The Case for VFV:CA as a FOMO-Proof Canadian S&P 500 ETF

For Canadian investors wary of missing out on U.S. market growth, the Vanguard S&P 500 Index ETF (VFV:CA) offers a compelling solution. With a management expense ratio (MER) of 0.09% as of September 2025, VFV:CA remains one of the most cost-effective vehicles for accessing the S&P 500 Index in Canada [3]. This low-cost structure, combined with its passive index-tracking design, makes it a no-brainer for investors seeking diversified exposure to the U.S. equity market without the risks of stock-picking.

Cost-Effectiveness: A Cornerstone of Long-Term Success

The S&P 500 Index has historically delivered robust returns, but high fees can erode gains over time. VFV:CA’s 0.09% MER is among the lowest in its category, outperforming many actively managed or hedged alternatives [3]. For context, the average MER for Canadian S&P 500 ETFs in 2025 is approximately 0.15% [4]. By minimizing drag, VFV:CA ensures that investors retain a larger share of market returns, a critical advantage for long-term wealth accumulation.

Moreover, the fund’s scale reinforces its cost-efficiency. With over $20 billion in assets under management, VFV:CA benefits from economies of scale, reducing per-unit costs and enhancing liquidity for investors [4]. This accessibility is particularly valuable for Canadian investors seeking to allocate capital without incurring prohibitive transaction costs.

Index-Tracking Precision and Diversification

VFV:CA is engineered to mirror the S&P 500 Index with minimal tracking error. While explicit 2025 tracking error figures are unavailable, the fund’s structure—replicating the index through direct holdings of U.S.-listed VOO—ensures tight alignment [2]. This precision is vital for investors aiming to capture broad market growth without exposure to individual stock volatility.

Diversification is another key benefit. The S&P 500 encompasses 500 large-cap U.S. companies across sectors, reducing the risk of overexposure to any single stock or industry. For Canadian investors, this broad basket of equities mitigates the “FOMO” of missing out on high-performing U.S. firms, particularly in sectors like technology and healthcare, which have dominated global markets in recent years [1].

Hedging Strategy: Balancing Currency Risk and Predictability

A critical consideration for Canadian investors is currency exposure. VFV:CA is unhedged, meaning its returns are influenced by both the S&P 500 and USD/CAD exchange rate fluctuations [2]. This dual exposure can amplify returns during U.S. dollar strength but introduce volatility when the Canadian dollar appreciates. For long-term investors, however, currency fluctuations often average out, making unhedged exposure a strategic choice [5].

In contrast, the hedged version (VSP) uses currency forwards to neutralize exchange rate risk. While this reduces volatility, it introduces higher tracking error and drag due to hedging costs [3]. For investors prioritizing cost-efficiency and long-term growth, VFV:CA’s unhedged structure is often preferable, particularly in a low-interest-rate environment where hedging premiums are less attractive [5].

Tax Considerations and Practical Implications

Canadian investors in VFV:CA should note a 15% U.S. foreign withholding tax on dividends, which cannot be fully offset in non-registered accounts [2]. While this tax drag is a known limitation, it is consistent with the fund’s low-cost, transparent structure. Investors can mitigate this impact by holding VFV:CA in tax-advantaged accounts like RRSPs or TFSAs.

Conclusion: A FOMO-Proof Solution for Canadian Investors

The Vanguard S&P 500 Index ETF (VFV:CA) stands out as a FOMO-proof solution for Canadian investors seeking cost-effective, diversified U.S. equity exposure. Its 0.09% MER, precise index tracking, and unhedged structure align with the principles of passive investing, offering broad market participation without the pitfalls of stock-picking or excessive fees. For those wary of missing out on U.S. market growth, VFV:CA provides a reliable, low-maintenance pathway to capitalize on one of the world’s most liquid and resilient equity benchmarks.

Source:
[1] VFV:CA: The Canadian FOMO Quencher [https://seekingalpha.com/article/4819640-vfvca-the-canadian-fomo-quencher]
[2] All You Need to Know as a Canadian Investor Before Buying the Vanguard S&P 500 Index ETF (VFV) [https://etfportfolioblueprint.com/posts/all-you-need-to-know-as-a-canadian-investor-before-buying-the-vanguard-s-and-p-500-index-etf-vfv]
[3] Vanguard ETFs, mutual funds and model portfolios [https://www.vanguard.ca/en/product?management-style=passive]
[4] Top Canadian S&P 500 Canadian Funds [https://etfdb.com/news/2025/05/16/top-canadian-sp-500-etfs/]
[5] Is Switching from VFV to a Currency-Hedged S&P 500 ETF ... [https://www.reddit.com/r/CanadianInvestor/comments/1inyr1l/is_switching_from_vfv_to_a_currencyhedged_sp_500/]