70% of the US stock market is constituted by the S&P 500 index which serves as the benchmark of the American market returns.
As you might be aware, the S&P 500 index tracks the returns of 500+ companies in the US. With an S&P 500 ETF like VFV and VOO, you will get low-cost exposure to the top US 500+ companies in one portfolio.
Since both VFV and VOO are among the best S&P 500 ETFs in Canada, you may be wondering which to choose between the two ETFs. That shouldn’t be the case if you understand their meh differences.
In this VFV vs VOO comparison, we’ll take an overview of each of the S&P 500 ETFs to identify their key similarities and differences.
Let’s get started.
Table of Contents
About VFV
VFV is the ticker symbol of the Vanguard S&P 500 Index ETF that’s traded in Canadian dollars at the Toronto Stock Exchange (TSE).
With no currency hedging, this S&P 500 Index ETF seeks to provide exposure to the returns of the top 500+ US companies.
With $6.700 billion in assets under management, 1.45% dividend yield and +15.93% returns since inception, VFV is regarded as one of the best S&P 500 ETFs in Canada.
By using a passive index strategy, VFV reduces your investment costs compared to investing through actively managed ETFs.
In what follows, you will learn about the pros and cons of VFV as they relate to VOO and other S&P 500 ETFs in Canada.
Pros and Cons of VFV
The following are the major pros and cons of the Vanguard S&P 500 Index ETF (VFV).
Pros
- Competitive returns: VFV has provided competitive returns to investors since its inception.
- Competitive yields: VFV has also provided competitive dividend yields to investors on its quarterly distribution schedules.
- Low-cost exposure: With VFV, you can invest in the top 500+ companies in the US using Canadian dollars. This helps you gain greater diversification without paying foreign currency conversion fees.
- Easily accessible: The ETF is easy to access as you don’t have to conduct foreign currency conversion to invest in it.
Cons
- High fees: VFV has a relatively high management fee and MER compared to VOO and other S&P 500 ETFs out there.
- High volatility: The ETF is highly volatile due to its price fluctuations. While this can help you earn faster, it comes with higher risk.
About VOO
VOO is the ticker symbol of the Vanguard S&P 500 ETF that’s traded with USD on the New York Stock Exchange (NYSE).
VOO is relatively older than VFV because it was established in 2010. As such, the ETF has already provided competitive 1-year to 10-year returns since its inception.
The objective and strategy of VOO are the same as those of VFV. That’s, the ETF also seeks to provide exposure to the top 500+ US companies.
Even though VOO is traded with USD, it’s relatively cheaper than VOO because it has a low management expense ratio of 0.03%.
But is that a guarantee to invest in VOO? Definitely not. You should know the pros and cons of the ETF and how they compare with those of VFV before deciding.
Pros and Cons of VOO
The following are the major pros and cons of the Vanguard S&P 500 ETF (VOO).
Pros
- Low MER: VOO’s 0.03% MER is one of the lowest among Canadian and US-listed S&P 500 ETFs in Canada.
- Impressive yields and returns: In addition to low fees, VOO also has impressive yields and returns compared to other passively managed ETFs.
- Low-cost diversification: VOO also provides low-cost diversification to the top 500 US companies.
Cons
- Highly volatile: The price of VOO can change at any time, making it highly volatile. Even though this could increase your earnings, you will be taking a higher risk.
- FX fee: Since VOO is traded with USD, you should expect to pay FX fees when trading the ETF. This could add up to the overall cost of your investment.
VFV vs VOO: Similarities and Differences
From the above overview of VFV and VOO, you can see how the two ETFs compare at varying levels. The following table summarizes the similarities and differences between the two S&P 500 ETFs.
| Profile | VFV | VOO |
| Inception date | November 2, 2012 | September 7, 2010 |
| Portfolio manager | Vanguard Investments Canada Inc. | The Vanguard Group |
| Exchange | Toronto Stock Exchange | New York Stock Exchange |
| # of stocks | 505 | 505 |
| AUM | $6.700 billion | $264.89 billion |
| Management fee | 0.09% | – |
| MER | 0.08% | 0.03% |
| Average returns since inception | +15.93% | 13.15% |
| Dividend yield | 1.45% | 1.69% |
| Dividend frequency | Quarterly | Quarterly |
| Risk level | Medium | Moderate – aggressive |
Looking at the above table, it’s obvious that VFV and VOO have more differences than similarities.
In what follows, we will take a side-by-side look at their key features to have a better understanding of how they compare.
VFV vs VOO: Allocations
The two ETFs allocate all their funds to the top 505 companies in the US across small-large-cap sizes. However, VFV and VOO have varying sector allocations and holdings. Below is an overview.
- Sector Allocations
With the exception of energy allocation, VFV and VOO have the same sector allocations as of September 30, 2022. Below are the sector allocations:
| Sector | VFV | VOO |
| Information Technology | 26.4% | 26.4% |
| Health Care | 15.1% | 15.1% |
| Consumer Discretionary | 11.7% | 11.7% |
| Financials | 11.0% | 11% |
| Communication Services | 8.1% | 8.1% |
| Industrials | 7.9% | 7.9% |
| Consumer Staples | 6.9% | 6.9% |
| Energy | 4.6% | 4.5% |
| Utilities | 3.1% | 3.1% |
| Real Estate | 2.8% | 2.8% |
| Materials | 2.5% | 2.5% |
It’s understandable why both VFV and VOO allocate more funds to the Information Technology sector. The reason is that most of the companies in the S&P 500 index are in the Information Technology sector.
