In what it says is its first new ETF announcement in four years, Vanguard Investments Canada Inc. today announced a new Fixed-Income ETF designed to met investors’ short-term savings needs. Here is the full release on Canada News Wire.
Trading on the TSX under the ticker VVSG, Vanguard Canada says the Vanguard Canadian Ultra-Short Government Bond Index ETF offers AAA-rated high-quality government bonds and treasury bills with a low management fee of 0.10%. It seeks to track the Bloomberg Canadian Short Treasury 1-12 month Float Adjusted Index. The release says the ETF will invest primarily in public, investment-grade government fixed-income securities with maturities of less than 365 days issued in Canada.
Vanguard Canada’s first new ETF in 4 years
In an email to me, Vanguard Canada spokesman Matthew Gierasimczuk confirmed “It’s our first ETF launch in four years.” It brings the total number of Vanguard ETFs in Canada to 38, with $80 billion (CAD) in Canadian ETF assets under management. You can find the full list on its website here. Continue Reading…
Anytime anyone consults a financial advisor, two things typically occur:
The financial advisor tends to recommend their “in-house” products, which often come with high management expense fees ranging from 2-3%
They inquire about your age and then miraculously present a fund tailored to individuals in your age group.
We’ve discussed point #1 in previous posts. Financial advisors invariably promote funds with high expense fees because they receive kickbacks known as trailer fees, which constitute a significant portion of their income. However, it’s important to note that these trailer fees come out of your pocket. It is in the financial advisor’s best interest to consistently suggest products that offer the most generous commissions.
Despite the fact that there are numerous low-cost index funds and ETFs that might be the best options for their clients, financial advisers seldom recommend them because they do not generate commissions. The success of investment advis0rs often depends on their clients’ lack of knowledge.
As for point #2, they are equally inadequate. The typical formula for selecting a stock-and-bond portfolio is to subtract your age from 100%. This implies that if you are 30 years old, your portfolio should consist of 70% stocks and 30% bonds. If you are 50 years old, the recommended allocation is 50% stocks and 50% bonds, and so on.
Is age really the most significant factor? What if I am already a millionaire? What if I am struggling to pay my rent? What if I am in good health? What if I am in poor health? These factors seem to be overlooked, as financial advisers simply refer to tables provided by their employers and assign clients to predetermined brackets from their sales manuals.
Historically, stocks have consistently outperformed bonds as an investment, but investing in bonds can create a false sense of security. In reality, bonds offer reduced volatility, but less volatility does not equate to lower risk. Over the long term, bonds are not less risky than stocks; they are simply less volatile.
The truth is that the more bonds you hold in your portfolio, the more you limit your growth potential. Why would anyone sacrifice their potential for earnings simply because they are older? When you are older and in need of your money the most, that’s precisely when you would want your money to work its hardest for you. Continue Reading…
In the quest for Financial Independence through savvy investing, we’ve gathered insights from Presidents and CEOs to share their top index fund picks.
From choosing a high-dividend yield ETF to recommending a total stock market index fund, explore the seven expert recommendations that could pave your path to financial freedom.
Choose High-Dividend Yield ETF
Suggest Vanguard Total Stock ETF
Prefer Zero Fee Total Market Fund
Select Australian-Domiciled International ETF
Opt for Monthly Distribution Index
Pick Broad-Market S&P 500 ETF
Recommend Total Stock Market Index Fund
Choose High-Dividend Yield ETF
My go-to for building Financial Independence has got to be the Vanguard High-Dividend Yield ETF. A lot of folks who’ve made it to FIRE (Financial Independence, Retire Early) live off dividends, and if that’s your goal, this ETF is worth considering. It sports a yield of 3.65% and keeps costs low with an expense ratio of just 0.06%. The fund aims to mirror the performance of the FTSE High-Dividend Yield Index.
It’s packed with stocks known for higher-than-average yields. You won’t find many fast-growing tech stocks here because those companies usually reinvest their profits into growth rather than paying out dividends. Instead, the ETF focuses on older, established companies with a strong history of profitability. As of the last update, the top five holdings included big names like Johnson & Johnson, JPMorgan Chase, Procter & Gamble, Verizon Communications, and Comcast.
While it might not match the S&P 500 in terms of rapid growth or impressive returns, the stability and consistent income it offers can be a major advantage, especially if you’re looking for reliable dividend income. — Eric Croak, CFP, President, Croak Capital
Suggest Vanguard Total Stock ETF
As a CFO, I recommend index funds like the Vanguard Total Stock Market ETF (VTI) for building long-term wealth. It provides broad exposure to over 3,600 U.S. stocks with an ultra-low expense ratio of 0.03%.
