VFV Review 2022: Vanguard S&P 500 Index ETF

Photo of author

by Enoch Omololu

Updated

Advertiser Disclosure

Exchange-Traded Funds (ETFs) such as the Vanguard S&P 500 Index ETF (VFV) make it easier for investors to diversify their portfolio holdings while saving on fees.

Compared to traditional mutual funds and their expensive management expense ratios (MER), an ETF can cost as low as 0.05% per year.

Over the long-term, the fee savings can result in higher returns as you keep more of your gains.

Stocks and ETFs like VFV are also easier to purchase these days using a discount brokerage platform.

For example, you can use Wealthsimple Trade and Questrade to buy VFV for free (no trading commissions).

This VFV review covers its holdings, performance, pros and cons, how to purchase it in Canada, and how it compares to VOO.

What is VFV?

VFV aka Vanguard S&P 500 Index ETF is a US-equity ETF from Vanguard Canada.

It is designed to track the performance of the S&P 500 Index by investing in large-capitalization U.S. stocks that are representative of the benchmark index.

If you have been looking to diversify your portfolio by holding more U.S. stocks, VFV offers an easy solution.

It is worth noting that this ETF is 100% invested in stocks, and you would typically hold it as a portion of your portfolio … and not the only asset.

The risk rating for VFV is “medium” and it trades on the Toronto Stock Exchange under the ticker symbol “VFV”.

Key facts for VFV as of February 28, 2021, include;

  • Inception date: November 2, 2012
  • Number of stocks: 509
  • Price/Earnings Ratio: 28.3x
  • Price/Book Ratio: 4.0x
  • Return on Equity: 20.2%
  • Earnings Growth Rate: 19.1%
  • Management fee: 0.08%
  • MER: 0.08%
  • Assets under management: $4.0 billion
  • 12-month trailing yield: 1.31%
  • Distribution yield: 1.19%
  • Distribution frequency: Quarterly
  • Eligible accounts: RRSP, TFSA, RRIF, TFSA, DPSP, RDSP
  • Currency: CAD

VFV Holdings

VFV is an all-stock portfolio which means it is growth-oriented and exposed to higher volatility compared to portfolios with some allocation to bonds or cash.

Higher volatility means you will potentially enjoy higher returns when the overall market is up and increased losses when there is a downturn.

As of February 28, 2021, the asset allocation of VFV is 100% U.S. stocks.

The top-10 stock holdings are names we are all familiar with, including technology (Apple), media (Facebook), automobile (Tesla), and banking stocks (JP Morgan Chase).

VFV stock holdings

And for the sector categories, VFV has the following exposure:

VFV equity sector exposure

Related: Best Bitcoin ETFs.

VFV Returns and Performance

You can track the performance of VFV since its inception in 2012.

Using the total return based on its year-end net asset value (NAV) and market price:

YearNAVMarket Price (CAD)
201340.65%40.97%
201423.76%23.99%
201520.22%20.31%
20168.46%8.22%
201713.61%13.66%
20183.35%2.79%
201924.49%25.12%
202015.58%15.79%

You can also see how the ETF has performed against its benchmark index (S&P 500).

VFV returns and performance

The disparity in returns between VFV and the S&P 500 Index (tracking error) can be attributed to fees and fund expenses.

Note that historical returns are not a guarantee that this ETF will perform well in the feature.

VFV Fees

VFV has a 0.08% management fee, the same as its management expense ratio.

This is significantly lower compared to what you pay the average equity mutual fund manager in Canada (1.98%).

How about robo-advisors?

A robo-advisor (online wealth manager) such as Wealthsimple has a 0.40% to 0.50% management fee. After you account for in-built ETF costs, your total fee is in the 0.60% – 0.70% range per year.

Given that robo-advisors automate portfolio rebalancing, dividend reinvesting, and also provide free investment advice, a 0.70% fee may be worth it.

