Stockchase Opinions

Terry Shaunessy Vanguard S&P 500 Index ETF VFV-T PARTIAL BUY Dec 09, 2020

Or other similar ETFs? They're all basically the same thing: the S&P 500, the number one index in the world, holding every famous American stock you can think of. Looking ahead, he expects other country indexes to outpace the S&P 500, including the TSX. But you should still have some exposure to the S&P 500. Go with the equal-weighted S&P 500, rather than the hedged or unhedged ETF. Go with the EQL--it's fine. Don't worry about the CAD, because the Bank of Canada won't allow the CAD to go much above 79 cents.

$83.630

Stock price when the opinion was issued

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COMMENT
The market maker has natural arbitrage. Over history, things have drifted but typically this is where there are derivatives or problems with the underlying asset class. There is little worry about dislocation with a large index.
HOLD
If you already own this, hang on. Though, for new clients, he will invest in the S&P, because you must own this or similar S&P ETFs. The S&P has run up so much, so he doesn't add if he already owns VFV.
BUY
Allan Tong’s Discover Picks VFV ETF, the Vanguard S&P 500 Index ETF, is the non-hedged version, and the VSP ETF is the Canadian-hedged. Both S&P stocks trade in Toronto and both are popular. I have owned both in the past, and they do the job. Neither hold equal-weighted baskets as tech commands the largest slice at 27.3%, distantly followed by health care at 14.1% and consumer discretionary at 11.4%. Therefore, the largest holdings are Apple, Microsoft, Amazon and Tesla in that order, totaling more than 18% of VFV ETF and VSP ETF. Read 5 ETFs for Index Investing for our full analysis.
BUY
Great option for investors looking to get exposure to S&P 500. Will provide steady rate of return for the long term investor. Small dividend yield as well.
DON'T BUY
VFV vs. ZDY

About 34% is tech and communications, so it's pricey. 25x PE, 4.4x price to book. Yield is 1.6%.

ZDY has better valuations, less exposure to tech and communications of about 20%. 18x PE, 3.3x price to book. Yield is 2.8%. More conservative. Better risk/reward.

SELL

Note that it's a 9 bps expense ratio. Keep in mind that the S&P 500 is very tech and communications heavy, 30% tech and 9% communications. That space is not cheap. Risks. Those sectors have been almost the only leaders this year, so he expects some rotation into other sectors. Consider an equal weight ETF instead.

WEAK BUY
Beginner's exposure to US companies.

Vanguard is a great place to start. Keep in mind that the S&P is broad market-cap exposure, so it's price x outstanding shares, with no connection to value. Rather, it's more a momentum strategy. Leaves you exposed to Magnificent 7 and concentration risk.

BUY

Very popular option for S&P 500 exposure. High exposure to "Magnificent 7". Very good performance the past 10 years. Good option for long term investors. Must be prepared to hold for 10 years (avoid market sell offs). 

RISKY

The S&P 500 index, but in Canadian dollars. Not expensive at 9 bps MER. But, as he's pointed out before, the S&P has about 37% bunched up around 10 names (with 8 of those being tech names). So you can think it's extremely diversified, but it's not. 

He's not saying not to own it, but you need to know what you're buying compared to what you already own in your portfolio.