VCN - ETF Overview
A Comprehensive Guide to the Vanguard FTSE Canada All Cap Index ETF (VCN)
For individuals seeking to learn about analyzing Exchange-Traded Funds (ETFs), I suggest reviewing my earlier post that explains the fundamentals of ETFs and the analysis process.
Vanguard FTSE Canada All Cap Index ETF (VCN) - Snapshot
Overview
The Vanguard FTSE Canada All Cap Index ETF (VCN) is designed to provide broad exposure to the Canadian stock market. It aims to track the performance of the FTSE Canada All Cap Domestic Index, which includes large, mid, and small-cap Canadian stocks.
Investment Strategy
VCN employs a market-cap-weighted strategy, meaning it invests in stocks based on their market capitalization. This approach ensures that larger companies have a greater influence on the fund's performance. The ETF aims to replicate the performance of the the FTSE Canada All Cap Domestic Index by holding a diversified portfolio of Canadian stocks.
The FTSE Canada All Cap Domestic Index is a market-capitalization weighted index that includes large, mid, and small-cap Canadian stocks. It is designed to provide a comprehensive benchmark for the Canadian domestic market.
Top Holdings
The top holdings in VCN include major Canadian companies. It is well-diversified, with around 170 holdings in total.
Sector Allocation
VCN has a significant concentration in the financial and energy sectors.
Risk Level
MEDIUM - due to its diversified portfolio and market-cap-weighted strategy. However, its heavy concentration in the financial and energy sectors may introduce additional sector-specific risks.
Performance
Since its inception on August 2, 2013, VCN has delivered an annualized performance of approximately 8.22%.
Expense Ratio
The expense ratio for VCN is 0.06%, which is relatively low compared to many other ETFs.
This means that for every $1,000 invested, the annual cost would be $0.60.
Dividend Yield
VCN offers a dividend yield of 2.66%, providing a steady income stream to investors.
This means that if you invest $1,000 in this ETF, you can expect to receive approximately $26.60 in dividends over a year, assuming the yield remains constant.
Similar Alternatives
Here are some similar alternatives to the Vanguard FTSE Canada All Cap Index ETF (VCN):
iShares S&P/TSX 60 Index ETF (XIU): This ETF tracks the performance of the 60 largest companies listed on the Toronto Stock Exchange, providing exposure to large-cap Canadian stocks.
BMO S&P/TSX Capped Composite Index ETF (ZCN): Similar to XIU, ZCN tracks the performance of the S&P/TSX Capped Composite Index, which includes the largest companies in Canada.
Vanguard FTSE Canada Index ETF (VCE): This ETF tracks the performance of the FTSE Canada Index, which includes the largest 100 companies in Canada.
iShares Core S&P/TSX Capped Composite Index ETF (XIC): This ETF also tracks the S&P/TSX Capped Composite Index, offering broad exposure to the Canadian equity market.
Here's a comparison of the expense ratios, yield, and performance of the VCN ETF and its close alternatives:
Target Investors
The Vanguard FTSE Canada All Cap Index ETF (VCN) is designed for a wide range of investors, including:
Long-term investors: Those looking to invest in the Canadian stock market for the long haul.
DIY (Do-It-Yourself) investors: Individuals who prefer managing their own investment portfolios without relying on financial advisors.
Retirement savers: People saving for retirement through accounts like RRSPs, RRIFs, and TFSAs.
Young professionals: Early-career individuals with a higher risk tolerance and a longer investment horizon.
Conservative investors: Those seeking a diversified portfolio with a mix of large-cap, mid-cap, and small-cap Canadian stocks to reduce risk.
VCN's diversified, cost-effective, and passive management strategy renders it a compelling choice for those seeking comprehensive exposure to the Canadian equity market.
Reason to Invest…
Low Fees: VCN has an extremely low Management Expense Ratio (MER) of 0.06%, making it one of the most cost-effective ETFs available.
Diversification: VCN provides broad exposure to the Canadian stock market, including large-cap, mid-cap, and small-cap stocks.
Dividends: The ETF offers a solid dividend yield of around 2.95%, providing a steady income stream.
Performance: VCN has shown consistent performance with an annualized return of 8.12% since its inception.
Liquidity: With $5.223 billion in assets under management, VCN is highly liquid and easy to trade.
Reason Not to Invest…
Market Risk: Like all equity investments, VCN is subject to market volatility and economic downturns.
Sector Concentration: The ETF has significant exposure to the financial and energy sectors, which can be risky if these sectors underperform.
Limited International Exposure: VCN focuses solely on Canadian stocks, so it lacks international diversification.
Opportunity Cost: Investors might find better returns with actively managed funds or ETFs focusing on specific sectors or regions.
