Are Vanguard Canada ETFs and Other Funds a Smart Investment?

Ask MoneySense

I’ve heard good things about Vanguard investment accounts in the U.S., owing to the low cost of the investment. Is there a Canadian equivalent and is it as beneficial?
—Kate

Vanguard Canada ETFs: What to know

The Vanguard Group, Inc., founded in 1975 by John Bogle, is a global leader in low-cost investing and one of the pioneers of index funds. Globally, Vanguard ranks among the largest providers of mutual funds and exchange-traded funds (ETFs), second only to BlackRock’s iShares in ETF assets. Vanguard entered the Canadian market in 2011 and built a reputation for low fees compared with many domestic competitors.

Vanguard reports that it has reduced its average asset-weighted management expense ratio (MER) substantially over time; the company states its current MER is significantly below the industry average. Lower MERs can make a meaningful difference to long-term returns, especially for buy-and-hold investors.

Accessing Vanguard ETFs in Canada

Yes, Kate — you can buy Vanguard products in Canada. Vanguard Canada offers a suite of ETFs designed for Canadian investors, and many U.S.-listed Vanguard ETFs are also accessible through Canadian brokerages. Note that most U.S.-registered mutual funds are generally not available to Canadian residents.

By assets under management (AUM), Vanguard is one of the largest ETF providers in Canada. As of July 31, 2023, the Canadian ETF Association listed Vanguard as the third-largest ETF issuer in Canada, after BlackRock Canada (iShares) and BMO Asset Management. Unlike the largest issuers, which offer well over a hundred ETF tickers each, Vanguard’s Canadian lineup is leaner — around 37 ETFs — focusing on broad-market exposure and core building blocks for portfolios.

You can purchase Vanguard ETFs through most Canadian discount brokerages and through many financial advisors. Vanguard itself does not open retail brokerage accounts in Canada the way it does in the U.S.; instead, its funds are distributed through advisors and broker platforms. Keep in mind that some advisors are limited by their licensing or product shelf and may offer mutual funds from their firm or other investment types rather than Vanguard ETFs.

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Are ETFs a good investment?

ETFs are popular because they offer diversified exposure at relatively low cost. Many ETFs are passively managed, meaning they track an index rather than relying on active stock selection. That passive approach reduces management expenses and typically results in lower MERs compared with actively managed mutual funds.

Another cost advantage of ETFs is the distribution model: ETFs generally do not include embedded advisor trailer fees inside the fund’s MER. When advisors use ETFs for clients, they may charge a separate advisory fee on top of the ETF costs, so it’s important to understand the total cost of ownership for your investments.

Are ETFs a passive investment?

Not all ETFs are uniformly passive or low-cost. Some ETFs are actively managed, and others use leverage or inverse strategies, which can amplify gains and losses and are unsuitable for most long-term investors. Always check the ETF’s objective, holdings, and structure before investing. Similarly, not all mutual funds are expensive or active—there are low-cost, passive mutual funds available to investors as well.

When is an ETF not a good investment?

Even a low-fee ETF can be a poor choice if it doesn’t match your goals, time horizon, or risk tolerance. For example, putting money intended for a near-term purchase, such as a down payment for a home within a year, into an equity ETF exposes that money to market volatility. Low fees won’t protect you from short-term losses when your time horizon is short.

Concentration risk is another concern. Some ETFs track narrow sectors or commodities—gold, utilities, or specific regions—and owning those exclusively can leave your portfolio undiversified. Additionally, certain fixed-income ETFs, especially those holding long-duration bonds, can suffer significant value declines when interest rates rise.

Vanguard Canada’s ETFs generally offer straightforward, “vanilla” exposure to broad markets, which can help less-experienced investors avoid complex or risky strategies. Whether Vanguard ETFs are right for you depends on your personal situation. Talk to a qualified advisor or, if you manage your own portfolio, make sure you fully understand each fund’s objective, holdings, costs, and risks before investing.