The Vanguard S&P 500 Index ETF (TSX: VFV) can turn one purchase into ownership of Nvidia, Apple, Microsoft, Amazon, and hundreds of other successful businesses. That feels wonderfully complete.
Problem is, it isn’t.
VFV owns approximately 500 large American companies. It doesn’t provide meaningful exposure to Canadian stocks, most overseas markets, emerging economies, or bonds. Even the smaller companies responsible for tomorrow’s growth receive no invitation until they become large enough for the S&P 500.
VFV remains an excellent fund. It simply shouldn’t be mistaken for the entire investing universe wearing one convenient ticker.
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What VFV does well
VFV tracks the S&P 500 Index and charges a management expense ratio (MER) of only 0.09%. Its enormous asset base and straightforward strategy have helped make it one of Canada’s most popular S&P 500 ETFs.
The fund also produced a trailing 10-year annualized return of approximately 15% through the end of 2025. That historical result explains why Canadian investors may be tempted to keep buying VFV and call the portfolio finished.
The problem isn’t quality. It’s concentration. VFV’s 10 largest holdings represent roughly 40% of the portfolio. Nvidia alone recently accounted for approximately 7.5%. Technology companies dominate the index, while every holding ultimately depends on the American economy and capital markets.
The missing pieces
VFV excludes several areas that may perform differently from U.S. large-cap growth stocks. Canadian banks, pipelines, railways, utilities, and resource companies are largely absent. Developed markets such as Japan, the United Kingdom, France, and Switzerland receive no meaningful allocation. Emerging markets including China, Taiwan, India, and Brazil are also missing.
The fund doesn’t hold bonds either. That may be appropriate for someone with decades before retirement and a high tolerance for market declines. An investor needing money sooner may want fixed income or cash available rather than selling VFV after a sharp U.S. correction.
Adding several ETFs can fill those gaps, although it also creates more opportunities to overlap holdings and forget to rebalance. A simpler option is replacing some or all of VFV with a globally diversified asset-allocation ETF.
An ETF that travels farther
The Vanguard All-Equity ETF Portfolio (TSX: VEQT) holds Canadian, American, developed international, and emerging-market equities. It automatically rebalances those regions as well. Here’s the practical difference.
| ETF | PRIMARY EXPOSURE | APPROXIMATE U.S. WEIGHT | CANADIAN STOCKS | DEVELOPED INTERNATIONAL | EMERGING MARKETS |
|---|---|---|---|---|---|
| VFV | U.S. large-cap stocks | Nearly 100% | No | No | No |
| VEQT | Global stocks | 45% | Yes | Yes | Yes |
VEQT recently held approximately 30% of its portfolio in Canada and 45% in the United States, with the remainder spread mainly across developed and emerging markets. Nvidia represented less than 3% of the fund, compared with roughly 7.5% of VFV.
That diversification doesn’t guarantee better returns. VFV could continue outperforming if American mega-cap companies remain dominant. VEQT’s Canadian allocation may also feel excessive to investors who believe our relatively small market deserves a smaller role.
VEQT charges a higher fee as well. Vanguard reduced its management fee to 0.17% in late 2025, compared with VFV’s 0.09%. The additional cost buys automatic rebalancing and exposure to markets VFV ignores. Investors wanting bonds would need a balanced asset-allocation ETF instead. Understanding how to invest in ETFs means matching the fund to the job rather than assuming the most popular ticker solves every problem.
Bottom line
VFV remains a low-cost, effective way to own large American companies. I’d happily use it as the U.S. core of a diversified portfolio.
However, owning 500 stocks from one country still leaves investors dependent on that country’s market leadership, currency, and largest technology companies. VEQT provides a broader one-ticket alternative, while investors comfortable managing several funds could add Canadian and international exposure separately.
VFV isn’t a bad portfolio building block. It’s simply one wall, and a comfortable retirement usually benefits from finishing the house.
