VUN: The Ultimate Canadian Counterpart to VTI for Investors -

Canadian investors seeking a counterpart to the Vanguard Total Stock Market ETF (VTI) often turn to the Vanguard U.S. Total Market Index ETF (VUN) for its similar investment strategy. Let’s delve deeper into these ETFs, highlighting the indexes they track, their holdings, and the implications of currency on investments (VTI Canada equivalent)

Executive summary

Here’s a concise table summarizing the key differences and similarities between VTI and VUN, tailored for Canadian investors:

Feature	VTI (Vanguard Total Stock Market ETF)	VUN (Vanguard U.S. Total Market Index ETF)
Target Market	U.S. investors	Canadian investors
Index Tracked	CRSP US Total Market Index	CRSP US Total Market Index
Market Exposure	Broad U.S. equity market	Broad U.S. equity market
Holdings	Direct holdings of over 4,000 U.S. stocks	Primarily units of VTI, providing similar exposure
Currency	Traded and valued in USD	Traded in CAD but exposed to USD assets
Currency Risk	Not applicable for U.S. investors	Exposed to CAD/USD exchange rate fluctuations
Currency Hedging	Not applicable	No currency hedging
Investor Base	Primarily U.S. investors	Designed for Canadian investors seeking U.S. market exposure
Trading Platform	U.S. exchanges	Canadian exchanges

Comparison VTI vs VUN – VTI canada equivalent

Indexes Tracked

VTI: This ETF tracks the CRSP US Total Market Index, encompassing over 4,000 stocks across every industry and size segment in the U.S. equity market. It’s a comprehensive representation of the entire U.S. stock market.

VUN: VUN tracks the CRSP US Total Market Index, mirroring VTI’s strategy but catering to Canadian investors. This allows for direct exposure to the same broad range of U.S. stocks.

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Key Features of the CRSP US Total Market Index

Broad Coverage: The index includes both large-cap and small-cap stocks, covering nearly 100% of the U.S. market capitalization. This includes stocks listed on the New York Stock Exchange (NYSE), NYSE MKT, NASDAQ, and other notable exchanges.

Diverse Representation: It represents various sectors and industries, reflecting the diversity of the U.S. economy. This includes technology, healthcare, finance, consumer goods, and many others.

Market Cap Weighted: The index is market-capitalization-weighted. This means that companies with higher market values have a more significant impact on the index’s performance.

Regular Rebalancing: CRSP regularly updates the index to reflect changes in the market, such as new listings, delistings, and corporate actions like mergers and acquisitions. This ensures the index remains an accurate barometer of the U.S. stock market.

Comparison of Holdings

While both VTI and VUN aim to replicate the performance of the CRSP US Total Market Index, there are nuances in their holdings due to their targeted investor base. VTI holds the actual stocks in the index, providing direct exposure to U.S. companies. VUN, on the other hand, primarily holds units of the U.S.-based Vanguard Total Stock Market ETF, effectively making it a “wrap” of VTI for Canadian investors. This structure ensures that VUN investors have similar exposure to the U.S. market as VTI investors, despite the cross-border investment.

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Currency Impact

An important consideration for Canadian investors in VUN is the currency impact. VUN is traded in Canadian dollars (CAD) on Canadian exchanges, but its underlying assets (U.S. stocks) are denominated in U.S. dollars (USD). This creates a currency exposure where the value of VUN can be affected by fluctuations in the CAD/USD exchange rate.

Currency Risk: When the CAD weakens against the USD, VUN’s NAV (Net Asset Value) in CAD terms could increase, and vice versa. This adds an additional layer of volatility and potential return impact unrelated to the underlying stock market performance.

Currency Hedging: Unlike VUN, some Canadian ETFs that invest in U.S. assets employ currency hedging to mitigate the impact of currency fluctuations. However, VUN does not hedge currency risk, which means investors are exposed to the currency movements between CAD and USD.

Conclusion

For Canadian investors, VUN offers a compelling way to gain exposure to the U.S. total stock market, mirroring the investment strategy of VTI. By understanding the indexes these ETFs track, the structure of their holdings, and the implications of currency fluctuations, investors can make more informed decisions. It’s crucial to consider these factors, along with your investment horizon and risk tolerance, when integrating VUN into your portfolio. As always, consider consulting with a financial advisor to tailor your investments to your financial objectives.