Over the past 25 years, the total U.S. stock market has returned over 9% annually. While volatile, for long-term investors, index funds are a simple, low-cost way to earn solid returns. I have leveraged index funds in my own portfolio and for clients to build wealth over time.
Vanguard’s scale and expertise allow for minimal costs and maximum tax efficiency. For small or large portfolios, VTI should be a core holding. For clients aiming to retire early or build wealth, low-cost broad market exposure is the most effective strategy. Total U.S. stock market funds provide the broadest, most diversified exposure available. — Russell Rosario, Owner, RussellRosario.com
Prefer Zero-Fee Total Market Fund
The Fidelity Zero Total Market Index Fund is my top pick for building Financial Independence. It covers the full spectrum of the U.S. market without charging any management fees, which means your investment grows faster without extra costs. This fund’s wide exposure to both established and emerging companies helps balance risk and reward. For anyone serious about long-term growth, it’s a great tool to steadily build wealth over time. — Jonathan Gerber, President, RVW Wealth Continue Reading…
Thanks to high-fee mutual funds, Canadians are leaving a lot of money on the table. While superior ETF investment options have been available for more than two decades, Canadians are slow to help themselves out. Those fees are wealth destroyers. We’re not making the move to ETFs at the pace of the rest of the developed world. It’s a no-brainer. Canadians can find investment options at less than 1/10th the cost. But too much money is still going into the wrong pockets – that of advisors and the mutual fund providers. We’re leaving too much money on the table, in the Sunday Reads.
Here’s the graphic that shows Canada is slow on the uptake …
The irony is that Canadians need to embrace low-cost index funds more than most people on earth. We pay some of the highest fees on the planet. And those high-fee mutual funds most often come attached to an advisor who offers no advice, or poor advice. They are salespersons, not real advisors. From the Globe & Mail piece …
Canadian investors, on the other hand, have been far slower to shift their allegiances to indexing. Since 2013, Canadian passive funds increased their market share from 10.4 per cent to just 15.5 per cent currently. Continue Reading…
When I ask clients and prospective clients about the return expectations they have for their portfolios, the responses vary wildly … anywhere from ‘about 5%’ to ‘over 10%.’ Almost all of these expectations are too high.
Admittedly, clients have different risk profiles leading to different asset allocations and ultimately, different outcomes. That’s reasonable. A problem crops up when otherwise reasonable people have been socialized into having out-sized expectations. How does one ethically re-calibrate expectations for irrational optimists who nonetheless think they’re within their rights to have those expectations?
The behavioural finance concept is overconfidence, although the attitude involves elements of optimism bias, cognitive dissonance and old-fashioned hubris, too. To quote J.M. Keynes: “Markets can remain irrational longer than you can remain solvent.” Few investors are prepared to acknowledge that the recent bull market seems unlikely to continue and that a recession appears to be on the horizon.
Learning from past Crashes
If we have learned anything from the great crashes of 1929, 1974, 2001 and more recently, the global financial crisis, it is that investors (often spurred by accommodative policy positions) can come to think of themselves as being all but invincible when central bankers are accommodative. Too often, they also lose their nerve when markets tumble and stay low for a prolonged period.
A good deal of personal finance is grounded in social psychology: especially group psychology. People can get ahead through investing not only by being shrewd about valuations and such, but also by accurately anticipating how other market participants might react to a given set of circumstances. Of course, it cuts both ways: and having reasonable expectations in the first place often assists investors in staying the course.
My concern is with the messaging being offered by many in the personal finance community these days is something I call “Bullshift.” The industry shifts peoples’ attention to make them feel more bullish. To hear many in the business tell it, there’s no appreciable need to be concerned about high valuations, high debt levels (both public and private), a long-inverted yield curve and interest rates at generational highs. Any one of these considerations would ordinarily give a rational investor pause. Taken together, they pose a clear and present danger for investors in the second half of 2024. Few seem concerned and it is that very lack of concern that concerns me.
Misleading investors with “Bullshift”
There is a directionally and mathematically accurate ad running by Questrade making the rounds that doesn’t tell the whole picture, either. Again, even the ‘good guys’ tend to mislead the average investor with Bullshift. The advertisement shows what you would earn over a long timeframe at 8% and what you would earn at 6%.
My question to you is simple: is it reasonable to assume an 8% return is even possible? There is longstanding evidence that higher-cost active investment strategies actually fail to outperform cheaper strategies such as passive index investing and that product cost certainly does matter. Continue Reading…
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In what it says is its first new ETF announcement in four years, Vanguard Investments Canada Inc. today announced a new Fixed-Income ETF designed to met investors’ short-term savings needs. Here is the full release on Canada News Wire.
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