Do you want to invest in the U.S. market but don’t want to deal with the hassle of currency exchange? Buying a Canadian Exchange Traded Fund (ETF) that invests in the U.S. market through stock indexes is the easiest way to do so.
ETFs such as S&P 500 offers a simple and cost-effective way to have a solid diversified investment option. They offer stability and performance and allow access to the stock index without buying individual stocks.
Since 1957, S&P 500 ETFs have offered Canadian investors an excellent medium to invest in the S&P 500 either through a US-domiciled ETF that trades in U.S. dollars or a Canadian dollar-denominated ETF that trades on the Toronto Stock Exchange.
This review covers the six best S&P 500 ETFs in Canada for 2022, why you should buy them, and how to buy them in Canada.
Without skipping a bit, let’s get right into it.
The 6 Best S&P 500 ETFs in Canada
There are different S&P 500 ETFs available in Canada, do your research and figure out which is best for you. Here I review and compare the best S&P 500 ETFs in Canada.
When you understand the various ETFs, what they have in common, and where they differ, you will easily decide to select the best S&P 500 ETFs in Canada.
1. Vanguard S&P 500 Index ETF (VFV)
- Inception Date: November 2, 2012
- Stock Price: $93.28
- Assets under Management: $6.472Billion
- Management fee: 0.08
- Management Expense Ratio: 0.09%
- Issuer: Vanguard Canada
- Ticker: VFV.TO
- Risk Rating: Medium
- Management Style: Passive
- Distribution Yield: 1.45%
- 12-month yield: 1.34%
- Distributions: Quarterly
Vanguard S&P 500 Index ETF (VFV) is one of the best and most inexpensive ETFs on this list. Offered by Vanguard Canada, it provides investors exposure to the S&P 500 ETF and passively tracks the S&P 500 index.
It concentrates your investments in U.S. large-capitalization stocks. Regarding fees, VFV is known as the most inexpensive Canadian ETF tracking the S&P 500.
Having been incepted in 2012, VFV has a long performance track record and massive assets under management. It offers a low yield with quarterly distributions and is rated medium risk, like most equity investments.
With Vanguard Canada as a reputable household name in the investment world and VFV being the most cost-effective ETF in Canada, VFV is a top choice when considering which ETF to buy.
2. Vanguard S&P 500 Index ETF CAD-Hedged (VSP)
- Inception Date: November 2, 2012
- Stock Price: $63.81
- Assets under Management: $2.430 Billion
- Management fee: 0.08%
- Management Expense Ratio: 0.09%
- Issuer: Vanguard Canada
- Ticker: VSP.TO
- Risk Rating: Medium
- Management Style: Passive
- Distribution Yield: 1.56%
- 12-month yield: 1.46%
- Distributions: Quarterly
Like VFV, vanguard S&P 500 Index ETF CAD-Hedged (VSP) invests directly in the U.S. stock market included in the S&P 500. The VSP is the hedged version of the VFV.
VSP is hedged toward the Canadian dollar, allowing the ETF to hedge against the currency fluctuations of the Canadian dollar.
However, VSP provides investors lower returns than its unhedged counterpart, VFV. Despite having the same MER, VSP pays out a lower annualized distribution yield.
3. iShares Core S&P 500 Index ETF (XUS)
- Inception Date: April 10, 2013
- Stock Price: $65.41
- Assets under Management: $4.48 Billion
- Management fee: 0.09%
- Management Expense Ratio: 0.10%
- Issuer: Blackrock iShares
- Ticker: XUS.TO
- Risk Rating: Medium
- Management Style: Passive
- Distribution Yield: 1.04%
- 12-month yield: 1.18%
- Distributions: Semi-Annual
The iShares Core S&P 500 Index ETF (XUS) is another inexpensive option offered in Canada by Blackrock’s iShares.
In contrast to VFV and ZSP, XUS has a slightly shorter performance track record and is relatively smaller in terms of assets under management. However, compared to other funds and ETFs in Canada, XUS is a massive ETF.
