If you want to gain exposure to the US stock market without spending time deciding and picking stocks, then you should consider this BMO ETF.
BMO S&P 500 Index ETF (ZSP) offers Canadian investors an excellent way to gain exposure to entire sectors in the US market without choosing individual stocks.
They offer a much cheaper alternative than traditional mutual funds. They are passively managed and have a lower expense ratio.
This ZSP ETF review covers everything concerning BMO S&P 500 Index ETF (ZSP), its holdings, its pros and cons, its performance, and how to buy it in Canada. Here, I also compare it with other similar ETFs in Canada.
Read on to learn more.
What is BMO S&P 500 Index ETF (ZSP)?
ZSP ETF is an Exchange-Traded Fund (ETF) offered by BMO Global Asset Management to replicate, to the extent possible, the performance of the S&P 500 Index.
Incepted on November 12, 2012, it is one of Canada’s largest ETFs in terms of market capitalization.
The ZSP ETF is an all-stock option. It is invested 99.95% in stocks and 0.05% in cash and cash equivalents. Canadian investors looking to invest and gain exposure to the US stock markets without paying foreign exchange fees will find this a suitable option.
It has an AUM of over $9 billion and currently trades at $55.73. The fund has a medium risk rating and currently trades on the Toronto Stock exchange under the “ZSP.TO” ticker symbol.
Key Facts about ZSP ETF (As of November 2, 2022)
- Inception date: November 14, 2012
- Stock price: 55.73%
- Assets under management: $9 billion
- Number of stocks: 504
- Management fee: 0.08%
- MER: 0.09%
- Currency: CAD
- 12-month trailing yield: 1.30%
- Distribution yield: 1.38%
- Distribution frequency: Quarterly
- Exchange: Toronto Stock Exchange
- Price/Earnings Ratio: 27.5x
- Price/Book Ratio: 4.1x
- Eligible accounts: RRSP, TFSA, RRIF, TFSA, DPSP, RDSP
Benefits and Downside of ZSP ETF
Like most ETFs in Canada that track S&P 500 Index, ZSP has benefits and downsides. You must carefully consider the pros and cons of ZSP ETF before buying.
Pros
- Low-risk asset class
- Diversified exposure to over 500 companies in the US stock market
- Holds the constituent securities directly
- Low-cost and high liquidity
Cons
- ZSP does not invest in fixed-income securities
- It does not offer geographical diversification outside the US Holdings
ZSP ETF Performance
Since its inception in 2012, ZSP stock has performed beyond expectations. It excellently mirrors the performance of the S&P 500 index.
Take a look at the cumulative average returns of BMO ZSP ETF:
ZSP ETF Holdings
BMO ZSP is an all-stock portfolio that tracks the performance of the S&P 500 index ETF and holds over 500 of the largest companies listed in the US stock market.
Canadian investors liking to gain exposure to the US stock markets will find BMO ZSP ETF a suitable option because it holds 100% US stocks.
Big tech companies make up a large portion of the ZSP ETF holdings. Tech companies like Apple, Microsoft, Amazon, Meta Platforms, etc.
Here is a list of the top ten ZSP ETF holdings:
ZSP ETF Sector
When it comes to sector diversification, ZSP ETF allocated 27% of its portfolio to information technology. This is no surprise because it is the fastest-growing sector in the US market.
After the information technology allocation, the remainder is evenly distributed across the rest of the industries in the US.
Here is a breakdown of ZSP ETF sector allocation:
ZSP ETF Fees
- Management fees: 0.08%
- Management Expense Ratio (MER): 0.09%
BMO ZSP ETF offers competitively low management fees and MER compared to other S&P 500 ETFs n Canada like XUS.
Also, compared to average mutual funds that are actively managed, ZSP ETF is cheaper. An average mutual fund charges about 1.98%.
So, if you invest $1000 in ZSP ETF, you will be charged an annual management fee of $0.80.
ZSP Vs ZUE
BMO S&P 500 Index ETF CAD-Hedged (ZUE) is similar to VSP and XSP. ZUE is the BMO ETF hedged to the Canadian dollar to protect against currency fluctuations.
ZUE is also offered by BMO Global Asset Management and tracks the S&P 500 index, just like the ZSP ETF.
ZUE ETF is not an all-stock fund. It comprises mainly of ZSP and cash equivalents to hedge the currency. It has the same MER of 0.09%, just like ZSP.
ZSP Vs VFV
Vanguard S&P 500 Index ETF (VFV) from Vanguard Canada is an ETF that tracks the S&P 500 Index in Canadian dollars, and like ZSP, it is also traded on the Toronto Stock Exchange.
ZSP and VSP are closely similar. They hold underlying securities directly, have the same MER of 0.09% and same as VFV management fee, and were established within days of each other. However, VFV has outperformed ZSP with a higher rate of returns over the years.
If you want to gain exposure to the US equity market, VFV ETF is a viable alternative to ZSP.
ZSP Vs XUS
Blackrock’s iShares Core S&P 500 Index ETF (XUS) is an ETF designed to track the performance of the S&P 500 index, just like BMO ZSP.
However, in contrast to ZSP, XUS has iShares IVV as its primary holdings. IVV is the US version of the ETF tracking the S&P 500 index.
iShares IVV has about 96% of the total holdings in XUS, and the remainder is divided across the other equity securities held by XUS.
Like ZSP, XUS is also passively managed and comes at a low cost. However, XUS charges a higher fee than ZSP. XUS has a management fee of 0.09% and MER of 0.10%, while ZSP has management fees of 0.08% and MER of 0.09%.
Also, Blackrock’s XUS ETF offers a lower annualized distribution yield of 1.08% compared to BMO ZSP ETF, which offers 1.45% as annualized distribution yield.
How to Buy ZSP ETF in Canada?
If you want to invest in ZSP ETF, look no further. Canada’s two most popular brokerage platforms offer ZSP ETF at zero commission.
- Questrade: Questrade is one of Canada’s most popular brokerage platforms that offers a long list of investment assets, like stocks, ETFs, and mutual funds. It allows you to buy ZSP at a $0 charge but charges $4.95 if you want to sell your ETFs. However, Questrade offers a straightforward and exciting user interface on desktop and mobile platforms. Click here to open your Questrade account and start trading with a huge sign-up bonus.
- Wealthsimple Trade: Wealthsimple Trade is another top finance platform in Canada, especially among young Canadians. Wealthsimple Trade allows you to buy and sell ZSP ETF in Canada at a $0 charge. Click here to open your Wealthsimple Trade account and start trading with a huge welcome bonus.
Final Thoughts on ZSP ETF Review
BMO ZSP ETF is one of the best in Canada. So if you want to track the performance of the S&P 500 Index and gain exposure to the performance of the US market, you should consider this fund.
BMO offers a passively managed fund that has a significant AUM and competitively low fees.
However, if you are unsatisfied with ZSP, you can consider other ETFs or other S&P 500 ETFs in Canada.
FAQs on ZSP ETF Review
Is ZSP ETF hedged?
BMO ZSP ETF is not hedged to Canadian dollars. However, the ETF has a twin fund called ZUE that is hedged to the Canadian dollar to protect against currency fluctuations.
Does ZSP Pay Dividends?
Like most ETFs in Canada, ZSP ETFs pay out dividends quarterly. ZSP dividends are currently 1.38%.
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.
