Tag Archives: asset allocation ETFs

How the one-ticket Asset Allocation ETFs performed in 2020

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By Dale Roberts

Special to the Financial Independence Hub

The one-ticket ETF portfolios are game changers in Canada. You can get a more comprehensive and ‘complete’ portfolio by way of entering one ticker symbol. The fees are incredibly low, in the area of .20%. Yes, that’s about one-tenth of the cost of a traditional mutual fund in Canada. Of course most Canadians should ditch their mutual funds and head on over to their one-ticket ETF of choice. The performance has been very strong. Today we’ll look at the performance of the one-ticket ETFs for 2020.

A one-ticket ETF portfolio will give you access to Canadian, US and International stocks. The stock market risks and volatility are managed by way of bond ETFs. Those bonds (depending on the ETF provider) can be by way of Canadian, US and International bonds.

Remember, stocks are the unruly and unpredictable toddlers, while the bonds are the adult in the room. We might also manage risks by way of cash, gold stocks and gold ETFs that hold physical gold, plus bitcoin and a basket of commodities and currencies. Personally, I am in the camp of managing the risks beyond the bond ETFs. You may choose to top up your one=ticket ETF; that is a personal choice.

One ticket ETFs are managed portfolios

When you invest in a one-ticket ETF you are accessing a managed portfolio. Your job is to add the monies. The ETF provider will buy the stocks and bonds and will rebalance the portfolio on a regular schedule. Easy peasy. That’s why most Canadians will not or do not need an advisor or broker. Especially if you are in the accumulation stage and are simply filling up your RRSP and TFSA accounts.

It’s so simple and effective. When you do need financial planning you can pay as you go by way of a fee for service financial planner. You don’t have to fork over a percentage of your investment wealth every week. In fact, IMHO, most Canadians should not allow perpetual access to their pockets.

The one-ticket ETF providers

The most famous and adopted one-ticket portfolios are offered by Vanguard. The following post will also help you learn how to choose the right ETF portfolio at the right level of risk. Here’s which Vanguard One Ticket ETF should you invest in? The following links are my reviews of each offering.

You might also look at the BMO One Ticket ETFs.

There are also the Horizons One Ticket ETFs and the iShares One Ticket ETFs.

And new to the fold is the TD One Click Portfolios offered by TD Bank. The TD portfolios were launched in August so they will not be part of our full year 2020 evaluation.

If you have any questions about which one ticket might be right for you, please use that contact form. I’m happy to help. No charge.

The one ticket returns for 2020

Even though we experienced the first modern day pandemic, returns for investment assets in 2020 was very strong. Here’s the 2020 year in review. In that post you can see the breakdown of returns for stocks and bonds in 2020. Continue Reading…

Time to add $6,000 to your TFSA but consider holding off investing it until after Jan 6th

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Happy New Year! However, this first business week of the new year promises to snap investors rudely out of their holiday moods, given political events south of the border.

As of last Friday, January 1st, Canadians could add another $6,000 to their TFSAs, taking their total cumulative lifetime contributions to $75,500. As I outlined in my latest MoneySense Retired Money column, it’s generally a good idea to do this early in January just to maximize the time value of money.

However, I’d hold off committing to particular equity investments until the dust settles, given that this morning’s headlines no doubt focus on the incredible political drama taking place in Georgia on Tuesday, Jan. 5th and then in Washington on Wednesday, Jan 6th.

After this weekend’s dramatic capturing on tape of soon-to-be-ex President Trump’s attempt to persuade the State of Georgia to “find” (aka steal) almost 12,000 votes, both the Georgia runoffs and Wednesday’s supposedly ceremonial formal certification of the state electors votes confirming Joe Biden’s victory promise to be full of fireworks.

Fireworks almost inevitable in Washington this Wednesday

Things were simmering even before Sunday’s saturation TV coverage of what seemed yet another impeachable offence from Trump. Violence from far right-groups fomented by Trump’s fanning the flames in anticipation of Wednesday’s ceremony in Washington already seemed to be in the cards even before this weekend. That can be hardly good for stock markets although pre-market Monday futures were strongly up in the three major US indices.

Add in the ongoing stress of the still-raging pandemic and recent euphoria over vaccines, and the fact US and many global stocks have been hovering near record highs: not to mention cryptocurrencies and Bitcoin, which this weekend smashed through US$30,000 for the first time.

So it hardly seems like there’s a need to rush to invest new TFSA money when all these portents mean prices could be cheaper later this week. Whether this creates yet another proverbial buying opportunity remains to be seen.

