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Vanguard VSP ETF Review 2023: Invest in the Largest US Companies

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

With low MER or Management Expense Ratios, ETFs are advantageous to long-term Canadian investors, especially compared to traditional mutual funds.

Canadian investors can easily buy ETFs like VSP on any discount brokerage for minimal to no commission fees.

In this VSP ETF review, we will cover its holdings, performance, the pros and cons of the fund, how it compares to other similar ETFs, and how to buy it.

What is VSP?

VSP is a Vanguard Canada ETF that was established in November 2012 and trades on the Toronto Stock Exchange.

It is designed to provide exposure to the 500 largest companies in the United States by tracking the benchmark S&P 500 index.

VSP is the hedged version of the Vanguard Canada S&P 500 ETF (VFV). This means that in addition to the underlying stocks in the S&P 500, VSP holds Canadian dollars as a hedge against currency fluctuations.

It is worth noting that this ETF is nearly 100% invested in stocks. Ideally, you would only hold it as a portion of your portfolio and complement it with safer assets like bonds.

Here are some key facts for VSP as of May 2022:

  • Inception date: November 2, 2012
  • Number of stocks: 505
  • Price/Earnings Ratio: 20.3x
  • Price/Book Ratio: 3.9x
  • Return on Equity: 21.8%
  • Earnings Growth Rate: 20.0%
  • Management fee: 0.08%
  • MER: 0.09%
  • Assets under management: $1.97 billion
  • 12-month trailing yield: 1.21%
  • Distribution yield: 1.03%
  • Distribution frequency: Quarterly
  • Eligible accounts: RRSP, TFSA, RRIF, TFSA, DPSP, RDSP
  • Currency: CAD
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VSP Holdings

VSP is a portfolio that holds nearly 100% US stocks but also holds Canadian dollars as a hedge.

It holds the 500 of the largest publicly-traded companies in the US that compose the S&P 500 index. Therefore, its stock exposure is 100% to the US markets.

Here are the top ten holdings in VSP as of May 2022:

Ticker SymbolStock NameAllocation in ETF
AAPLApple Inc.7.10%
MSFTMicrosoft Corp.6.04%
AMZNAmazon.com Inc.3.16%
TSLATesla Inc.2.11%
GOOGLAlphabet Inc. Class A1.99%
GOOGAlphabet Inc. Class C1.85%
BRK.BBerkshire Hathaway Inc. Class B1.71%
UNHUnitedHealth Group Inc.1.39%
JNJJohnson & Johnson1.38%
NVDANVIDIA Corp.1.34%
Source: Vanguard.ca

And here is the sector breakdown of the holdings in VSP:

SectorFund Allocation
Information Technology27.4%
Health Care14.2%
Consumer Discretionary11.5%
Financials10.9%
Communications Services8.6%
Industrials7.8%
Consumer Staples6.8%
Energy4.2%
Real Estate2.9%
Utilities2.9%
Materials2.8%
Source: Vanguard.ca

Due to their significant market caps, technology stocks like Apple and Microsoft have a considerably higher weight in VSP.

As you can see, information technology stocks account for more than a quarter of the weighted allocation of the entire S&P 500. 

Related: Registered vs Non-Registered Investments.

Vanguard VSP ETF Review

VSP Returns and Performance

Vanguard Canada allows you to track the returns and performance of its ETFs.

Since its inception, VSP has had an average annualized return of about 13.04% and a cumulative return of 220%.

Below is a history of VSP’s returns comparing Market Price to its NAV over the years:

Calendar YearNAV PriceMarket Price (CAD)
202128.04%27.90%
202015.22%15.44%
201929.26%29.94%
2018-6.02%-6.60%
201720.76%20.85%
201611.22%10.93%
20150.44%0.55%
201413.68%13.94%
201332.62%32.73%

And this is how VSP has performed against the benchmark S&P 500 index:

As of April 30, 20221 MonthYTD1 Year3 Years5 Years10 YearsSince Inception
VSP (Market Price)-9.28%-13.42%-0.60%+40.63%+75.41%N/A+220.06%
VSP (NAV)-9.01%-13.32%-0.63%+40.81%+75.67%N/A+220.38%
Benchmark-8.96%-13.28%-0.48%+41.30%+77.43%+237.60%+230.18%

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

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VSP Fees

VSP has a management fee of 0.08% and an MER of 0.09%, which are both very reasonable for the ETF industry.

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

Pros and Cons of Vanguard VSP

VSP provides Canadian investors with direct exposure to the largest companies on the US stock market without needing to hold US dollars.

Both the management fee and MER are very reasonable. With an MER of just 0.09%, you pay $0.90 per every $1,000 you have invested in the ETF on an annual basis.

