I’m sure you’ve seen the headlines: “S&P 500 at ALL TIME HIGHS!” Great news! 🇺🇸📈 If you own $VOO or SPY in US dollars, you’re at the peak (see chart below) But for the Canadians 🇨🇦 that hold VFV or ZSP, we’re falling a little behind… $VFV is NOT at all time highs, they’re still away from their peak back in January... How does this make sense? ⁉️ If the S&P is at its peak and VFV tracks the S&P, why is VFV falling behind VOO? 🤔 The answer is the US Dollar 🇺🇸 VFV is a Canadian dollar ETF that contains VOO, so it literally contains the same US stocks as VOO. By definition, if VOO goes up then VFV will also go up. But here’s the tricky part. VFV also depends directly on the strength of the US dollar 🇺🇸 VFV is an unhedged ETF so even though it’s in Canadian dollars, it’s value depends directly on the US dollar and is affected by currency fluctuations 🇨🇦🇺🇸 For years, the US dollar was flying high and so VFV appeared to “outperform” VOO. The stock price of VFV got an extra boost thanks to the rising US dollar 📈 Now, the situation has flipped… Thanks to the Trump tariffs, the US dollar has fallen hard over the past several months (see below) That HURTS the share price of VFV, that’s why it’s now falling behind 📉 VOO is at it’s peak but VFV is NOT because the falling US dollar is bringing down it’s value. Does that mean we should sell off VFV and switch over to VOO? No, that’s not what I’m saying. I have a whole 10 minute video (and an older Blossom post) breaking down the difference between VFV and VOO. Long story short, in an RRSP then VOO is definitely the way to go since you avoid that 15% cut to your dividends and you pay 3x less in annual fees. For a TFSA, it’s more of a personal preference, they’re both great options. You don’t have to freak out now that VFV is lagging behind. Likewise, you shouldn’t brag when VFV was “winning.” You just need to understand how currency exchange rates affect ETFs like VFV, because they are unhedged. That’s the risk you take, you’re exposing yourself to USD:CAD fluctuations 🇨🇦🇺🇸 Sometimes it helps, sometimes it hurts but no matter how you do it, investing in the S&P 500 is a fantastic investment for any investor 🙌 In the end, it doesn’t matter a whole lot. Whether you invest in VFV or VOO, when you eventually convert back into the same currency (CAD or USD) the returns will be about the same. VOO will always have a slight edge but again, don’t stress, VFV is fantastic. This is a question I’ve seen a lot in the past few weeks so I hope this post helped clear that up. I’ll link my longer post on the differences between VFV and VOO and the risks involved with CAD ETFs that contain US stocks 👇
Great post! I appreciate your dedication! I hold VFV and it’s honestly frustrating to see it lagging behind right when we hit all-time highs. But don't forget, USD can strengthen again long term, the USD tends to outperform CAD. This temporary dip is driven by politics (Trump tariffs), but structurally, the USD is still the global reserve currency. That advantage isn’t gone. USD weakness is temporary. if it rebounds, VFV will catch up quickly. Stay patient, stay invested.
C I@canadian.investor · 1yrEdited
I have 1979 $VFV shares in my RRSP. I converted from mutual funds to ETF during april dip and didn’t want to risk waiting 2-3 days for norber’s gambit and maybe having to buy VOO at 5% higher from the time i cashed the MF. So i went with VFV. With markets going up sometimes 2% overnight it seems still risky to convert a big amount… how to calculate how much less dividends i am getting? Should i switch?
Snowman
@snoowman · 1yr
There's also VSP which is the hedges version for anyone looking for the CAD hedged version !
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