Some ideas for how to invest new TFSA money

Those in doubt who would rather invest sooner than later on any anticipated market downturns Monday could always hedge their bets with value-oriented balanced mutual funds or the Asset Allocation ETFs often mentioned on this site, from BlackRock iShares, BMO ETFs, Horizons ETFs or Vanguard Canada. Hard to believe it was just three years ago that the Hub published this blog about these “game-changers”  and they seem to me to make a lot of sense for the large “core” of most portfolios.  Continue Reading…

Vanguard’s VRIF: Your new single-ticket Retirement Income Solution

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Two years ago, Vanguard launched a suite of asset allocation ETFs that changed the game for DIY investors in their accumulation years. These balanced ETFs provide low-cost, global diversification, and automatic rebalancing with just one fund.

On Wednesday (Sept 16), Vanguard announced another evolution in the asset allocation ETF space with a new product aimed at retirees in the decumulation phase. The Vanguard Retirement Income ETF Portfolio, or VRIF, uses global diversification and a total return approach to provide steady monthly income at a target payout rate of 4% per year.

ETF TSX Symbol Management fee Target annual payout
Vanguard Retirement Income ETF Portfolio VRIF 0.29% 4%

Saving for retirement is by far the number one objective for investors and Vanguard believes that space is well covered with their now flagship products like VEQT, VGRO, and VBAL. An investor in his or her accumulation phase could simply move down the risk ladder, switching from VEQT to VGRO to VBAL as they get closer to retirement age.

But what to do with your ETF portfolio in retirement? It’s a question I get every time I mention the benefits of investing in asset allocation ETFs. Prior to today, the answer was to sell ETF units as necessary to meet your spending needs or rely on smaller, quarterly distributions of around 2% per year.

With VRIF, investors get a predictable monthly income stream (targeted at 4% per year) to help meet their regular spending needs and not have to worry about rebalancing and/or selling ETF units.

Indeed, you could think of VRIF as the retirement equivalent of VBAL.

Vanguard Retirement Income ETF Portfolio (VRIF)

VRIF is a single-ticket income solution. It’s a wrapper containing eight underlying Vanguard ETFs that offer global exposure to more than 29,000 individual equity and fixed income securities.

Related: Top ETFs and Model Portfolios in Canada

Here’s a look under the hood of VRIF:

Asset class ETF Weight
Canadian equity VCN 9.0%
Canadian aggregate fixed income VAB 2.0%
Canadian corporate fixed income VCB 24.0%
Emerging markets equity VEE 1.0%
U.S. fixed income (CAD-hedged) VBU 2.0%
U.S. equity VUN 18.0%
Developed ex North America equity VIU 22.0%
Global ex U.S. fixed income (CAD-hedged) VBG 22.0%

Here is the geographic breakdown of VRIF’s holdings:

  • Canada – 35%
  • United States – 20%
  • Developed ex North America – 44%
  • Emerging markets – 1%

VRIF focuses on a total return approach using an approximate asset allocation of 50% equity and 50% fixed income. This approach allows the portfolio to payout from capital appreciation in years when the portfolio yields fall below the target.

A total-return approach is more tax-friendly because VRIF can distribute from capital appreciation. In that case, only the difference between the cost basis and the sale price is taxed. Meanwhile, the full dividend distribution from underlying securities is taxable.

Vanguard highlights the transparency of VRIF and its underlying holdings, saying because its building blocks are clear, you always know what you’re investing in and why, adding that regular monitoring and rebalancing helps maintain exposures across key sub asset classes and risk levels.

VRIF’s 0.29% management fee (before taxes) is roughly one-third the cost of any comparable monthly income mutual fund in Canada. Costs matter, especially to retirees with sizeable portfolios who are looking to keep more of their returns and protect their investment base. Continue Reading…

Retired Money: What to do with “Found Money” from the Covid lockdown

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My latest MoneySense Retired Money column looks at what to do with the “found money” most of us are experiencing during this extended Covid-19 lockdown. Click on the highlighted text to access the full column: What to do with $500, $1,000 or $10,000 right now.

In it, four experts are asked what they’d recommend clients do with an extra $500, $1,000 and $10,000. One was Adrian Mastracci, portfolio manager with Vancouver-based Lycos Asset Management Inc., who suggests any extra savings should be “parked out of sight” for a month or two while you analyze your needs and options.   Repaying debt – particularly high-interest credit card debt – is always a top-notch, risk-free way of deploying cash, Mastracci says.