It offers a low distribution yield and pays distribution semi-annually. Though it is not at the same level as S&P ETFs from Vanguard and BMO, iShares Core S&P Index ETF is still a top choice for Canadian investors.
4. iShares Core S&P 500 Index ETF CAD-Hedged (XSP)
- Inception Date: April 10, 2013
- Stock Price: $41.09
- Assets under Management: $7 Billion
- Management fee: 0.09%
- Management Expense Ratio: 0.10%
- Issuer: Blackrock iShares
- Ticker: XSP.TO
- Risk Rating: Medium
- Management Style: Passive
- Distribution Yield: 1.13%
- 12-month yield: 1.26%
- Distributions: Semi-Annual
The iShares Core S&P 500 Index ETF CAD-Hedged (XSP) is the Canadian hedged version of XUS. It replicates the performance of the S&P 500 index toward achieving long-term capital growth.
Like the XUS, XSP ETF distributes dividends in a scattered manner (semi-annually), with the last dividend being 1.26%.
Since its inception on April 10, 2012, the iShares Core S&P 500 Index ETF CAD-hedged (XSP) has returned a 5.03% average annual return.
5. BMO S&P 500 Index ETF (ZSP)
- Inception Date: November 14, 2012
- Stock Price: $57.15
- Assets under Management: $9.241 Billion
- Management fee: 0.08%
- Management Expense Ratio: 0.09%
- Issuer: BMO Global Asset Management
- Ticker: ZSP.TO
- Risk Rating: Medium
- Management Style: Passive
- Distribution Yield: 1.43%
- Distributions: Quarterly
BMO Global Asset Management offers the BMO S&P 500 Index ETF (ZSP) to expose investors to the underlying stocks in the S&P 500.
Also, the ZSP ETF trades on the Toronto Stock Exchange and has the same MER as VFV but pays out a higher distribution yield.
The ETF has a medium risk rating and offers greater exposure to diversified U.S. equities with 100% allocations to stocks that make up the index.
ZSP also has a CAD-hedged version that trades the BMO S&P 500 ETF called ZUE.
6. Horizons S&P 500 Index ETF (HXS)
- Inception Date: November 30, 2010
- Stock Price: $52.60
- Assets under Management: $2.309 Billion
- Management fee: 0.10%
- Management Expense Ratio: 0.10%
- Issuer: Horizons ETFs
- Risk Rating: Medium
- Ticker: HXS.TO
- Management Style: Passive
- Distribution Yield: 0%
- Distributions: None
Horizons ETFs offers another large fund that tracks the S&P 500 index ETF in Canada. The issuer focuses on tax-efficient strategies and offers ETFs that don’t pay distributions so investors can reduce their tax liabilities, especially for non-registered accounts.
The Horizons S&P 500 Index ETF (HXS) has a higher MER than other ETFs and does not pay out any distribution. It has a hedged version called HSH that trades on the Toronto Stock Exchange.
Also, HXS is one of Canada’s oldest domiciled S&P 500 index ETFs and is eligible for both registered and non-registered accounts.
What are S&P 500 ETFs?
S&P 500 is a grouping of the 500 largest companies in the U.S. chosen based on their market capitalization, branded by Standard and Poor’s. It is the world’s most widely tracked index.
The S&P 500 index represents more than 70% of the U.S. market and is heavily weighted towards the largest companies in the U.S., like Apple, Microsoft, Tesla, Amazon, and Google.
Getting exposure to the index of over 500 individual companies can be difficult, expensive, and time-consuming. That’s where S&P 500 ETFs come in.
Investing in S&P 500 ETFs instead of individual stocks helps you spread your risk to many companies.
Also, ETFs are more liquid, easier to buy and sell and have lower fees than purchasing individual stocks.
So if you want exposure to U.S. stocks, invest in the best S & P 500 ETFs in Canada.
