Canadian ETF vs US One

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frankrom
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Canadian ETF vs US One

Post by frankrom » 08 Aug 2017 10:50

Hey Guys...

Quick question...

If you are considering two of the EXACT same ETFS one usd domiciled vs Canadian domciled... IE VFV vs VOO (as an example) ... unless you buy a currency hedged fund you are at the exact same currency risk via whether you get it on the usd or cad side.

Example over 10-20 years if you hold VFV or VOO you should get the exact same return with the exception of MER fees correct?

Because as the dollar rises VFV will go up less in terms of value relative to VOO but as the dollar drops VFV will get enhanced VOO returns.

These ups and downs are pecentage basis and assuming you take the position at the exact same time and exit the exact same time there shouldn't be a big difference between the two correct?

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AltaRed
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Re: Canadian ETF vs US One

Post by AltaRed » 08 Aug 2017 11:44

This subject has been discussed many, many times. Yes...subject to any forex exchange costs. VFV invests in VOO.

Edit: Clarified VFV composition

Added later: Just be aware that if VFV is held in an RRSP or TFSA, the withholding tax is lost. In the case of VOO, there will be no withholding tax withheld if held inside a RRSP. Try to use the US domiciled versions in an RRSP. It matters not with a TFSA since the USA doesn't recognize TFSAs as registred retirement accounts.
Last edited by AltaRed on 08 Aug 2017 11:51, edited 2 times in total.
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frankrom
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Re: Canadian ETF vs US One

Post by frankrom » 08 Aug 2017 11:46

I figured as much... I also know we spoke about it.

I just didn't know if over time it gets exponentially greater in terms of the rate of returns over time. I was pretty confident just wasn't 100% confident hence reconfirming.

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Peculiar_Investor
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Re: Canadian ETF vs US One

Post by Peculiar_Investor » 15 Aug 2017 08:49

The collective wisdom of FWF on the issue is captured in our wiki, see Currency hedging - finiki, the Canadian financial wiki. The wiki article's Further Reading section contains a number of links back to FWF topics on the subject, which hopefully is helpful in saving the effort to search FWF.
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