If you choose to purchase ETFs like VFV directly, make sure to watch out for trading fees.

For example, on TD Direct Investing, you pay $9.99 per trade. Over time, you could rack up enough trading commissions to exceed even the costs of a mutual fund, particularly when you trade small lots.

You can avoid this by using a broker that offers commission-free trades on ETFs e.g. Questrade (free for purchases) and Wealthsimple Trade (free for both buy and sell orders.

Pros and Cons of Vanguard VFV

VFV offers exposure to the largest capitalization stocks in the U.S. (over 500 of them) at a low cost.

It would be difficult holding each of these stocks by purchasing them individually, and if you were to hold a comparable mutual fund, you can expect to pay a lot more in fees.

If you don’t mind the volatility (ups and downs) of an all-stock portfolio, VFV can give your portfolio extensive exposure to the U.S. market.

That said, you’d want to hold other assets as well, including Canadian and international equities, plus some bonds depending on your risk tolerance.

VFV is easy to purchase using a self-directed brokerage account and it is eligible for both registered and non-registered accounts.

This ETF is cheap, costing just 0.08% every year. That is, you pay only 80 cents on every $1,000 invested.

That said, a costly brokerage platform can erase any advantage from a lower MER if you are paying trading commissions every time you click on “buy” or “sell”.

VFV vs. VOO

VFV is the Canadian version of the Vanguard S&P 500 ETF offered by Vanguard U.S.

VOO is listed on the New York Stock Exchange and is traded in U.S. dollars. What this means is you will be paying FX fees if you purchase VOO using Canadian dollars.

Dividends paid out by VFV are subject to a 15% foreign withholding tax. However, if you hold VOO in an RRSP, the dividends earned are not subject to this 15% cut.

VOO has a 0.03% MER, while it is 0.08% for VFV.

VFV vs. VSP

VSP is the Vanguard S&P 500 Index ETF (CAD-hedged).

Basically, the VSP tracks the same U.S. stocks as the VFV, however, it also hedges its currency exposure to the Canadian dollar.

If the U.S. dollar was to weaken or strengthen against the Canadian dollar, VSP is hedged to protect your portfolio and eliminate the effect of the foreign exchange rate.

You pay a small fee for hedging your position. VSP has a 0.09% MER compared to 0.08% for VFV.

VFV vs. VUN

VUN is the Vanguard U.S. Total Market Index ETF. It tracks the CRSP US Total Market Index which is made up of large, medium, small, and micro-capitalization stocks in the U.S.

VUN held 3,669 stocks as of February 28, 2021, compared to 509 for VFV.

The U.S. version of VUN is the VTI ETF.

VUN has an MER of 0.16%. The annual fee for VFV is 0.08%.

Related: Best Stock Trading Apps.

How To Buy the Vanguard VFV ETF in Canada

You can easily purchase VFV using Questrade or Wealthsimple Trade.

Questrade:

This online brokerage offers trading in stocks, ETFs, bonds, mutual funds, options, IPOs, GICs, and precious metals.

ETF purchases are free and you pay a minimum of $4.95 per trade when selling.

Questrade is available on all devices and experienced traders can access advanced charting, multiple order types, and research.

To get started, open an account here and use SAVVY50 to get $50 in free trades after you fund your account with at least $1,000. Learn more about the platform in the Questrade review.

Wealthsimple Trade:

Looking to buy and sell stocks and ETFs for free? Wealthsimple Trade offers commission-free trading whether you are buying or selling.

It is available on all devices and your account is protected by the Canadian Investor Protection Fund (CIPF).

Our readers get a $150 welcome bonus when they open an account and deposit and trade at least $300. Get more details in this review.

Is VFV a Good Buy?

As per Vanguard Canada, VFV is for investors who:

“Are seeking long-term capital growth, want to invest in U.S. large capitalization equity securities within their portfolio, and can handle the ups and downs of the stock market.”

