5 Best S&P 500 ETFs for Canadians

Ticker XSP VFV THU EQL.F HSU
Net Assets $8.37B $6.52B $0.03B $0.48B $0.11B
CAD Hedged Yes No Yes Yes Yes
Management Expense Ratio (MER) 0.10% 0.09% 0.08% 0.26% 1.58%
Leverage 2x

1. iShares Core S&P 500 Index ETF – CAD Hedged

Blackrock’s iShares Core S&P 500 Index ETF is their flagship product providing access to the large-cap US universe at a highly reasonable 10 basis points for fees.

The iShares Core S&P 500 Index ETF has more than $8bn in net assets, thereby ensuring sufficient liquidity for investors.

The fund limits foreign exchange volatility by hedging US dollar exposure and can be traded on Canadian exchanges.

Those wanting to express a bullish CAD/USD view can opt to choose a similar but unhedged product – iShares Core S&P 500 Index (XUS) that offers to replicate the returns of the S&P 500 while not hedging the currency exposure.

2. Vanguard S&P 500 Index ETF

Vanguard as an indexer, revolutionized the asset management industry by showing the world the benefits of passive management combined with low fees to compound investing gains.

As a result of this approach, index investing is a popular methodology amongst institutional investors and retail clients.

The Vanguard S&P 500 Index ETF embodies this spirit by providing Canadians with the opportunity to buy large-cap US equities on an unhedged basis.

This fund provides an excellent alternative to the iShares product suite with identical holdings and a similar cost structure.

3. TD US Equity CAD Hedged Index ETF

As the name of this index ETF suggests, it does what it’s built for and provides a no-fuss index replication of the S&P 500.

TD’s index ETF has the lowest cost structure with only 8 basis points in fees, which is 20% less than other index managers.

Having marginally lower fees, the TD US Equity Index ETF is a great investment vehicle for those who intend to invest long-term and benefit from lower fees over time.

4. Invesco S&P 500 Equal Weight Index ETF

S&P 500 exchange-traded products are designed to replicate returns of the index by constructing a portfolio of the various index constituents.

However, these Index ETFs ’ popularity is owed to the convenience of gaining exposure to the whole basket of large-cap assets as well as the minimal cost expended to gain such exposure.

As a result, these index ETFs are forced to construct market price-weighted portfolios to match the movements of the S&P 500 index.

For investors cautious of concentration risks posed by such indexing methodologies and wanting to find avenues to diversify from price-weighted indexes, they can stand to benefit from allocating capital to the Invesco S&P500 Equal Weight Index ETF.

Although the fund charges a small premium compared to other passive investment funds, it might be worth paying this premium to lower your portfolio risk.

A more equal-weighted approach may be advisable since the technology stocks have grown to make up large portions of the overall market-weighted indexes.

5. BetaPro S&P 500 2x Daily Bull ETF

Most index ETFs are standard vanilla products that help investors allocate capital toward long-term investing objectives.

With the surge in retail participation in stocks and options trading, we have seen ETF indexers produce a broad basket of products involving leverage to produce greater volatility in returns of standard index-tracking ETFs.

Such products are intended to return a more significant percent change than the underlying index tracked using derivatives.

However, there is a bump in management fees in such levered exchange-traded products to gain this exposure.

Despite their higher fees, these products can provide additional directional exposure for investors with higher risk appetites and nimble positioning when used with discretion.

Also, a unique characteristic of levered ETFs is that they offer the ability to trade from the short side.

The BetaPro S&P 500 2x Daily Bear ETF is a good example of an exchange-traded product offered in Canada that can help investors protect their downside during risk-off moves.

S&P 500 chart on screen

What is an S&P 500 ETF?

The S&P 500 index represents 500 of the largest US companies.

This index is often taken as the benchmark for the performance of risk assets.

With the explosion of assets under passive management, S&P 500 index ETFs replicate the returns of large-cap US equities in the most cost-effective manner.

Investors can utilize these ETFs to seek exposure to the underlying performance of the US economy.

Asset managers like BlackRock, Vanguard, and State Street offer best-in-class products with fees as little as a few basis points.

These index ETFs have become a cornerstone of long-term diversified portfolios and offer spectacular returns given the simplicity of owning these assets.

Did You Know?

The S&P 500 didn’t always track the 500 largest US companies. Its inception in 1923 was commonly known as the “Composite Index,” comprising a mere 90 companies. On March 4, 1957, the S&P 500 as we know it today was created and now tracks the top five hundred large-cap stocks in the US.

How to Invest in an S&P 500 ETF

As alluded to earlier, S&P 500 ETFs can provide diversified exposure to the long-term prospects of the US economy.

These Index ETFs trade with excellent liquidity and can be added to your portfolio just like any other stock you’d purchase or trade.

Investors can set up trading accounts with most banks, online brokerages and exchanges to buy them using limit/market orders during trading hours.

Long-term investors often systematically invest in such ETFs on a predetermined basis to avoid timing market tops and bottoms while averaging out their acquisition cost.

Frequently Asked Questions

  • Can you buy a US ETF in Canada?
  • How do I buy the Vanguard ETF in Canada?

Sources

https://www.blackrock.com/ca/investors/en/products/239727/ishares-sp-500-index-etf-cadhedged-fund

https://www.vanguard.ca/en/advisor/products/products-group/etfs/VFV

https://www.td.com/ca/en/asset-management/funds/solutions/etfs/FundCard/TD%20S&P%20500%20CAD%20Hedged%20Index%20ETF/?fundId=6903

https://www.invesco.ca/ivz/p/exchange-traded-fund/invesco-s-p-500-equal-weight-index-etf—cad/at-a-glance/501?lang=en

https://www.horizonsetfs.com/ETF/HSU


Sid Mohapatra is an energy trader based out of Toronto working in power and natural gas trading. Prior to working in commodities, Sid worked at a top Canadian bank’s fixed income and derivatives business. He possesses strong fundamentals in asset allocation, global macro thematic investing and physical commodities.

As a graduate of McMaster University, Sid specialized in Finance and has taught numerous sessions on Investing, Financial Securities and Trading courses. He led and managed the Horizon’s Trading Center at McMaster University.

Sid’s unique experience brings a breadth of institutional knowledge to the retail investing universe. He covers equity derivatives, structured credit instruments and tax harvesting techniques to help Canadians make better financial decisions in the ever-changing landscape of financial markets and investing.