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.
Our Verdict
10
S&P500 ETF for Canadians
Vanguard VFV is an ETF for Canadians that tracks the S&P 500 index.
Buy this ETF with $0 Trading Fees
Pros
- Low cost
- Tracks the S&P 500 closely
- Simple and effective way to get exposure to some of the best companies in the world
Cons
- Is heavily reliant on the tech sector for performance
Table of Contents show
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.
