VCN or The Vanguard FTSE Canada All Cap Index ETF was launched on the 2nd of August, 2013. It has since then till the close of trading on May 23rd, 2020 amassed a total net asset value of $2.2 Billion. VCN is currently trading at $30.17 per stock. But the question really is – Is VCN good for your investments and portfolio? Let’s find that out here.
VCN is managed by the Vanguard Investments Canada Inc. and its distributions are paid out quarterly. All of the VCN dividend distributions are paid within ten days to each quarter-end.
The Vanguard FTSE Canada All Cap Index ETF trades on the Toronto Stock Exchange or TSX. Its ticker symbol is VCN and all trading is done in Canadian dollars.
What Is VCN All About?
The goal of VCN is to track the performance of a broad Canadian equity index that measures the return on investments of large-mid and small-capitalization, publicly traded securities in the Canadian market. The tracking is done to the best possible and reasonable extent and the market returns are only measured before fees and expenses are deducted.
With VCN, The current index being tracked is the FTSE Canada All Cap Index. Thus VCN invests in all kinds of Canadian stocks.
The fund’s primary industries of interest are the Financials, Oil & Gas, and Industrial sectors. These industries account for 37%, 19.1% and 12.6% of the fund’s investments.
VCN also invests in other sectors such as – Basic Materials, Consumer Services, Consumer Goods, Technology, Utilities, and Telecommunications industries.
Here a list of VCN’s top ten investments and the corresponding percentages:
1. Royal Bank of Canada 7.0%
2. Toronto-Dominion Bank 6.5 %
3. Enbridge Inc. 4.7%
4. Canadian National Railway Co. 4.1%
5. Bank of Nova Scotia 4.0%
6. Suncor Energy Inc. 3.2%
7. Bank of Montreal 3.0%
8. TC Energy Corp. 2.9%
9. Brookfield Asset Management Inc. 2.5%
10. Canadian Imperial Bank of Commerce 2.2%
These top ten VCN investments account for 41% (208 in number) of the fund’s total investments.
VCN Fund Facts
|VCN Management Fee||0.05%|
|VCN MER Fee||0.06%|
|VCN Inception Date||02-08-2013|
|VCN Benchmark||FTSE Canada All Cap Index|
|Net assets||$2.2 Billion|
|VCN 12 months trailing yield||3.04%|
|VCN Dividend Distribution yield||2.12%|
|Income distribution per unit||$0.158082|
|Accounts Eligible||RRSP, RRIF, RESP, TFSA, DPSP, RDSP|
How Risky Is It To Invest In VCN?
As always, the best way to determine the risk rating of an ETF is its volatility. This represents the change in the ETF’s returns over time. More volatile ETFs are known to have more return on investments alongside with higher risk of losing money. The volatility of the fund will guide you on how best to proceed when investing.
Vanguard has given The Vanguard FTSE Canada All Cap Index ETF (VCN) a volatility rating of “Low to Medium”.
This means that your chances of you losing money is not high. Like I said earlier on, a high volatility rating indicates you will make more money, but it also signifies a high chance of you losing all your money.
You should know, going forward, there are no guarantees on investments. You stand a chance of losing some or all of your money in any investment.
Market Performance Of VCN
I will be discussing the performance of the ETF over the course of 5 years in this section. You should know that an ETF’s previous performance does not give adequate information on how it will perform in the future. This information is just to help you assess how risky the ETF has been in the past.
Starting from 2014 up to 2018, VCN has experienced several ups and downs.
The return on investments for the years 2014, 2015, 2016, 2017 and 2018 were 9.80%, -8.74%, 21.46%, 8.46%, and -9.06% respectively.
So far till May 2020, the best month in which the highest return on investment was recorded was in March 2019 where the stock price was at its highest. There was a total of 12.62% return for the month. A $1000 investment would have yielded a $126 return.
The worst month to invest In VCN was in December 2018. There was -10.22% return on investments. A $1000 investment, would have fallen to $898. Now, that’s how volatile the ETF really is.
