BMO S&P 500 Index ETF (ZSP) Review
We have embarked on a journey to explore ‘all’ of the exchange-traded funds (ETFs) created by the BMO Global Asset Management group. They have around 149 ETFs at the moment and the list keeps on growing. So, at least we will try to cover the most popular and best-performing ETFs in their portfolio. In this article, we talk about the BMO S&P 500 Index ETF, ticker symbol; ZSP.TO in the Toronto Stock Exchange (TSX).
BMO Global Asset Management (BMO GAM) is a family member of the Bank of Montreal, Canada’s first bank. The company holds a massive portfolio of exchange-traded funds (ETFs) that fit different investment goals of their customers. From low-risk funds to high-risks and from moderate incomes to high incomes, they have funds that fit all your investment needs. A smart investor will invest in a collection of these ETFs to manage risk and increase yield.
The BMP S&P 500 Index ETF is one of BMO’s most popular funds for obvious reasons. This fund attempts to follow the infamous Standard and Poor’s 500 (or S&P 500) index in the USA. The BMO ETF replicates the constituents of the S&P 500 Index in equal weightage and rebalances these investments every quarter to match the S&P 500 holdings.
The TLDR of S&P 500 Index: a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States. It is one of the most followed and replicated indices in the world. There are several criteria that a company must pass to be eligible to be entered into this index. Unsurprisingly, S&P 500 Index has given sustainable returns over the years. Since its inception in 1970, the index has given an average annual return of around 10%.
| Quick Facts | ZSP.TO |
|---|---|
| Fund inception date | November 14, 2012 |
| Net Assets (Oct 8, 2021) | $9.8 billion |
| Exchange | Toronto Stock Exchange |
| Annualized distributions yield | 1.32% |
| Distribution frequency | Quarterly |
| Management expense ratio | 0.09% |
| Account eligibility | TSFA/RRSP/RESP/RRIF/DPSP |
For Canadians, investing in the US stock market comes with a few complications. From holding USD in a Canadian account to currency translation fees by brokers and even receiving distributions getting charged with withholding taxes. So, it is much easier to invest in an index fund incorporated in Canada that tracks a US index. This is exactly what ZSP does.
BMO rates ZSP ETF as a medium-risk investment. This is likely due to the fact that the fund is restricted to the US market and also to 500 large-cap companies.
BMO S&P 500 Index ETF (ZSP) Holdings
The BMO S&P 500 Index ETF holds 504 companies and some cash at the time of this article. The extra 4 is simply to replicate the exact constituents of the US S&P 500 index. No, I do not know why there are additional 4 companies!
Below are the top 20 holdings of ZSP ETF as of October 8, 2021.
| Holding Name | Weightage |
|---|---|
| MICROSOFT CORP | 6.01% |
| APPLE INC | 5.98% |
| AMAZON.COM INC | 3.91% |
| ALPHABET INC (GOOGL) | 2.24% |
| ALPHABET INC (GOOG) | 2.10% |
| FACEBOOK INC | 2.04% |
| TESLA INC | 1.80% |
| NVIDIA CORP | 1.43% |
| BERKSHIRE HATHAWAY INC | 1.39% |
| JPMORGAN CHASE & CO | 1.31% |
| JOHNSON & JOHNSON | 1.12% |
| UNITEDHEALTH GROUP INC | 1.06% |
| VISA INC | 1.03% |
| HOME DEPOT INC/THE | 0.98% |
| PROCTER & GAMBLE CO/THE | 0.93% |
| WALT DISNEY CO/THE | 0.91% |
| PAYPAL HOLDINGS INC | 0.85% |
| MASTERCARD INC | 0.82% |
| ADOBE INC | 0.77% |
| SALESFORCE.COM INC | 0.75% |
Anyone familiar with anything in the world will be able to recognize most if not all of these names. Many of the top companies fall into the technology category, which is an indicator of where the world is headed. However, some old names such as Walt Disney Co., Proctor & Gamble, JPMorgon Chase, and Berkshire Hathaway also make this list.
BMO S&P 500 Index ETF (ZSP) Performance
The ZSP ETF has been in operation for almost 10 years which is a decent time period to evaluate a growth-focused fund like this. During these 10 years, the ZSP ETF has returned 365%. In dollar terms, a $10,000 investment in 2012 would have turned into $46,595 by 2021. This is an incredible return — almost 4x return on investment. However, it feels like many of the technology companies’ accelerated growth happened during the last decade which could be the reason for this massive performance.
Since the ZSP ETF tracks the S&P 500 Index, both should be ideally performing on a similar yield curve. Fortunately, BMO has both the indices’ performances side-by-side to boast their success in managing this fund.
This is a beautiful performance chart, period.
The US S&P 500 Index is marked in yellow and the Canadian BMO ETF that tracks it, is marked in blue. For the longest time, ZSP EFT has stayed parallel to the S&P 500 Index. It has, however, lagged a little in the past year for some reason. However, this is nothing alarming at the moment.
The manner in which index-tracked ETFs are created, there is little chance for the ETF to outperform or underperform the original index.
Is ZSP ETF for You?
If you are a Canadian investor looking to invest in the US S&P 500 Index without going into currency and tax complications, ZSP is your solution. Performance and yield-wise, ZSP will deliver exactly what the S&P 500 Index will deliver (or at least that is the plan).
Check out the latest information about the fund on BMO.
Disclosure: Any information given in this article is not to be construed as investment advice. You must do your own research before investing any money in the stock market. All investments carry inherent risks even with the possibility of losing all your money.
