Vanguard expanded to Canada in 2011. Its fees at the time were significantly lower than the rest of the industry. According to the company, Vanguard has cut its average asset-weighted management expense ratio (MER) by almost half. It says its current MER is 48% lower than the industry average.
Buying Vanguard Canada ETFs
You can buy Vanguard Canada products here at home, Kate. You can buy many of its U.S. products as well. Vanguard’s U.S. ETFs trade on the New York Stock Exchange. Its U.S. mutual funds are generally not available to Canadian investors.
Vanguard is one of the biggest domestic ETF providers in Canada. As of July 31, 2023, the Canadian ETF Association listed it as the third biggest by assets under management after BlackRock Canada (iShares) and BMO Asset Management.
Unlike the top two, who are neck and neck with 146 and 144 ETFs, respectively, Vanguard has a much narrower line-up of 37 ETFs.
Vanguard definitely offers low-cost investment options to Canadian investors, Kate. You cannot open an account with Vanguard, though. Most investment advisors in Canada can access their products, and you can buy them if you have a discount brokerage account. Some advisors are limited to offering mutual funds due to their securities licenses. Others are limited to offering proprietary funds from their own company. And others may prefer to use individual stocks and bonds, or other investment products for their clients.
Are ETFs a good investment?
ETFs are a popular investment because they’re a low-cost way of diversifying your portfolio. ETFs tend to be passive, which is one of the reasons they have relatively low fees. Rather than having a management team researching which investments to buy, they simply buy the market. For example, an S&P 500 ETF might own all 500 stocks that make up the index, rather than spending time and money trying to figure out which ones to own.
Another reason the fees are relatively low is that they do not have embedded fees payable to an investment advisor. Mutual funds tend to have higher fees than ETFs, because some of them pay trailer fees to the advisor who manages the investment account. When advisors use ETFs, they typically charge a separate management fee that is not included in the fund’s MER.
Are all ETFs passively managed?
The important thing to understand about ETFs, Kate, is that they are not all low-cost and passive. Some ETFs are active, and some are risky because they use leverage, which can magnify gains as well as losses. You can buy inverse ETFs that go down when markets go up as well.