Benefits and Drawbacks of S&P 500 ETFs
Over the years, the S&P 500 index ETFs has had a long track record of excellent performance. Canadian investors who can stomach the risk of investing in equities will find S&P 500 ETFs a good component in their portfolio.
However, S&P 500 ETFs have their pros and cons. Regardless of the pros and cons of S&P 500 ETFs, the ETFs tracking the S&P 500 are a sound long-term investment.
Pros
- S&P 500 index ETFs in Canada offer very inexpensive MERs when compared to other funds and ETFs
- They have an excellent long-term index performance
- They are a good one-ticket diversification across 500 individual equities
Cons
- No active portfolio manager involvement
- Your investment becomes concentrated in large U.S. companies
- Heavy weighting towards larger companies (by market cap) in the index
- The index will likely have large allocations to specific sectors (like tech)
Should You Hedge Your S&P 500 ETFs?
When you invest in the S&P 500 index stocks, you invest in U.S. companies, and you must purchase these companies in U.S. dollars. This exposes Canadians to the risk of currency fluctuations between Canadian and U.S. dollars.
When investing in a U.S. company, your investment returns go down whenever the U.S. dollar appreciates against the Canadian dollar. An unhedged investment allows currency fluctuations to impact your total return, whereas a hedged investment removes currency differences from the equation.
Hedging your investment comes with additional costs, but it helps to reduce volatility. VSP and VFV are two ETFs offered by Vanguard Canada that track the S&P 500 index ETF.
The difference between both is that VSP is hedged to the Canadian dollar and currently underperforms against VFV.
How to Buy S&P 500 ETFs in Canada
If you want to invest in the best S&P 500 ETFs in Canada, you can easily do so using Canada’s most popular discount brokerages.
As a Canadian investor, there are several brokerages you can use to buy S&P 500 ETFs. The most common is Questrade and Wealthsimple Trade.
- Questrade
Questrade is Canada’s largest and oldest discount brokerage. They offer a highly-rated platform for buying and selling ETFs.
Using Questrade, you can buy ETFs for free, but you must pay a charge of $4.95 when you want to sell them.
Click here to open a Questrade account and get a massive welcome bonus to start your trade.
- Wealthsimple Trade
Established in 2014, Wealthsimple Trade is part of Wealthsimple Financial Service dedicated to stock trading. The platform is known for its commission-free trading for stocks, mutual funds, and cryptocurrencies.
Click here to open a Wealthsimple account and start trading with your substantial welcome bonus.
Final Thoughts on the Best S&P 500 ETFs in Canada
As a Canadian investor, if you want to add U.S. stocks t your investment portfolio, you should consider purchasing S&P 500 Index ETFs.
While most of these best S&P 500 ETFs in Canada are virtually identical, there are still a few differences between them.
Do your research and make the right choice on which S&P 500 ETF to buy. And if you want to invest outside the U.S. stocks, consider other ETF options available to Canadians.
FAQs on the Best S&P 500 ETFs in Canada
Do S&P 500 ETFs pay dividends?
Yes, they do, but it’s not really called dividends. It’s a distribution that includes a return of capital, dividends, or capital gains. The payment schedule comes at the fund’s discretion, which can be quarterly, semi-annually, or annually.
Is there a Canadian S&P 500?
No, there is no Canadian S&P 500 because the Canadian stock market is too small to have 500 stocks in such an index.
Is S&P 500 a good investment?
Yes, S&P 500 ETF is a good investment for Canadian investors. You can easily beat the Canadian market through one simple ETF such as VFV. The U.S. market tends to outperform the Canadian market, so ensure you’re investing for the long run.
Can you get rich off index funds?
You cannot get rich in one day. Getting rich is a factor of time, return, and capital. How fast you get rich depends on how much money you can invest.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
The primary purpose of Money Reverie is to help everyday Canadians make better financial decisions by providing up-to-date financial news and information, reports, product reviews, and government programs.
