If you’re an investor in Canada, chances are you’ve heard of Vanguard.
Vanguard has grown rapidly in Canada and boasts of over $26.1 billion in assets.
The amount is a drop in the bucket compared to Vanguard Group (U.S), which holds a jaw-dropping $7.9 trillion in assets. This indicates that Vanguard Canada still has a lot of room to grow.
As someone who used to work for a fund company, I understand that lowering management fees is crucial for the long-term performance of an investment.
Vanguard’s founder, Jack Bogle, had a grand vision to bring passive index investing to investors and to return profits to investors in the form of lower fees.
Vanguard offers a robust product line of 39 ETFs and four mutual funds. I break down the products in this Vanguard product overview.
Warren Buffett: “If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle.”
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Vanguard Mutual Funds
Mutual funds in Canada have gotten a bad reputation in recent years. They are known for having some of the highest fees in the world, at an average Management Expense Ratio (MER) of over 2% per year.
Vanguard Canada is looking to change the perception of mutual funds by drastically lowering the fees that it charges for them.
If there is volatility in the market, mutual funds with active managers are supposed to be able to offer downside protection when the market goes down and to capture larger gains as it increases.
In theory that is how it’s supposed to work, but fees tend to eat away at these gains, and make them less attractive for investors. There is also no guarantee that even with no fees, an active manager will outperform the fund’s benchmark.
But because of the lower fees (between 0.34% – 0.56% MER) for Vanguards mutual funds, it will be interesting to see how they perform against their respective benchmarks in the future.
Right now, the funds are too new to have much performance data gathered to see the long term effects of its active managers.
Here are the four Vanguard mutual funds in Canada:
1. VANGUARD GLOBAL BALANCED FUND (VIC100)
Asset Allocation: 69% Equity, 31% Fixed Income (Feb 2020)
Geographical holdings: Worldwide
Objective: Provide long-term capital growth
VIC100 invests in a combination of equity securities and fixed income securities from all economic sectors and industries, located anywhere in the world. The fund has exposure to both developed and emerging markets and it’s sub-advisor actively manages the portfolio.
2. VANGUARD GLOBAL DIVIDEND FUND (VIC200)
Asset Allocation: 80% Equity (minimum)
Geographical holdings: Worldwide
Objective: Provide above-average level of current income combined with long-term capital growth.
VIC200 invests in equity securities of companies that tend to pay above-average levels of dividend income and are located anywhere around the world. At least 80% of the fund’s assets must be invested in equities.
3. VANGUARD US VALUE WINDSOR FUND (VIC300)
Asset Allocation: 100% Equity, 0% Fixed Income
Geographical holdings: U.S
Objective: Provide long-term capital appreciation and income
VIC300 invests mainly in large- and mid-cap companies in the U.S. The active managers try to consider the stocks they purchase to be undervalued.
The fund seeks to provide long-term capital appreciation and income by investing primarily in large- and mid-capitalization companies located in the United States whose stocks are considered to be undervalued.
4. VANGUARD INTERNATIONAL GROWTH FUND (VIC400)
Asset Allocation: 100% Equity, 0% Fixed Income
Geographical holdings: Worldwide (excluding Canada and U.S)
Objective: Provide long-term capital appreciation
VIC400 investments in international companies located outside Canada and the U.S. The fund diversifies its assets across developed and emerging markets. The fund chooses large, mid, and small cap companies considered to have strong growth potential.
How to Buy Vanguard Mutual Funds in Canada
The mutual funds will be available as Series F funds and can be purchased from:
- Third-party fee-based financial advisors that don’t charge embedded commissions
- Self-directed (DIY) through a discount brokerage (usually the cheaper option). I use Questrade to trade mine. I know Qtrade offers the funds as well.
Note that each fund has a minimum initial purchase of $5,000.
Vanguard Asset Allocation ETFs
Asset Allocation ETFs are also known as all-in-one ETFs. An investor can simply purchase one of these funds that meet their desired risk tolerance and asset allocation, and not have to worry about rebalancing it. The asset allocation will be rebalanced periodically.
Vanguard was launched recently, but are already some of the most popular Vanguard investments in Canada. It’s easy to see why, with its low MER and ease of use, many Canadians choose these funds for their investment accounts such as the TFSA or RRSP.
Here are the Vanguard Asset allocation ETFs:
1. Conservative Income ETF Portfolio (VCIP)
Asset Allocation: 18.7% Equities, 81.3% Fixed Income (Feb 2020)
2. Conservative ETF Portfolio (VCNS)
Asset Allocation: 37.8% Equities, 62.1% Fixed Income (Feb 2020)
3. Balanced ETF Portfolio (VBAL)
Asset Allocation: 57.8% Equities, 42.1% Fixed Income (Feb 2020)
4. Growth ETF Portfolio (VGRO)
Asset Allocation: 78.5% Equities, 21.4% Fixed Income (Feb 2020)
5. All-Equity ETF Portfolio (VEQT)
Asset Allocation: 100% Equities, 0% Fixed Income
Vanguard Index ETFs
Canadian index funds are Vanguard Canada’s main offerings. Index ETFs are seeing a lot more money flow into them, as they provide you diversification in a low cost, passive manner.
