The S&P 500 Index ETF, or VFV ETF for short, is a US equity ETF. Its purpose is to track the performance of the S&P 500 Index and to track the performance of large cap US stocks
It is unhedged unlike VSP, which is hedged against the Canadian dollar. Both trade in Canadian dollars, but the VSP ETF will also have currency trading to offset the currency exchange.
Should you hedge or hedge the S & P500 ETF? It’s a question everyone asks and it’s not clear whether one is better than the other, but a great explanation of the complexity and benefits can be found at PWL Capital.
Benefits of the Vanguard VFV ETF
- Passively managed portfolio
- Low-cost ETF with a MER of only 0.08%.
- Uses efficient, inexpensive index management techniques.
- It invests in ~ 507 US stocks with a median capitalization of over $ 232 billion.
Disadvantages of the Vanguard VFV ETF
- 100% equity, can be volatile
- No international exposure. The fund invests 100% in the USA.
Vanguard VIU ETF facts
- Starting time: November 2, 2012
- Benchmark: S&P 500 index
- Net worth: $ 4,663 million
- MER: 0.08%
- Distribution income: 1.12%
- Dividend plan: Quarterly
Vanguard VFV-ETF MER – management expense ratio
VFV’s management fee is 0.08% and MER is 0.08%, which is much cheaper than robo-advisors. VSP, which tracks the same stocks as VFV but is CAD-backed and has a MER of 0.09%.
MER takes over Vanguard to manage the fund for you. It’s much cheaper than mutual funds and, in some cases, cheaper than investing on your own.
Mutual funds can charge over 2% and rob you of your returns. It’s time to ditch your mutual funds and switch to ETFs as soon as possible. Many brokers like Questrade offer free ETFs. Combine the free ETFs with a low MER and you are ahead of many.
Vanguard VFV-ETF perfomance
The annual return of the Vanguard VFV ETF has been more than 18% since inception. Its performance has been in line with the broader S&P500 index over the past five years.
Investing in the S & P500 is easy and works. The only question is whether or not you will cover yourself.
The decision on whether or not to CAD hedged is out there and most of it is based on your understanding and expectation of the USD currency. It’s not worth getting upset about in my opinion.
Take your TFSA account as an example. The rules are the same for everyone and I mean everyone. Ultimately, growth is a factor in your investment performance, provided you meet your TFSA contribution limit each year. The annual performance of an ETF is important as you can see from the 20+ year growth below.
|1||2009||5,000||5,000||5,250||5,500||Not pursued||Not started|
|2||2010||5,000||10,000||10,762||11,550||Not pursued||Not started|
|3||2011||5,000||15,000||16,550||18.205||Not pursued||Not started|
|4th||2012||5,000||20,000||22,628||25,525||Not pursued||Not started|
|5||2013||5,500||25,500||29,534||34,128||$ 41,742||Not started|
|6th||2014||5,500||31,000||36,786||43,590||$ 52,820||Not started|
|7th||2015||10,000||41,000||49.125||58.949||$ 56,307||Not started|
|8th||2016||5,500||46,500||57,356||70,984||$ 70,200||Not started|
|9||2017||5,500||52,000||65,999||84.034||$ 78,900||$ 13,308|
|10||2018||5,500||57,500||75,074||98,487||$ 96,937||$ 58,818|
Vanguard VFV ETF stocks
VFV is a purely equity-based fund, unlike Vanguard’s VGRO and iShares XGRO, which have 80% stocks and 20% fixed income. The Portfolio-Asset Mix may be recomposed and rebalanced from time to time at the discretion of the Sub-Advisor.
Approximately 82% of the fund’s allocation is in large capitalization stocks, followed by 12% in mid-cap stocks. The remainder (~ 6%) is in US medium to large and medium to small capitalization stocks.
VFV’s top investments include Apple Inc, Microsoft Corp., Facebook Inc., Alphabet Inc., Berkshire Hathaway, Tesla, NVIDIA Corp. and JP Morgan & Chase & Co. (as of June 2021).
Why hold Vanguard VFV ETF?
VFV ETF is a great way for Canadian investors to diversify their holdings and get exposure to some of the most popular blue chip companies.
It offers exposure to large US stocks specifically biased in the IT, healthcare, consumer discretionary and financial sectors. The ETF carries a medium risk and is suitable for investors who are looking for long-term capital growth and who do not mind the volatility of the stock markets.
Remember that the S&P500 companies all operate in many countries and contribute to the global economy. It’s like investing in the world.
If you want the dividends, it’s not clear you’re getting the same growth, but the best banks and the best utility stocks will bring you more income.