VFV vs VOO: Top Holdings
With the exception of Apple, Microsoft, Amazon and Tesla allocations, both VFV and VOO have similar allocations on their underlying holdings. The following are their top holdings as of September 30, 2022.
| Holding | VFV | VOO |
| Apple Inc. | 6.84% | 6.85% |
| Microsoft Corp. | 5.69% | 5.70% |
| Amazon.com Inc. | 3.28% | 3.29% |
| Tesla Inc. | 2.31% | 2.32% |
| Alphabet Inc. Class A | 1.88% | 1.88% |
| Alphabet Inc. Class C | 1.69% | 1.69% |
| Berkshire Hathaway Inc. Class B | 1.58% | 1.58% |
| UnitedHealth Group Inc. | 1.55% | 1.55% |
| Johnson & Johnson | 1.41% | 1.41% |
| Exxon Mobil Corp. | 1.19% | 1.19% |
The above top holdings account for about 30% of the funds of each of the two S&P 500 ETFs. This is not surprising since those companies are the leading among the S&P 500+ companies.
VFV vs VOO: Yields
Even though both VFV distribute dividends quarterly, they have different dividend yields.
As of September 30, 2022, VFV had a dividend yield of 1.45%. But as of November 2, 2022, VOO had a 1.69% dividend yield.
While VOO has a higher dividend yield than VFV, you will have to pay a 15% withholding tax on the VOO dividends if you’re trading outside an RRSP account.
In the end, the VOO competitive yields may be worthless if you factor in the withholding tax rate on the dividends. Although you can offset the tax by filing your taxes and claiming the foreign tax credit.
But if you hold VOO in a registered account, it will likely outperform VFV due to the withholding tax waiver.
However, the VOO yields will be more or less the same as those of VFV if you hold them in non-registered accounts.
VFV vs VOO: Returns
In terms of returns, VFV and VOO have impressive records in terms of their 1-year to 5-year returns. The following is a highlight of their returns as of October 31, 2022:
| Year | VFV | VOO |
| 1-year | −6.33% | -14.61% |
| 3-year | +11.13% | 10.16% |
| 5-year | +11.26% | 10.40% |
| Since inception | +15.93% | 13.15% |
Because VOO is older than VFV, it has also provided a 10-year return of 12.74% as of October 31, 2022.
Nevertheless, VFV has better returns than VOO. This is partly due to their varying currency fluctuations, MER and withholdings.
VFV vs VOO: Fees
Like other index ETFs, VFV and VOO have low fees. However, VFV charges 0.09% MER compared to VOO’s 0.03% MER.
However, when you factor in the foreign currency conversion fee and the withholding tax on VOO, you will see that VFV is more cost-saving than VOO.
Buh whether you’re going with VFV or VOO, you should note that your brokerage may charge you commissions when trading your chosen ETF.
Notwithstanding, with an online discount brokerage like Wealthsimple Trade, you wouldn’t have to worry about commissions at all.
VFV vs VOO: Which to Choose?
There you have the side-by-side comparison of VFV vs VOO. You can see how the two ETFs differ in their allocations, holdings, yields, returns and fees.
For obvious reasons, you may be wondering which to choose between the two ETFs as they both have varying pros and cons.
With VFV, you will not have to worry about FX fees and withholding taxes, giving you easy and low-cost access to US top 500+ companies.
But since VOO has a low MER and withholding tax waiver, you will likely earn more with it by investing through a registered account. This is coupled with the fact that USD is more stable than CAD.
So when determining which to choose between the two index ETFs, it’s essential to determine the currency and account you want to trade with.
If you want to avoid FX fees and withholding taxes, you can’t go wrong with VFV. But if you’re willing to invest with USD without regard to FX fees and withholding taxes, VOO is available for you.
Notwithstanding, you can’t go wrong with either VFV or VOO so long you choose the one that suits your investment needs.
Is It Worth Investing in VFV or VOO?
There’s no one-size-fits-all answer to this question. The actual answer depends on your investment objective, risk tolerance and situation.
If you’re a passive investor with moderate to high-risk tolerance, you can’t go wrong with S&P 500 ETFs like VFV and VOO.
However, the exact S&P 500 ETF you invest in can impact the success or failure of your investment. This makes it essential to critically evaluate the ETFs before making a selection.
But if after reading this compilation you realize that an S&P 500 ETF doesn’t suit your needs, you can check out our review of the best all-in-one ETFs in Canada to choose an actively managed ETF.
While actively managed ETFs have higher fees than passively managed ones, they can provide higher returns than index ETFs.
In addition, actively managed funds can provide greater diversification by investing across different markets, sectors and companies.
The Bottom Line
Both VFV and VOO provide exposure to the top 500+ companies in the US with different approaches. Even though they are both index ETFs, they’re traded on different exchanges and currencies.
With this comes the fundamental difference between the two ETFs. To invest with CAD, you have to go with VFV without regard to its high management fee and MER. Of course, this will give you easy access to the US S&P 500 index.
But if you want to invest with USD, you can’t go wrong with VOO if you don’t mind the attendant FX fees and withholding taxes on registered accounts.
The bottom line is that both ETFs have distinct pros and cons which you need to consider before deciding. But if you’re still not sure which to choose, kindly contact your financial advisor.
Alternatively, you can reach out to our expert team at [email protected] to get a bespoke recommendation on the best investment deal that suits your risk tolerance and situation.
That brings us to the end of this comparison. For more related information, check out our Investing Archive or jump to the following articles:
