Tag Archives: income

Gamechanger? Vanguard Canada launches 3 new Asset Allocation ETFs (plus my take)

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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…

Time to stop following the Retirement herd

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We are all social animals: we crave interaction and generally don’t like being alone. We crave that feeling of togetherness and being part of something bigger,  the added comfort and safety that comes with being part of a group or a  herd.

The herd protects individuals from being singled out, and in the animal kingdom provides safety from being killed by a predator.

Many people have developed a “herd” mentality in life deriving comfort by going with the flow and if everyone else is going in one direction they must know something that we don’t. It is easier not to complicate things by forging our own path based on what we learn or believe. What happens if we are wrong and the herd is right?

When it comes to retirement the “herd” has been doing this retirement thing for a long time. So they must be right, right?

I used to be a follower, part of the herd if you will. I was willing to put my fate in the hands of others and follow along blindly. Then I realized the retirement herd was heading in the wrong direction, and this wasn’t going to work for me. Let me explain.

Retirement worked when life expectancy was much lower

When the concept of retirement was created just over a hundred years ago, it worked.  The reason it worked was because life expectancy was much lower and if you were one of the lucky ones to reach the retirement finish line, you could expect to enjoy a couple of years in the proverbial “rocking chair,” watching the world go by.

Continue Reading…

What Is the Income Factor in U.S. Equities?

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blog-see-more-dividendschris_gannatti_crop-bwBy Christopher Gannatti, Associate Director of Research, WisdomTree

Special to the Financial Independence Hub

The factor discussion is gaining popularity in the world of smart beta indexing. Size, value, momentum, minimum volatility, quality—these are all factors in the current discussion, and for the initiated they are becoming part of the common index lexicon.

But are investors really looking for these specific factors by name? We explore how these factors relate to real-world investment goals.

Translating Factors into Investment Goals

Some commonly referenced investment goals are:

• Keeping principal stable for unexpected expenses and emergencies

• Generating a certain average annual return to meet future goals in retirement

• Drawing income in order to meet planned expenses

We focus on income, as WisdomTree was the first to create a suite of U.S. equity Indexes weighted by cash dividends.

Defining the Income Factor

Continue Reading…

Dividends: The Foundation of the Smart Beta Movement

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blog-see-more-dividendschris_gannatti_crop-bwBy Christopher Gannatti, Associate Director of Research, WisdomTree

Special to the Financial Independence Hub

Smart beta exchange-traded funds (ETFs) are rapidly proliferating and capturing assets at a faster clip than the broader ETF industry. In 2015, 143 smart beta ETFs came to market, [Note 1] representing half of the year’s new ETF launches, or double the percentage of traditional beta products born last year.

Dividend strategies are one of the primary drivers of smart beta ETF growth. Smart beta ETFs had about $616 billion in assets under management at the end of 2015, [Note 2] and more than a quarter of that total was allocated to dividend-oriented funds.

Since the publication of the widely followed Fama-French research in 1993, outperformance of fundamentally weighted indexes has mostly been attributed to the market factor, the size factor (mid- and small caps outperforming larger stocks) and the value factor. [Note 3] Later, momentum factor was added as an accepted driver of fundamental weighting’s ability to top market cap-weighted strategies.

At WisdomTree, we believe weighting by dividends elevates fundamental indexing or smart beta. In 2006, 25 dividend ETFs [Note 4] came to market, 22 of which courtesy of WisdomTree. Our Dividend Stream® weighting methodology offers distinct advantages over weighting by market capitalization, dividend yield or focusing on the number of consecutive years that companies have increased payouts. Continue Reading…

Withdrawing from your Retirement Nest Egg

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MarieEngen
Marie Engen, Boomer & Echo

By Marie Engen, Boomer & Echo

Special to the Financial Independence Hub

You’ve been saving all your working life and now that you have entered your retirement phase, it’s time to start drawing from your savings. In some circumstances there will be people who will be able to live off their dividends and interest alone. Most retirees, however, will have to start spending the money they have saved.

Once you have decided on the amount of income you need annually for your retirement lifestyle and determined how much of it will come from your guaranteed pensions, the remainder must be withdrawn from your nest egg.

You may have multiple accounts and both registered and unregistered savings. Your investments could be stocks and bonds, ETFs and/or mutual funds. You might be in a position where you must withdraw a minimum amount from your RRIFs.

This example will show you how you can manage your retirement withdrawals, taking the total of all your accounts as a whole. It assumes dividends and interest will be reinvested, but you can use them as part of your yearly cash allotment if you so choose. You just have to adjust as necessary.

A model for retirement withdrawals

Meet newly retired Rodney and Pamela O’Brien. They have a retirement nest egg totalling $500,000. Continue Reading…