A Canadian investor has a lot to consider when seeking out exchange-traded funds (ETF). There are literally thousands on the TSX today, and even multiple options when comparing the S&P 500 ETFs on the market. Currency exposure, fees, structure, tax efficiency, it’s all worth considering. Yet when it comes to the best of the best, simple is often the, well, best choice. Which is why today we’re going to look at the Vanguard S&P 500 ETF (TSX:VFV).
About VFV
For most Canadians who want straightforward, low-cost exposure to the U.S. market, VFV is the easy button. It gives you the full S&P 500 in one trade on the TSX, in Canadian dollars. Plus, it has an expense ratio around the floor for Canadian-listed funds, currently with a management expense ratio (MER) of just 0.09%. And the ETF has been doing quite well, with shares up almost 13% year to date at writing.
Furthermore, it offers deep liquidity that keeps bid–ask spreads tight. Because it’s large and simple, VFV tends to track the index closely after fees, and its scale and Vanguard’s stewardship help keep trading and operating frictions low. In plain English: you get the U.S. market, cheaply, reliably, and without fiddling with currency conversions or U.S. brokerage logistics.
How it works
VFV is unhedged to the U.S. dollar, which many long-term Canadian investors actually prefer. Hedging can add cost and tracking noise, while leaving the currency exposure in place gives you another source of diversification. Simply put, when the Canadian dollar weakens, often in risk-off or commodity downturns, your U.S. holdings’ CAD returns get a natural boost. This softens the blow to your home-market portfolio and Canadian-dollar purchasing power. Over multi-year horizons, that simplicity-plus-diversification has been a feature, not a bug.
It’s also operationally clean. You buy and sell in CAD at any Canadian broker. You can easily set up a dividend reinvestment plan (DRIP), and you avoid T1135 foreign reporting that kicks in for large U.S.-listed positions. Furthermore, the tax picture is what you’d expect for a Canadian-listed U.S. equity ETF. U.S. dividends face a 15% withholding tax at the fund level. In a Tax-Free Savings Account (TFSA), that drag is unrecoverable (true for peers, too). In taxable accounts, you can usually claim a foreign tax credit, and in Registered Retirement Savings Plans (RRSP), VFV trades conveniently in CAD. Though to be clear, a U.S.-listed ETF can be marginally more tax-efficient if you’re willing to convert currency cost-effectively.
Foolish takeaway
Compared with other TSX S&P 500 funds, VFV is consistently among the cheapest, most liquid choices, and it tracks the classic market-cap-weighted index most investors want. Alternatives can make sense at the margin. Yet for a broad cross-section of Canadians who value cost, convenience, and robustness, VFV hits the best overall balance. In fact, here’s what just $7,000 would bring in today from an investment in VFV, currently yielding at 0.93%.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| VFV | $165.80 | 42 | $1.54 | $64.68 | Quarterly | $6,963.60 |
As always, check the latest MER, spreads, and your account-specific tax considerations before you buy. However if you want the simplest, lowest-friction way to own America’s largest companies from a Canadian account, VFV is tough to beat.
