I love the BMO S&P 500 Index ETF (TSX:ZSP). It’s one of the largest ETFs in Canada, with $19.6 billion in assets. For a slim 0.09% MER, it has delivered a stellar 13.9% annualized return over the past decade.
Sure, that performance has been boosted by U.S. tech sector dominance and a strong U.S. dollar, but credit is due where it’s earned. Here’s what you need to know about ZSP, and just how effective investing even $1,000 in the S&P 500 Index has been over time.
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What is ZSP and the S&P 500?
The S&P 500 is a market-cap-weighted index of the 500 largest publicly traded companies in the U.S. Widely viewed as the best single gauge of the American stock market, it is notoriously hard to beat.
Over the past 15 years, nearly 90% of large-cap U.S. active managers have underperformed it. Because it’s market-cap weighted, the largest and strongest companies rise to the top over time, while underperformers naturally drop off, creating a “self-cleaning” portfolio.
ZSP is simply a low-cost way for Canadian investors to own the S&P 500. The ETF trades in Canadian dollars, but it’s unhedged, so changes in the USD/CAD exchange rate will affect returns. A rising U.S. dollar is good for Canadian investors, while a rising Canadian dollar is a drag.
Like most Canadian-listed U.S. equity ETFs, 15% of dividends are lost to U.S. withholding tax, even in registered accounts, but the impact is relatively small over the long term.
The Growth of $1,000
While ZSP itself doesn’t have a long enough track record for this example, we can use the performance of similarly priced U.S.-listed S&P 500 ETFs for reference.
From January 29, 1993 to August 14, 2025, a $1,000 investment in the S&P 500, with all dividends reinvested and no taxes paid, would have grown to $26,467.84. That’s a cumulative return of 2,546.8%, which translates to a compound annual growth rate (CAGR) of 10.6%. Over more than three decades, that’s an incredibly strong number.
However, those results are only possible if you stayed invested the entire time and never sold during downturns. Over that period, the S&P 500’s volatility was 18.7%, meaning that in a typical year, returns often fluctuated almost 19% above or below the average.
It was even worse during the 2008 financial crisis, when the index suffered a maximum drawdown of 55.2% from peak to trough, meaning more than half of its value was wiped out before recovering.
Long-term compounding works best when you resist the urge to react to short-term noise. Market crashes, corrections, and volatility are inevitable, but history shows they’ve always been temporary. If you can tune out the day-to-day swings, reinvest your dividends, and give your investments time, a low-cost ETF like ZSP can turn even modest contributions into serious long-term wealth.