VCN from its inception till May 31, 2019, an investment of $1000 in the Vanguard FTSE Canada All Cap Index ETF (VCN), would have yielded $1478 to date. This equates to a compound return rate of 6.93%.
Screenshot Of VCN Total Returns over time (Since Inception)
Screenshot Of Growth of $10000 invested over time (Since Inception)
VCN is currently trading at a price of $30.14 CAD (as of May 21, 2020).
Just like any other ETF, VCN has the market price (listing price) and the Net Asset Value (NAV).
VCN units are sold at the market price during the regular trading day. It can vary across each period of the trading day and is especially volatile at the beginning and end of the trading day. That’s just the normal case with any other TSX ETF as well.
You should use limit orders to trade during the regular market hours (if option trading). This will help you avoid being subject to random changes (market volatility and fluctuations) in the market price.
The Vanguard FTSE Canada All Cap Index ETF (VCN)’s market price falls between $28.09 and $33.72 for a twelve-month period that ended on May 31, 2019.
Just in case you don’t know – The NAV price of any ETF is calculated at the end of the trading day. It is used to prepare reports at the close of each trading day. It reflects the value of the ETF investments at the end of the trading day.
VCN Vs. XIC
First of all, VCN, as we know, is from the Vanguard family of funds and XIC is from Blackrock.
Both these ETFs are very similar in terms of investments, the market index they track and so is this comparison.
Here’ a quick breakdown and comparison between VCN and XIC in terms of the overall market returns:
From the first screenshot below, you can notice that for the maximum timeframe selected (to identify returns better and market-tested) almost the returns of VCN and XIC are on par.
There’s a slight edge to VCN over XIC in terms of better gains. Apart from that, everything remains intact and choosing one over the other doesn’t really make a big difference.
From the second screenshot below, you can notice that when it comes to ETF dividends, XIC pays out a 2.94% dividend every quarter whereas VCN pays slightly less at 2.74%. Again, not much of a difference.
We can finally conclude with this comparison that, choosing VCN or XIC is an individual choice, however, there is not much of a difference as these ETFs have the same investment patterns and track the same index. Also, when it comes to dividends they are pretty much the same with not much of a difference.
VCN Additional Fees
Here’s a list of all the additional fees and charges you might want to know before investing in VCN:
1. VCN Taxation
Capital returns on all of your investments will form a part of your taxable income. The amount of tax to be deducted will depend on the tax laws of the location you live in (province I mean).
If you hold VCN in a registered account such as the Tax-Free Savings Account (TFSA), the amount of tax to be paid will definitely reduce.
In case you do not want to use a registered account, dividend distributions from VCN will also be taxed. This is regardless of whether you reinvest or collect them in cash.
2. VCN Brokerage Commissions
You may have to pay a brokerage commission every time you trade your ETF units. The amount to be paid will be determined by the brokerage firm you use. If you open an account with Questrade, you can minimize the costs, as ETF trading in Questrade is totally free (buy or sell).
3. VCN ETF Expenses
While you do not have to pay the fees directly, they are important because ETF fees affect your overall market returns. The most significant expense is the Management expense ratio (MER). This is the fee you pay for the management and operating of the ETF. The MER is now set at 0.06% of the returns you make.
4. VCN Trailing Commission
This is what you may have to pay for as long as you own an ETF. It is charged for the services and advice that your representatives and firms provide you.
The Vanguard FTSE Canada All Cap Index ETF (VCN) does not currently have any trailing commissions.
If you are looking for an ETF that will provide you with long-term capital growth and you want to invest in Canadian small-mid and large-capitalization equity securities, then the Vanguard FTSE Canada All Cap Index ETF (VCN) is for you.
VCN has been around for several years and its one of the most loved Canadian ETFs around. Yes, it is extremely volatile but that does not mean the returns are not great. It’s excellent in fact. Always hold the investments for a longer period of time to reap the true benefits. That’s the case with all the ETFs or any individual stocks.
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