asset allocation ETFs Archives - Page 5 of 5

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…

Vanguard Investments Canada Inc. has announced the listing of three new low-cost Asset Allocation ETFs that give investors one-stop shopping to the firm’s globally diversified strategies. They began trading on the TSX today (February 1, 2018.)

Both investors and advisors are asking for “simple yet sophisticated single-ticket investment solutions that provide well-diversified global equity and bond exposure within a low-cost ETF structure,” says Atul Tiwari, managing director for Vanguard Canada. The new ETFs offer investors three different risk profiles and regular rebalancing.

In effect, each ETF is a fund of funds although Vanguard describes them as having an “ETF of ETFs structure.” Each holds seven existing core Vanguard index ETFs (which I list in the postscript below). Each new ETF of ETFs has a management Fee of 0.22%. Vanguard says that when one of its ETFs invests in underlying Vanguard funds, “there shall be no duplication of management fees.” Spokesman Matthew Gierasimczuk said “There are no duplicate fees beyond the 0.22 management fee, other than a basis point or two for operating expense and the trading fee for buying or selling the ETF.”

The three asset allocation ETFs cover the normal range from Conservative to Balanced to Growth, as reflected in the product names. Equity weights range from 40% for the Conservative offering, to 60% for the Balanced and 80% for the Growth.

Here are the 3 ETFs and their ticker symbols on the TSX:

Vanguard Conservative ETF Portfolio (VCNS) seeks to provide a combination of income and moderate long-term capital growth by investing in equity and fixed income securities with a strategic allocation of 40% equities and 60% fixed income.

Vanguard Balanced ETF Portfolio (VBAL) will provide long-term capital growth with a moderate level of income split 60% equities to 40% fixed income.

Vanguard Growth ETF Portfolio (VGRO) provides long-term capital growth by investing in equity and fixed income securities with 80% equities and 20% fixed income.

In a press release, Vanguard Canada head of product Tim Huver said the ETFs offer “a simplified and scalable solution for financial advisors, and a one-stop globally-diversified and transparent option for investors … Investors can rely on Vanguard’s global investment experts to continuously assess their portfolio’s exposure and rebalance it back to its intended risk level.”

With the three new ETFs, Vanguard Canada now offers 36 ETFs, with C$14 billion in assets under management. Vanguard Investments Canada Inc. is a wholly owned indirect subsidiary of The Vanguard Group, Inc.

You can find more at Vanguard Canada’s website.

Postscript: My Take

After sleeping on this announcement, it strikes me as more significant than I had initially perceived. Continue Reading…