Low Cost ETFs – Canadian Vanguard ETFs
With the rising popularity of ETFs, more ETF products are being released which brings more competition and better value for investors. I’ve written about low cost ETFs before and put together a diversified low cost ETF portfolio. However, the landscape has changed with Vanguard ETFs coming to Canada.
Vanguard has been around for a while and are well known for low cost ETFs in the US. Some popular U.S based Vanguard ETFs that I like are:
- VTI – Total US stock market index with over 3000 stocks – MER: 0.06%
- VWO – FTSE Emerging markets – MER: 0.18%
- VEA – MSCI EAFE index (Europe and Pacific) – MER: 0.12%
- VXUS – MSCI All Country (except US) – MER: 0.16%
- VIG – US Dividend Achievers - MER: 0.13%
So if you have Canada covered, for low cost US and international exposure, a combination of VTI and VXUS would do the trick. In fact, my wife’s RRSP holds both.
Now that we have some context, lets talk more about the Canada’s newest set of ETFs launched by Vanguard which have low MERs compared to other the competition.
Canadian Vanguard ETFs
Canadian index ETFs have come a long way since XIU was introduced. Vanguards version is the MSCI Canada index ETF (VCE) that has 97 holdings and a very low MER of 0.09% (vs. 0.15% for XIU). Note that the Canadian index space is very competitive with Horizons S&P/TSX 60 Index ETF offering their ETF with a MER of 0.07%.
My preference for broad based U.S coverage is VTI with a low MER of 0.06%. However, if you are set on staying with Canadian products, Vanguard has a few options, some hedged, some not (preferred). First there is the MSCI U.S Broad Market Index ETF (CAD-hedged) (VUS) with 3,237 holdings and a MER of 0.15%. Next is the S&P500 Index ETF (VFV) and hedged version (VSP), both have a MER of 0.15%.
International/Emerging Markets Index
As mentioned above, I like VXUS as an all in one solution low cost solution for international exposure, but here are the CAD versions. Vanguard Canada offers FTSE Emerging Markets (VEE) for 0.49%, and the MSCI EAFE Index ETF (CAD-hedged) (VEF) for 0.37%. Still a bit pricey in my opinion.
Canadian Bond Index
iShares XBB may be the most popular Canadian bond index ETF which has a MER of 0.30%. Vanguard’s Canadian Aggregate Bond Index ETF (VAB) undercuts them bit by charging a MER of 0.20%.
Short Term Bond
There are quite a few options for short term bonds for Canadians, some popular ones include the iShares XSB (MER 0.25%), CLF (government) (MER 0.15%) and CBO (corporate) (MER 0.25%). Vanguards Canadian Short-Term Bond Index ETF (VSB) charges 0.15%. The Vanguard short term corporate bond index ETF (VSC) charges 0.15% as well.
I included this one in my Canadian Dividend ETF article and explained that this product is highly competitive. I won’t get into too much detail here, but the Canadian Dividend ETF competitors are basically CDZ, XDV, ZDV and Vanguards VDY. The MERs can be quite high for this genre, but Vanguard’s comes in at the lowest with a MER of 0.30%.
Last, but not least, Vanguards FTSE Capped REIT Index ETF (VRE) has 19 holdings with a MER of 0.35%. Who are the competitors? iShares XRE and BMO ZRE both with a relatively high MER of 0.55%. With so few holdings in these ETFs, you may be better off holding the largest players in the space directly.
As you can see from the list above, Vanguard offers some very competitive products. Which ones are my favorite? As I mentioned before, I like their VTI and VXUS for US and international exposure. I like their Canadian Index ETF (VCE), their Canadian dividend ETF (VDY), and their short term bonds (VSB and VSC).
Do you have Vanguard ETF products for your portfolio?