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VFV ETF Review: All You Need to Know About the S&P 500 Index ETF

Blue-chip Dividend stocks

Each day we see more Canadians choose passive ways of making money through stocks; so, you’re not alone. If you know you can wait five to ten years for your investment to grow, Canadian ETFs will give you good returns.

One such ETF that you can consider for inflation-beating returns is the Vanguard’s VFV ETF. Here’s everything you should know about the S&P 500 Index ETF or VFV.

What is the VFV ETF?

The VFV ETF is one of the most famous products created by Vanguard Equity Index Group, a global authority in asset management. Vanguard is currently managing assets worth over $6.2 trillion. In its basket of products, you will find various ETFs created to provide Canadians with stress-free income-generating opportunities.

The Vanguard S&P 500 Index ETF is for Canadian investors who want exposure to the top 500 companies in the U.S. stock market.

The VFV ETF carefully monitors the S&P 500 Index and tracks the performance of stocks of the largest companies in the U.S.

By the end of March 2021, VFV ETF had $2.25B in total AUM or assets under management.

How the VFV ETF works

You already know that when Vanguard created VFV, the objective was to help Canadians gain exposure to the top blue-chip companies in the U.S. 

Therefore, the fund replicates the holdings of the S&P 500 Index providing you with an opportunity to have top-notch tech stocks like Microsoft, Google, and Amazon in your portfolio.

That means, while other ETFs like VGRO and XGRO have 80% equity and 20% fixed-income assets in their portfolio, VFV is purely a stock-based fund.

That gives it medium risk and high volatility so, you cannot have the ETF as the only asset in your investment portfolio. 

Since the ETF is a low-cost passive investment, any investor can buy it. Whether you’re a beginner or expert stock trader, you can invest in VFV.

Top Canadian discount brokerage Weathsimple Trade and Questrade will allow you to buy the VFV ETF for free.

Is VFV ETF a good investment?

Since its inception in 2012, the fund’s performance keeps attracting more and more investors. Nevertheless, let’s look at its characteristics so that you can make an informed decision.

VFV top ten holdings as of March 2021

Apple Inc.5.64%
Microsoft Corp.5.20%
Amazon3.87%
Facebook Inc.2.07%
Alphabet Class A1.81%
Alphabet Class C1.74
Tesla Inc.1.50
Berkshire Hathaway Inc.1.41%
JP Morgan Chase & Co.1.36%
Johnson & Johnson1.26%

Summary

  • Number of stocks        509
  • Median market cap     203.5B
  • Price/earnings ratio     29.5X
  • Price/book ratio          4.2X
  • Return on Equity        20.2%
  • Earnings growth rate  18.7%
  • Eligible accounts        RRSP, TFSA, RRIF, TFSA, DPSP, RDSP
  • Currency                     CAD

VFV ETF sector weighting

Healthcare14.0%
Financials12.1%
Information Technology24.4%
Energy3.6%
Utilities3.5%
Industrials8.9%
Real estate3.1%
Communication services10.7%
Consumer staples7.3%
Consumer discretionary9.9%
Materials2.5%

VFV ETF Fees

You will pay a 0.08% management fee and it has a MER (Management Expense Ratio) of 0.08%. The average cost for most Canadian mutual funds is 1.98%; hence the VFV ETF is cheaper and more diverse.

VFV ETF pros and cons

Pros

  • You get a chance to invest in the largest companies in the U.S. at a low cost.
  • It’s a passive way of growing your money.
  • You can purchase it using a registered or non-registered account.
  • It’s easy to buy (0.08%)
  • You might enjoy high returns since the stock market is highly volatile.
  • Income distribution stands at $0.269015 per unit.

Cons

  • High volatility means you could lose your money. Thus, to be on the safe side, kindly buy other assets as well. E.g., VGRO or XGRO
  • If you choose the wrong stockbroker, you might pay a lot in terms of fees.

VFV vs. VOO

  • Both focus on the S&P 500 Index.
  • Nevertheless, you will find VOO ETF on the New York Stock Exchange while VFV is on Toronto Stock Exchange.
  • VOO is listed in U.S. dollars; hence if you opt to invest in it, you need to consider currency conversion rates.
  • VOO has a MER of 0.03%, while VFV is at 0.08%
  • VOO is a brainchild of Vanguard U.S., but VFV is from Vanguard Canada.

VFV vs. VSP

  • Both focus on the S&P 500 Index but VSP hedges on the Canadian dollar. 
  • VSP is commonly known as the Vanguard S&P 500 Index ETF (Canadian-hedged). That protects you from the impact of foreign exchange rates.

VFV vs. VUN

  • VFV focuses on the large companies while VUN tracks small and medium cap too.
  • VUN has MER of 0.16%

VFV vs. XUU

  • iShares XUU tracks U.S. total market Index (large, medium, and small-cap), while VFV focuses on large-cap only.

Verdict

That’s everything you need to know about the VFV S&P 500 Index ETF. Now, if you want a passive capital growth venture invest in the VFV ETF for long-term gains.


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