VSP allows you to hold every company in the S&P 500 without having to buy individual stocks.

It is hedged with the Canadian dollar to avoid foreign exchange volatility with US-dollar-denominated stocks.

With that being said, VSP should not be your only holding if you want to diversify your portfolio with other assets.

The VSP ETF is easy to purchase on a number of discount brokerages that offer minimal commission fees for investing in ETFs.

VSP vs VFV

VFV is the Vanguard Canada S&P 500 Index ETF that trades on the Toronto Stock Exchange.

VFV and VSP are identical, aside from VSP using Canadian Dollars as a hedge.

VFV has a management fee of 0.08% and an MER of 0.09%. It also has a quarterly distribution yield of 1.02% and a trailing 12-month yield of 1.17%.

Learn more about Vanguard Canada ETFs.

VSP vs. XSP

XSP is the Blackrock iShares Core S&P 500 Index ETF (CAD-Hedged) that trades on the Toronto Stock Exchange.

XSP and VSP are nearly identical as they both track the benchmark S&P 500 index. XSP holds CAD Dollars plus a 100.51% allocation to the US-domiciled iShares Core S&P 500 ETF (IVV).

VSP has a management fee of 0.09% and an MER of 0.10%. It also has a semi-annual distribution yield of 1.36% and a 12-month yield of 1.21%.

Learn more about iShares Canada ETFs.

VSP vs. VOO

VOO is the Vanguard S&P ETF that is domiciled on the New York Stock Exchange.

Canadian investors who want to invest in VOO will need to buy the stock in US dollars.

VOO has an MER fee of 0.03%, and its quarterly distribution is subject to a 15% withholding tax. This tax is not applicable if you hold VOO in an RRSP.

How To Buy the Vanguard VSP ETF in Canada

Questrade

Questrade is Canada’s largest discount brokerage and was founded in 1999 in Toronto, Ontario.

Questrade offers Canadian investors free ETF purchases and charges a low fee when you sell ($4.95 min.). You can also use this platform to buy and sell stocks, mutual funds, options, currencies, and precious metals.

Questrade

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Wealthsimple Trade

Established back in 2014, Wealthsimple is primarily owned by the Power Corporation of Canada.

Wealthsimple Trade is a discount brokerage that offers investment services for Canadians. It has zero commission trading for stocks and ETFs.

Wealthsimple Trade

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Trade stocks and ETFs for free

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$25 cash bonus when you deposit $200+

Transfer fees waived up to $150

Qtrade

Qtrade is another popular discount brokerage that offers lower trading fees than the major banks.

This platform provides free ETF trading for specific funds. Unfortunately, neither VSP nor VFV qualifies for this right now.

Qtrade

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Trade stocks, ETFs, options, etc.

Competitive trading fees

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Is VSP a Good Buy?

VSP checks off all of the boxes for Canadian long-term ETF investors. It provides exposure to the largest US companies in the S&P 500 with a low annual MER.

VSP has seen consistent returns with a reasonable quarterly distribution yield.

One negative is that it does not provide diversified exposure. It is 100% invested in US stocks.

Overall, VSP is an excellent way to add exposure to the US markets as a component of your portfolio.

VSP ETF Review FAQs

Is VSP a good investment?

Yes, VSP is an excellent way to add US exposure to your Canadian investment portfolio. It has a very low annual MER and pays a quarterly distribution to shareholders. Both VSP and VFV are great ways to invest in the US stock market.

Does VSP pay dividends?

Yes, VSP pays a quarterly distribution to shareholders and had a trailing 12-month yield of 1.21% as of September 2022.

How do I buy growth ETFs in Canada?

You can purchase ETFs from any major brokerage in Canada. If you want to save on trading fees, it is always worth checking out discount brokerages like Wealthsimple Trade and Questrade. These discount brokerages offer zero-commission purchases of ETFs, which can help improve your gains over the long term.

Are equity ETFs safe?

Generally, equity ETFs provide a safe investing floor as it provides diversification across entire industries or markets. Equity ETFs require less upfront capital than if you were to buy individual stocks. These ETFs also see less volatility than holding a basket of individual stocks.

Related:

Vanguard S&P 500 Index ETF VSP Review
4.7

Summary

Vanguard S&P 500 Index ETF provides exposure to the S&P 500. This VSP ETF review covers its holdings, returns, fees, how to buy in Canada, and how it compares to VFV, VOO, and XSP.

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Author

Gravatar for Enoch Omololu, MSc (Econ)
Enoch Omololu, MSc (Econ)

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 is passionate about helping others win with their 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, CBC News, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, and many other personal finance publications. You can learn more about him on the About Page.

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.

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