ETFs · 7 min read

ZSP vs VFV vs XUS: Which S&P 500 ETF Should Canadians Buy in 2026?

BMO's ZSP, Vanguard's VFV, and iShares' XUS all give Canadians S&P 500 exposure in Canadian dollars from a single TSX ticker. On paper they look almost identical: same 500 companies, same currency exposure, MERs within a rounding error. But how each ETF is actually built - and how it interacts with your account type - can tilt the decision.

Stock market chart showing US large-cap index performance

The 30-second answer

For most Canadians, ZSP and VFV are effectively interchangeable. Both charge 0.09% MER, both track the S&P 500 in Canadian dollars, and both trade with tight spreads on the TSX. XUS is a touch more expensive at 0.10% MER but functionally the same. Pick whichever your brokerage lets you buy commission-free, and never let the choice between these three delay a single contribution.

Quick recapAll three ETFs are unhedged - your return is the S&P 500 return plus or minus the CAD/USD move. If you want to strip out currency, use the hedged siblings ZUE, VSP, or XSP instead. More on that below.

What each ETF actually holds

Vanguard's VFV and iShares' XUS are both wrapper funds. Under the hood they hold a single US-listed parent - Vanguard's VOO for VFV, and iShares' IVV for XUS - and pass through the returns. BMO's ZSP takes a different route: it actually owns the 500 underlying US stocks directly.

In practice this rarely changes anything for a long-term holder. The wrapper structure adds a thin extra operational layer, but Vanguard and iShares have been running it for a decade and tracking error is tiny. ZSP's direct-holding structure means it does not depend on the availability of a parent US ETF, which some Canadians prefer on principle.

The numbers side by side

Metric	ZSP (BMO)	VFV (Vanguard)	XUS (iShares)
MER	0.09%	0.09%	0.10%
Structure	Direct US stocks	Holds VOO wrapper	Holds IVV wrapper
AUM (approx)	$9.8B	$6.6B	$4.4B
Trading currency	CAD	CAD	CAD
Currency hedged	No (see ZUE)	No (see VSP)	No (see XSP)
Distribution frequency	Quarterly	Quarterly	Quarterly
Inception	2012	2012	2013

MER is not the only cost

The published MER captures the fund's own expenses, but two other costs shape your real return: the bid-ask spread you pay to trade, and any tracking error versus the index. All three ETFs are highly liquid, so spreads are typically a fraction of a cent. Tracking error over the last five years has been within 0.05% for each - well inside the noise of a single trading day.

Direct-hold (ZSP)

Owns the 500 US stocks itself
No parent-ETF layer to depend on
BMO handles securities lending revenue
Slightly larger AUM than VFV or XUS

Wrapper (VFV, XUS)

Owns a single US-listed parent ETF
Vanguard or BlackRock does the actual investing
Adds a thin extra operational layer
Track record shows tiny real-world impact

Watch the spread on small ordersFor a $500 buy, a one-cent spread costs you about 0.03% - more than a full year of the MER difference between XUS and VFV. Use limit orders during regular TSX hours (9:30am - 4:00pm ET) and skip the first and last 15 minutes when spreads widen.

Currency, taxes, and account choice

All three ETFs are unhedged. Your CAD-denominated return equals the S&P 500's USD return plus or minus how the loonie moved against the greenback. Over the last decade, US equities and a strong US dollar both worked in Canadians' favour. That will not always be the case, and no one can predict FX reliably. The right answer for most long-term investors is to accept currency exposure rather than pay for hedging.

Tax tip for RRSPsUS dividends held inside an RRSP or RRIF in a US-listed ETF (like VOO or SPY) are exempt from the 15% US withholding tax under the Canada-US tax treaty. But ZSP, VFV, and XUS are Canadian-listed, so the withholding still applies at the fund level regardless of what account you use. If maximising after-tax yield in your RRSP matters, hold VOO directly and use Norbert's gambit to convert.

So which one should you buy?

Pick in 30 seconds

You already own VOO or XEQT and want to stay in the same fund family - VFV or XUS
Your brokerage offers commission-free trades on BMO ETFs (Wealthsimple, Questrade) - ZSP
You care about the tightest possible spread and highest AUM - ZSP
You want the fund manager to hold the underlying stocks directly rather than through a wrapper - ZSP
None of the above matters to you - flip a coin between ZSP and VFV and start contributing

Hedged versions if you want to strip out FX

If you would rather isolate the S&P 500 return and remove Canadian-dollar swings, each provider has a hedged sibling. These cost more, drag on returns slightly over long periods, and are best used only if you have a specific reason (like matching a US-dollar liability).

ZUE - BMO S&P 500 Hedged to CAD, 0.11% MER
VSP - Vanguard S&P 500 Hedged to CAD, 0.09% MER
XSP - iShares Core S&P 500 Hedged to CAD, 0.10% MER

Whichever you buy, the harder problem is not the ticker choice - it is knowing when to trim after a run-up. Wealth Rebalancer shows the drift in your S&P 500 sleeve against every other holding in one view, and tells you exactly how much to buy or sell to get back to target.

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Frequently asked questions

Is ZSP better than VFV?

They are essentially the same product. Both charge 0.09% MER, both track the S&P 500 in Canadian dollars, and both are unhedged. ZSP holds the 500 US stocks directly while VFV holds Vanguard's VOO as a wrapper. Over any realistic holding period the tracking error is a rounding error. Pick whichever trades commission-free at your broker.

Is XUS worth the extra 0.01% MER?

Only if you strongly prefer the iShares brand or already hold other iShares funds and want to keep everything under one issuer. On a $10,000 investment, the MER difference costs you $1 per year versus ZSP or VFV. That is not a reason to switch, but it is not a reason to avoid XUS either.

Should I hold VFV in a TFSA or RRSP?

For pure growth potential the TFSA is often preferred because all gains and eventual withdrawals are tax-free. But VFV, ZSP, and XUS all pay quarterly US-source dividends that lose 15% to US withholding tax at the fund level regardless of account type - because they are Canadian-listed. If you want to recover that withholding, you need to hold VOO directly in an RRSP.

Does ZSP pay a higher dividend than VFV?

Yields are within a hair of each other - typically 1.2% to 1.5% and driven by the underlying S&P 500 companies, not the ETF wrapper. Any small gap between the three usually comes from timing of distributions rather than a real yield difference.

Can I mix ZSP, VFV, and XUS in one portfolio?

Technically yes, but there is no benefit - they all hold the same 500 companies. You would just be splitting your S&P 500 sleeve across three tickers with three sets of confirmations to track. Pick one and consolidate.

Should Canadian investors hedge S&P 500 exposure?

Usually no. Currency hedging costs money, drags on long-run returns, and adds another layer of complexity you do not need for a decades-long holding. Accept the CAD-USD noise and let it wash out over time. Hedged versions like ZUE, VSP, and XSP are worth considering only for shorter horizons or specific US-dollar liabilities.