Exchange-Traded Funds (ETFs) are an excellent investment tool for Canadians who want to achieve various investment goals. ETFs offer a convenient and hands-free option for investors who want to rely on the performance of a basket of stocks instead of picking individual equities for their portfolio.
I’ve used several ETFs in my career. Vanguard offers some of my favourite ETFs. The non-profit asset management firm uses its profits to lower the fees for its investors.
Vanguard’s ETFs, like the Vanguard FTSE Canada All-Cap Index ETF (VCN), simplify investment for Canadians. I will take a closer look at the ETF in my Vanguard VCN review to help you understand why I like this ETF so much.
Wealthawesome Score: 4.7/5
- Low-cost Exchange-Traded Fund (ETF)
- Simple and effective ETF
- Seeks to track the FTSE Canada All-Cap Domestic Index
- Does not offer exposure to international companies
Summary: Vanguard VCN is a low-fee ETF for Canadian all-cap exposure.
What is Vanguard FTSE Canada All-Cap Index ETF
Vanguard VCN is a low-cost index fund that Vanguard Canada started offering since August 2, 2013. It is one of Canada’s most popular funds, and it has a massive $2.5 billion worth of Assets Under Management (AUM) as of July 31, 2020.
If you want to search for the price at which VCN is currently trading on the Toronto Stock Exchange (TSX), you can search for its ticker displayed as TSE: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 is 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 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 only of 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 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 health care 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 MER
Vanguard VCN has a very low Management Expense Ratio (MER) of 0.06%. 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 0.08%.
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 26, 2020:
- 12-Month Trailing Yield: 2.86%
- Distribution Yield: 3.49%
- 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 July 31, 2020.
VCN Vanguard FTSE Canada All-Cap Index ETF Holdings
Vanguard VCN invests in 188 Canadian stocks currently trading on the TSX. The top 10 holdings of Vanguard VCN show a decent level of diversity in the companies across various sectors.
Despite its weighting veering more towards the financial sector, the top holding for VCN is Shopify Inc., a tech company that all Canadian investors are well aware of. The rest of its top holdings constitute several top Canadian banks, oil & gas companies, and even a gold-related company. Its top 10 holdings make up 39.7% of its net asset value.
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.
For instance, Shopify is one of the fastest-growing companies in the country, and it is the most significant holding for VCN. Royal Bank of Canada and Toronto-Dominion Banks are long-standing companies on the TSX that have been providing substantial long-term returns to investors.
How to Buy Vanguard VCN ETF
There are several ways you can invest in the Vanguard VCN ETF. If you are a Canadian, most banks have trading platforms that allow you to purchase ETFs like VCN.
I personally use the trading platform Questrade. Questrade allows you to purchase ETFs for free on its platform. You can open an account at Questrade for free here, and get $50 in free stock trades also.
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.
The ETF does not offer you exposure to companies other than the ones operating in the domestic market.
However, it provides you with diverse exposure to dependable companies across various sectors in the economy. Its weighting is inclined more towards the more secure industries, and it offers little risk compared to mutual fund products.
I hope you found my Vanguard VCN review helpful. Let me know if you will want to give it a try as well.