When picking an ETF that tracks the S&P500, should I be looking at an unhedged ETF like VFV, or the hedged version like VSP?
Ive heard that many think the CAD dollar is near its low, and will most likely move up in the coming years against the USD. In this case, a hedged ETF would be better (I think) – Is this correct?.
Is there anything else I should consider when picking hedged vs unhedged ETFs? Is the difference so minimal that its not worth considering?
VSP and vfv have the same mer cost is the same
Hedging costs dont show up in a funds MER because they arent paid to the fund manager. These costs are incurred by the fund to roll currency forwards and show up as tracking error.
OH I ACTUALLY HAVE A PICTURE OF THIS! I can finally use it:
Basically shows the benefit of currency depreciation for VFV, and tracking error between VSP and VOO.
Personally I see hedging as an added cost with no increases expected return. If you are a true believer in market efficiency then the same logic carries through to currencies. Trying to predict the direction the CAD will move in relation to US is no different than predicting the way a stock will move or out perform the market (which if you are buying ETFs you likely understand the arguments behind the difficulty of picking winning stocks) . The only known factor is that hedging comes with added complexity and therefore added cost in terms of MER.
Thanks! Looks like Im going with VFV then!
Why not split the difference? Buy VTI and VSP to get both?
The question is, does it make sense to do this, or is it detrimental? And why would I get VTI instead of VFV? Im Canadian so the exchange rate would hurt me if I were to do this.
I have been wondering this as well. I keep a decent chunk of my registered accounts at Wealthsimple and they moved me to hedged ETFs without an explanation as to why. As I do more reading, this seems like the wrong move … Ill be contacting them on Monday to see their reasoning. Anyone know why this may have been done?
Always go unhedged ….you are adding costs AND risk when you hedge. In the end, it all balances. The only time you would hedge is if you want to make a bet on the currency. . . . Ie the purpose of the trade is about the currency as much or more as it is about the underlying security
Canadians Interested in investing and looking at opportunity in the market besides being a potato. Discussion would be geared around any investment opportunities a Canadian has access to. Questions regarding individual companies, ETFs, Tax implications, Index Investing, and more…