Holding the broad market is one of the best financial steps to secure your future. Holding the broad market allows you to remain diversified and earn phenomenal exposure and returns in the long term.
The U.S. market is one of the world’s largest financial markets because it has some of the largest household name trade.
If you want to hold the top 500 U.S. companies under one investment vehicle, consider investing in an Exchange-Traded Fund (ETF), like VFV vs VSP.
These two ETFs are designed to replicate the performance of the S&P 500 index ETF to the extent reasonably possible and net of expenses. This article compares two of the best S&P 500 ETFs (VFV vs VSP).
Similarities between VFV and VSP
Vanguard S&P 500 Index ETF (VFV) and Vanguard S&P 500 Index ETF (CAD-hedged) (VSP) are great ways to invest in the U.S. stock market. They both share many similarities, some of which are listed below:
VFV vs VSP: Fund Age
VFV and VSP were both incepted on November 2, 2012. They have the same fund age.
With over a decade of excellence and competence, VFV and VSP are great ways for Canadian investors to evaluate and assess their investment potential.
VFV vs VSP: MER
Management Expense Ratio (MER) is an annual fee you pay to buy ETF. It includes the management fee, operating expenses, and any other expenses.
VFV and VSP have the same MER of 0.09%. When you make an initial investment of $10,000, your MER for the year is $9.
These two ETFs offer competitively low MER compared to mutual funds that can charge you $200 annually.
Also, the lower your MER fees, the more returns you can keep.
VFV vs VSP: Allocation & Exposure
VFV and VSP have similar sector exposure. They are both 100% focused on the equity asset class.
Sector | Fund |
Information Technology | 26.4% |
Health Care | 15.1% |
Consumer Discretionary | 11.7% |
Financials | 11.0% |
Communication Services | 8.1% |
Industrials | 7.9% |
Consumer Staples | 6.9% |
Energy | 4.6% |
Utilities | 3.1% |
Real Estate | 2.8% |
Materials | 2.5% |
Total | 100.0% |
VFV vs VSP: ETF Provider
Vanguard Canada is one of the world’s biggest asset management companies. They provide easy access to product details and documentation on their website.
Also, vanguard provides a wide range of ETFs that can meet your investment needs. They are a great and reliable ETF provider.
VFV vs VSP: Holdings
VFV and VSP have similar holdings.
Difference Between VFV and VSP
Features | VFV | VSP |
Ticker | VFV.TO | VSP.TO |
Exchange | TSX | TSX |
Inception date | 11/02/2012 | 11/02/2012 |
Asset class | Global Equity | US Equity |
Management fee | 0.08% | 0.08% |
MER | 0.09% | 0.09% |
VFV vs VSP: Hedging Strategy
Vanguard S&P 500 Index ETF (VFV) and Vanguard S&P 500 Index ETF (CAD-hedged) (VSP) are both listed on the Toronto Stock Exchange and can be bought in CAD dollars.
The core difference between these two ETFs is their hedging strategy. The VSP is the hedged version of VFV. VSP is ideal for any investor who believes the Canadian dollar will appreciate in value relative to the USD dollar.
When you buy S&P 500 ETFs that hold U.S. companies, you gain exposure to the U.S. companies and the CAD-USD currency fluctuations. The CAD-hedged ETF protects your returns from the negative impacts of fluctuations.
When the CAD dollar appreciates in value, your CAD-hedged ETF (VSP) offers higher returns. However, when the CAD dollar depreciates in value, an unhedged ETF (VFV) provides higher returns.
VFV vs VSP: Performance & Returns
When it comes to the performance and returns of the S&P 500 ETFs, VFV is an ideal long-term investment. Canadian investors who desire higher capital gains will prefer VFV.
Unlike VSP, VFV has delivered excellent returns and performed well since its inception. Even when the world is currently facing a market downturn in 2022, VFV has powered through and outperformed VSP.
USD is still the strongest currency in the world, and CAD is struggling to keep up. As a CAD-hedged ETF, VSP protects you against the falling USD, affecting its performance against VFV.
VFV vs VSP: Performance Against The S&P 500
Suppose you are looking for an ETF that generates similar exposure and returns as the S&P 500. In that case, you should consider the VFV as it is a better choice than VSP.
ETFs are designed to replicate the performance of the S&P 500. VFV excellently replicates and outperforms the S&P 500 by 97.65% since its inception. However, within the same time frame, VSP underperforms the S&P 500 by 17.4%.
VFV vs VSP: Dividend Yield
The underlying stocks of VFV and VSP pay dividends. These dividends are collected and distributed to their shareholders on a pro-rata basis.
VFV has a 12-month distribution yield of 1.34%, while VSP has a 12-month yield of 1.46%. Therefore, VSP earns you a higher dividend return.
Final Thoughts: Should I Buy VFV or VSP?
The similarities between VFV and VSP are evident in nearly all aspects. The core difference between the two ETFs is their respective hedging strategies.
VSP is the CAD-hedged version of VFV and is designed to protect you against the falling USD and CAD-USD fluctuations while providing exposure to the S&P 500 index ETF.
If you are looking for higher dividend income, VSP delivers excellently because VFV is ideal for long-term investment and offers better future returns.
However, VFV is a better investment considering its higher returns over different time horizons.
Ultimately, the choice is yours to decide between VFV vs VSP. My two favorite platforms to buy VFV or VSP are Wealthsimple Trade and Questrade. These trading platforms charge a $0 trade commission when you purchase ETFs.
FAQs on VFV vs VSP
Is VSP better than VFV?
While VSP and VFV are structurally similar and usually move in the same direction, keeping track of their differences is still essential. The major difference between these two ETFs is that while VSP is hedged for the Canadian Dollar (CAD), VFV is not.
Is VSP a good investment?
VSP is an excellent ETF that adds US exposure to your Canadian investment portfolio. It has a very low annual MER of 0.09% and pays quarterly distributions to its shareholders.
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.
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