Growth/aggressive portfolios are not suitable for everyone and you should always invest in line with your risk tolerance and investment needs.

You can gain exposure to a more diversified stock portfolio using an all-in-one ETF like VEQT.

Related: Best ETFs in Canada.

VFV ETF Review FAQs

Is VFV the same as VOO?

VFV invests in VOO which is the U.S- version of the Vanguard S&P 500 ETF.

Does VFV pay a dividend?

VFV distributes dividends on a quarterly basis in March, June, September, and December. As of February 28, 2021, its distribution yield was 1.19%.

Is VFV hedged?

If you are interested in the currency-hedged Vanguard S&P 500 Index ETF, you can purchase VSP which is CAD-hedged.

VFV Review
4.8

Summary

VFV is Vanguard’s S&P 500 Index ETF. This VFV review covers its fees, holdings, how it compares to VOO and VSP, and how to buy it in Canada.

Pros

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

Cons

  • Medium risk asset
  • Trading fees can pile up if you pay per trade and make small trades

Best Investment Offers This month

Get $50 in FREE trades or invest $10,000 FREE for 1 year

Offers self-directed and professionally managed portfolios.

No trading commissions on ETF purchases.

Low fees to buy stocks starting at $4.95 per transaction.

Free transfers from other banks and $0 inactivity fees.

Earn high interest rates on your savings accounts ($150 bonus offer)

1.65% interest rate on your savings account.

Up to 150x more earnings than other banks.

No monthly account fees; fast and easy online sign-up.

Free and unlimited bill payments and Interac e-Transfers.

Overall best crypto exchange in Canada + $50 bonus

Crypto trading platform for beginners and advanced traders.

Low trading fees at 0.20% and multiple fiat currencies supported.

Trade 16 popular cryptocurrencies.

$50 instant bonus when you deposit $200.

Get a cash bonus and FREE stock and ETF trades

First commission-free stock and ETF trading platform in Canada.

$0 trading commissions.

$25 cash bonus when you fund and trade $150 or more.

Search and track stocks easily with watchlists and price alerts

Retirement 101 eBook - 3D

Author

Photo of author
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. He has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, CIBC, and many other personal finance publications.

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

7 thoughts on “VFV Review 2022: Vanguard S&P 500 Index ETF”

  1. Great summary, exactly what I needed! How do we know if such ETF rebalance themselves? I assume VFV et VSP will rebalance themselves if needed, independently if they are in WealthSimple Invest or Trade?

    • @MJC: These ETFs (e.g. VFV) will rebalance themselves to stay in line with their mandate. That said, you will need to rebalance your portfolio if you hold a basket of ETFs that are not “all-in-one” to keep things balanced such as when one fund performs better than the others and exceeds the allocation you intended for it to have. If you are holding these ETFs on Wealthsimple Invest, they do the rebalancing for you. On Trade, you do it yourself. Hope this makes sense?

  2. With regards to the 15% foreign withholding tax, can that be claimed back at tax time? If so, which type of account would be best to hold this ETF ie. TFSA, RRSP or Cash to be able to claim the 15% FWT? Your advice is appreciated.

    • @Leslie: The US withholding tax does not apply to RRSPs.

  3. Does the US withholding tax apply to TFSA?

    • @Ash: Yes, it applies to TFSAs.

  4. Hi Enoch, I want to buy a US listed ETF but I am worried about paying US Estate Tax. I would like to buy VOO instead of VFV becaues it performs better and there are lower MER fees. Is it a guarantee I will pay US Estate Tax if my portfolio grows anywhere between $10 million and $50 million? What can I do to guarantee I don’t pay any US Estate Tax? Thanks in advance.

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

EXCLUSIVE OFFER
Invest up to $10,000 for free for one year when you open a Questwealth Portfolio account.
* Terms & Conditions Apply. Fund account with min. $1,000 deposit. Applies only to Wealthsimple Invest accounts.
Share
Pin
Tweet
WhatsApp
Reddit