Certified financial planner Aaron Hector, vice president of Calgary-based Doherty Bryant Financial Strategists, suggests those nervous about their employment status should leave the money parked while they “wait and see” what transpires. “Cash provides flexibility,” he says. You also need to determine if there really are true savings or you are simply experiencing a delayed expense, as may be the case if a planned vacation abroad was cancelled because of Covid. If so, that money will eventually be spent.

Covid-19 has forced everyone to re-think our financial goals and objectives, says fee-only planner Robb Engen, the blogger behind Boomer and Echo, “For some retirees, that has meant putting off large projects such as a home renovation until better times. But for those who have enough income to meet their spending needs and then some, I’d recommend squirreling away any extra cash savings in a high-interest savings account to ensure you can pay cash for your next big-ticket purchase without cashing in any investments.”

Asset Allocation ETFs a good choice for $10,000

Engen — one of the MoneySense experts on the annual ETF All-Stars feature — suggests an asset allocation ETF, assuming all short-term goals have been funded and accounted for. For older folk wanting some fixed income to cushion any further Covid-related market volatility, consider VBAL or VCNS (60% and 40% equities respectively.) Keep in mind that iShares has a similar set of asset allocation ETFs, as does Horizons ETFs, all highlighted in the latest ETF All-stars package. Continue Reading…

Vanguard All Equity ETF (VEQT): my new One-Ticket investing solution

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Vanguard changed the self-directed investing game in Canada with the launch of its new suite of asset allocation ETFs. Now investors can get an ultra low cost, globally diversified portfolio of equities and bonds with just one product.

The funds first came in three flavours – VCNS, VBAL, and VGRO – each with a different target asset allocation for the conservative, balanced, and growth-minded investor.

Shortly after came the sweetener, at least for me, when Vanguard introduced an all-equity version called VEQT.

Asset allocation ETFs take away the biggest pain point for DIY investors by removing the need to periodically re-balance when adding new money or whenever markets veer off course. Simply buy units of a single ETF and hold, and/or add new money as needed. Vanguard’s professional managers take care of the rest so you can enjoy a mostly hands-off investing experience.

What is VEQT?

The Vanguard All Equity ETF Portfolio trades under the ticker symbol VEQT. It’s one of five asset allocation ETFs offered by Vanguard. Just like the name suggests, VEQT’s asset allocation is made up of 100 per cent equities. VEQT is a “fund of funds,” meaning it’s a wrapper that contains four other Vanguard ETFs. Here’s what’s under the hood:

  • Vanguard US Total Market Index ETF 39.8%
  • Vanguard FTSE Canada All Cap Index ETF 29.8%
  • Vanguard FTSE Developed All Cap ex North America Index ETF 23.0%
  • Vanguard FTSE Emerging Markets All Cap Index ETF 7.4%

While investors are often cautioned not to put all their eggs in one basket, in this case with just one ETF your investment portfolio would have exposure to more than 12,200 stocks from around the globe. It doesn’t get much more diversified than that.

Sector weightings for VEQT include:

  • Financials 26.3%
  • Industrials 13.5%
  • Technology 12.1%
  • Consumer Services 10.5%
  • Oil & Gas 9.5%
  • Consumer Goods 9.0%
  • Health Care 7.6%
  • Basic Materials 6.0%
  • Utilities 3.0%
  • Telecommunications 2.5%

Finally, VEQT (like all of Vanguard’s asset allocation ETFs) comes with a management fee of 0.22 per cent. The total management expense ratio (MER) will be known at a later date but it is expected to be 0.25 per cent.

VEQT | My New One-Ticket Investing Solution

It was January 2015 when I sold all of my dividend stocks and switched to an index investing strategy. At the time I went with a two-ETF solution comprised of Vanguard’s FTSE Canada All Cap Index ETF (VCN), and Vanguard’s FTSE Global All Cap ex Canada Index ETF (VXC). This was a variation on the three-fund model portfolio popularized on the Canadian Couch Potato blog (the third fund being Canadian bonds: VAB).

The simple two-fund portfolio worked out great for me, growing by a total of 41.43 per cent in the three years from January 2015 to January 2018. Last year was more challenging and the two-fund portfolio lost 4.25 per cent after a weak fourth quarter sunk the stock markets.

I wasn’t looking to make a change but back in February 2019 Vanguard launched VEQT: adding the 100 per cent equity allocation ETF to its product mix. I was intrigued enough and so on March 4th of this year I wrote about potentially adding VEQT to my portfolio in an effort to reduce my home country bias. Continue Reading…