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Canadian versions of US ETFs
June 19, 2021
8:35 pm
saren
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Is there any advantage to buying the Canadian version of a US ETF, for example: VTI vs. (VUS.TO) or VMO vs. (VEE.TO). The share price is different and the performance charts usually show the US version doing better. What are some other differences between them? Then I can choose what's right for me. Thanks.

June 19, 2021
9:55 pm
Norman1
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VUS is Vanguard U.S. Total Market Index ETF (CAD-hedged).

Hedging the US$ investments in the underlying CRSP US Total Market Index to C$ is not free and results in higher MER.

In contrast, VTI is Vanguard Total Stock Market Index Fund ETF which just holds the same US$ investments.

June 19, 2021
10:02 pm
saren
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Yes I understand the MER is higher because of the hedge protection, but why are the performance charts showing these 2 funds behaving differently when they are the same.

June 20, 2021
4:50 am
Dennis
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I believe currency hedging is additional cost on top of MER.

Another difference is U.S. withholding tax (15%) for dividend for foreign investors. VUS is hidden so can't avoid it but VTI not hidden so can avoid it if it is held in RRSP/RRIF account.

June 20, 2021
5:04 am
savemoresaveoften
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slightly off topic, but I would buy US ETFs in USD i.e no Cad version / currency hedge. Rather treat it as an exposure to both USD and US stocks. One should have some exposure to non CAD exposure including FX to have a balanced portfolio anyway.
The MER and FX hedging cost that you got charged by these cad version of US ETF is a lot higher than the simple US ETFs which are less than 10bps for most index these days.

June 20, 2021
8:18 am
Norman1
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The C$ hedged and non-hedged funds aren't going to have the same performance when the US$/C$ exchange rate has changed as much as it has the past year.

The US$ dropped 12.4% from C$1.3787 at the end of May 2020 to C$1.2072 at the end of May 2021.

June 20, 2021
9:17 am
Dean
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saren said

Is there any advantage to buying the Canadian version of a US ETF, for example: VTI vs. (VUS.TO) or VMO vs. (VEE.TO). The share price is different and the performance charts usually show the US version doing better. What are some other differences between them? Then I can choose what's right for me. Thanks.  

    I hear ya

Several years ago I ran into similar concerns, while wanting to invest in US stocks (ETF's, etc.). I solved the problem by setting up a separate USD investment account, which I still have today.

Maybe give it some thought ❓
.

    Dean

sf-cool " Live Long And Prosper " sf-cool

June 20, 2021
11:58 pm
saren
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Thank you everyone!

June 26, 2021
7:16 pm
maxb
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You may want to purchase the cdn ones because of the broker you are using. For example, WealthTrade has $0 commissions, but has no US accounts.
(Yes you can buy US version, but then you get hit with exchange fees)

August 30, 2021
3:37 pm
geotabs
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saren said
Is there any advantage to buying the Canadian version of a US ETF, for example: VTI vs. (VUS.TO) or VMO vs. (VEE.TO). The share price is different and the performance charts usually show the US version doing better. What are some other differences between them? Then I can choose what's right for me. Thanks.  

I'm confused as VTI has a return of 23.3% YTD and VUS is at 22.94% YTD
That's only 0.36% difference between the 2
The currency conversion with most big banks would be much higher than that.

August 30, 2021
3:45 pm
AltaRed
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VUS is hedged to take currency forex out of the equation. The difference you see is mostly in MER differences. I have no comment re VMO and VEE

August 30, 2021
4:04 pm
Loonie
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I'm no expert but I think you would be wise to first decide how much of your portfolio you want to have in USD. Then decide how you will get that done. I suspect that worrying about the differences between these two funds is confusing the issue.

You don't say if you are dealing with registered or non-registered funds. That too can be a factor. I believe (someone will correct me if I'm wrong) that you can't put US funds into TFSA as US doesn't recognize TFSA and the income will be taxed in the US regardless. If I remember correctly, in a previous thread you were asking about TFSA money.

August 30, 2021
4:42 pm
mordko
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Loonie said
I believe (someone will correct me if I'm wrong) that you can't put US funds into TFSA as US doesn't recognize TFSA and the income will be taxed in the US regardless. If I remember correctly, in a previous thread you were asking about TFSA money.  

You can and (probably) should put US funds into a TFSA. They will be subject to withholding taxes. That would be 0.15% of dividends. VTI has a dividend yield of 1.2%, so we are talking about 0.2% damage in annual withholding taxes. In the last 10 years VTI returned over 300%.

If you buy US traded funds within an RRSP then they are not subject to withholding taxes and withholding taxes in a non-reg account get reimbursed but we are talking about details. The big picture is that you own 100% of return on your TFSA and US is an important market for investors.

August 30, 2021
6:04 pm
AltaRed
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The USA does not recognize the TFSA as a retirement account like a RRSP and thus recurring distribution income is taxed at a 15% rate as Mordko has posted. Canadians can own almost anything they want in a TFSA.

August 30, 2021
6:08 pm
mordko
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Yes, 15%. Sorry. Translating into ~0.2% of the total value

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