VCN Review: Vanguard FTSE Canada All Cap Index ETF

An Exchange Traded Fund (ETF) such as VCN holds a basket of securities (e.g. stocks and/or bonds) giving investors easy access to multiple securities and a diversified portfolio at a low cost.

When you purchase an ETF using a commission-free broker, you save even more on fees.

While I prefer to hold assets allocation ETFs like VGRO or XBAL to avoid the need to rebalance, you can choose to build your portfolio using individual ETFs like VCN and a target allocation of your choosing.

The VCN review covers its holding, performance, fees, pros and cons, and how it compares to XIC.

What is VCN?

VCN aka Vanguard FTSE Canada All Cap Index ETF is a Canadian equity ETF from Vanguard Canada.

It is designed to track the FTSE Canada All Cap Domestic Index by investing in large, medium, and small-capitalization Canada stocks.

VCN is traded on the Toronto Stock Exchange under the ticker symbol ‘VCN’ and has a ‘medium’ risk rating.

The key facts for this fund as of February 28, 2021, are:

  • Inception date: August 2, 2013
  • Management fee: 0.05%
  • MER: 0.05%
  • Price/Earnings Ratio: 18.7x
  • Price/Book Ratio: 2.0x
  • Return on Equity: 11.2%
  • Earnings Growth Rate: 8.9%
  • Number of stocks: 179
  • 12-month trailing yield: 2.60%
  • Distribution yield: 2.59%
  • Eligibility: RRSP, TFSA, RESP, RRIF, DPSP, RDSP
  • Listing currency: CAD
  • Assets under management: $3.2 billion

VCN Holdings

The Vanguard FTSE Canada All Cap Index ETF (VCN) is mostly invested in Canadian stocks (98.6%).

Its top stock holdings include Shopify, RBC, TD, Scotiabank, BMO, Enbridge, Canadian National Railway, Canadian Pacific Railway, and CIBC.

VCN equity holdings

This ETF offers diversification across various sectors including Financial Energy, Technology, Industrials, Utilities, Consumer Discretionary, Telcoms, and more.

Large-cap stocks make up 72.31% of the stocks held by VCN.

Related: Best Stock Trading Apps in Canada.

VCN Performance and Returns

The annual returns of VCN are available starting from 2014.

Here’s how it has fared:

YearTotal Return by NAVTotal Return by Market Price
20149.80%9.86%
2015-8.76%-8.76%
201621.46%21.49%
20178.46%8.42%
2018-9.06%-9.16%
201922.06%22.17%
20204.84%4.90%

For this year to date (January 1 – March 31, 2021), VCN has earned a 8.69% return.

As shown in the image below, VCN’s performance over the years is a few basis points lower than its benchmark index. This disparity is due to the fund’s fees and expenses.

VCN ETF returns

Note that while historical returns are great for seeing how an ETF has performed in the past, they do not predict what may occur in the future.

VCN Fees and MER

VCN has a low 0.05% management expense ratio. Compared to the average equity mutual fund in Canada which costs 1.98% per year, this ETF saves you a lot of money in fees.

One strategy for holding onto this fee savings is to purchase VCN using a free or cheap brokerage platform. For example, Wealthsimple Trade offers free purchases and sales of VCN.

VCN is also cheaper compared to investing with a robo-advisor. The best robo-advisors charge up to 0.50% in fees and when you add ETF costs, you pay roughly 0.70%.

That said, robo-advisors automatically rebalance your portfolio and they also offer limited free financial advice.

Also, you can lose the fee savings when you purchase VCN using a high-fee brokerage account e.g. the ones that charge up to $9.99 per trade.

Related: Compare Robo-Advisor Fees in Canada.

Pros and Cons of VCN

It would be extremely difficult for the average Canadian investor to diversify their portfolio and lower its risk level by purchasing 179 individual stocks. However, when you buy VCN, you get this exposure using a single ETF.

You can extend this same strategy even further by purchasing a one-fund solution fund such as VBAL or XGRO.

VCN costs 0.05% per year. This means you are paying $0.50 for every $1,000 you invest.  A comparative mutual fund could easily cost you $19.80 per $1,000 invested.

Also, you can hold this ETF in personal (registered and non-registered) or corporate investment accounts.

You should note that VCN is all-equity which means its returns can be more volatile depending on what’ going on in the financial markets.

If you are looking for a steady source of income, this ETF is not what you want. You should look for a conservative or income ETF, or keep your funds in a GIC/saving.

VCN vs. XIC

XIC is the iShares Core S&P/TSX Capped Composite Index ETF.

It takes the entire Canadian stock market (95%+) and holds 229 stocks as of April 12, 2021, (compared to 179 stocks for VCN).

The top-10 stock holdings by XIC are:

XIC stock holdings

This index is ‘capped’ which means that the weight of individual stocks in the index capped at a maximum of 10%.

XIC has a MER of 0.06% while VCN has a MER of 0.05%.

Both ETFs have a ‘medium’ risk rating.

How To Buy Vanguard VCN ETF in Canada

You can purchase VCN using a self-directed brokerage account. My top two choices are:

  • Questrade
  • Wealthsimple Trade

Questrade: This trading platform can be used to buy and sell a variety of investment products including stocks, ETFs, GICs, options, and more.

Questrade offers free ETF purchases. When you sell ETFs, a small fee applies (minimum of $4.95 per trade).

Our readers get $50 in free trades when they open and fund their account with at least $1,000.

Questrade VCN trade

Wealthsimple Trade: This platform offers zero-commission trades on ETFs and stocks. What this means is that you don’t pay trading fees when you buy and sell VCN.

Wealthsimple Trade is available on all devices.

When you open an account here, you receive a $50 welcome bonus after depositing and trading at least $100.

Wealthsimple Trade VCN Trading

FAQs

Is VCN a good ETF?

VCN is great for investors who have a higher than average risk tolerance. It is designed for investors who are seeking long-term capital growth and who don’t mind significant fluctuations in their portfolio value from day-to-day.

Does VCN pay dividends?

VCN has a quarterly dividend schedule with distributions in March, June, September, and December. The most recent cash distribution per unit was $0.298183 on March 31, 2021.

Can I hold VCN in a TFSA?

Yes, you can hold VCN in a TFSA and other registered investment plans (RRSP, RESP, DPSP, and RRIF).

How can I trade VCN for free?

Wealthsimple Trade is the only brokerage platform offering free trades in ETF and stocks in Canada. You can read this Wealthsimple Trade review for more information.

VCN ETF Review
4.8

Summary

VCN is the Vanguard FTSE Canada All Cap Index ETF. This VCN review covers its fees/MER, holdings, how to purchase it in Canada, and comparison to XIC.

Pros

  • Low management fee and MER
  • Diversified across 179 stocks
  • Eligible for multiple accounts

Cons

  • Medium risk asset
  • Trading fees can pile up if you pay per trade
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Author

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. His writing has been featured or quoted in the Toronto Star, The Globe and Mail, MSN Money, Financial Post, Winnipeg Free Press, CPA Canada, Credit Canada, Wealthsimple, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO and monitors his credit score for free using Borrowell.

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