |
|---|---|---|
| Royal Bank of Canada | 6.1 % | Banks |
| Toronto-Dominion Bank | 5.4% | Banks |
| Shopify Inc. | 3.7% | Ecommerce |
| Canadian Pacific Kansas City Ltd. | 3.6 % | Oil: Crude Producers |
| Enbridge Inc. | 3.5 % | Pipelines |
| Canadian Natural Resources Ltd. | 3.4 % | Railroads |
| Canadian National Railway Co. | 3.3 % | Railroads |
| Bank of Montreal | 3.0% | Banks |
| Bank of Nova Scotia | 2.8 % | Banks |
| Brookfield Corp. | 2.5 % | Asset Managers and Custodians |
Some investors might not like the lack of geographical diversity of Vanguard VCN. Many other ETFs also expose investors to companies in the US through various benchmarks.
VCN depends solely on the performance of some top industries in the country. However, its top 10 holdings show that the ETF provides investors with exposure to leading companies across various reliable sectors.
VCN Risk And Volatility
As of August 31, 2023:
| Fund Type | R-Squared | BETA | ALPHA | Standard Deviation | Sharpe Ratio |
|---|---|---|---|---|---|
| Fund | 1.00 | 1.00 | − 0.00 | 13.91% | 0.65 |
| Benchmark | — | — | — | 13.92% | 0.65 |
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Conclusion
To round off my Vanguard VCN review, I would highly recommend it. The ETF is a simple and effective fund offered by Vanguard. It is a low-cost ETF that focuses on a variety of Canadian companies.
VCN provides you with diverse exposure to dependable companies across various sectors of the Canadian economy.
Learn more about Vanguard ETFs here.