An index ETF is constructed to replicate a benchmark such as the S&P/TSX 60 Index, or the S&P 500. Vanguard has a wide variety of some of the best index funds in Canada.
Here’s an overview of Vanguard Index Funds in Canada:
Vanguard Index Equity ETFs
For Canadian equities, the three largest by AUM Vanguard Index Equities are:
- FTSE Canada All Cap Index ETF (VCN)
- FTSE Canada Index ETF (VCE)
- FTSE Canadian High Dividend Yield Index ETF (VDY)
Here is a full list of the Canadian equity ETF offerings by Vanguard:
Vanguard Canada Index Funds (Canadian Equity)
|FTSE Canada All Cap Index ETF||VCN||0.06%|
|FTSE Canada Index ETF||VCE||0.06%|
|FTSE Canadian Capped REIT Index ETF||VRE||0.39%|
|FTSE Canadian High Dividend Yield Index ETF||VDY||0.22%|
Vanguard Canada Index Funds (U.S and International Equity)
For international equities, the most popular Vanguard Canada ETFs are:
- FTSE Developed All Cap ex North America Index ETF (VIU)
- FTSE Emerging Markets All Cap Index ETF (VEE)
- FTSE Global All Cap ex Canada Index ETF (VXC)
For U.S equities, the most popular Vanguard ETFs are:
- S&P 500 Index ETF (VFV)
- U.S. Dividend Appreciation Index ETF (VGG)
- U.S Total Market Index ETF (VUN).
|FTSE Developed All Cap ex North America Index ETF||VIU||0.22%|
|FTSE Developed All Cap ex North America Index ETF (CAD-hedged)||VI||0.23%|
|FTSE Developed All Cap ex U.S. Index ETF||VDU||0.22%|
|FTSE Developed All Cap ex U.S. Index ETF (CAD-hedged)||VEF||0.22%|
|FTSE Developed Asia Pacific All Cap Index ETF||VA||0.22%|
|FTSE Developed Asia Pacific All Cap Index ETF (CAD-hedged)||VAH||0.23%|
|FTSE Developed Europe All Cap Index ETF||VE||0.22%|
|FTSE Developed Europe All Cap Index ETF (CAD-hedged)||VEH||0.25%|
|FTSE Developed ex North America High Dividend Yield Index ETF||VIDY||0.32%|
|FTSE Emerging Markets All Cap Index ETF||VEE||0.24%|
|FTSE Global All Cap ex Canada Index ETF||VXC||0.26%|
|S&P 500 Index ETF||VFV||0.09%|
|S&P 500 Index ETF (CAD-hedged)||VSP||0.09%|
|U.S. Dividend Appreciation Index ETF||VGG||0.30%|
|U.S. Dividend Appreciation Index ETF (CAD-hedged)||VGH||0.30%|
|U.S. Total Market Index ETF||VUN||0.16%|
|U.S. Total Market Index ETF (CAD-hedged)||VUS||0.16%|
Vanguard Bond Index ETFs
The most popular bond offerings by Vanguard are:
- Canadian Aggregate Bond Index ETF (VAB)
- Canadian Short-Term Bond Index ETF (VSB)
- Canadian Short-Term Corporate Bond INdex ETF (VSC)
Here’s an overview of Vanguard Canada index funds (bonds):
|Canadian Aggregate Bond Index ETF||VAB||0.09%|
|Canadian Corporate Bond Index ETF||VCB||0.26%|
|Canadian Government Bond Index ETF||VGV||0.28%|
|Canadian Long-Term Bond Index ETF||VLB||0.19%|
|Canadian Short-Term Bond Index ETF||VSB||0.11%|
|Canadian Short-Term Corporate Bond Index ETF||VSC||0.11%|
|Canadian Short-Term Government Bond Index ETF||VSG||0.20%|
|Global Aggregate Bond Index ETF (CAD-hedged)||VGAB||—|
|Global ex-U.S. Aggregate Bond Index ETF (CAD-hedged)||VBG||0.38%|
|U.S. Aggregate Bond Index ETF (CAD-hedged)||VBU||0.22%|
Vanguard Active ETFs
Vanguard’s Active ETFs aren’t the most popular Vanguard ETFs in Canada. It’s might be because many investors are not aware that Vanguard offers Active ETFs.
Investors can get active ETFs by Vanguard through Equity Factors ETFs. Vanguard active management is managed by the Vanguard Quantitative Equity Group (QEG).
The Vanguard active ETFs are diversified globally, which gives you increased currency and market diversification. This could potentially lower volatility versus a single-country fund, all else remaining equal.
Here’s an overview of all the Vanguard Active ETFs in Canada:
|Fund name||Fund code/ Ticker||Management fee*|
|Global Liquidity Factor ETF||VLQ||0.35%|
|Global Minimum Volatility ETF||VVO||0.35%|
|Global Momentum Factor ETF||VMO||0.35%|
|Global Value Factor ETF||VVL||0.35%|
How to Buy Vanguard ETFs in Canada
If you’re wondering how to invest in Vanguard Canada ETFs, you can purchase them from:
- Third-party financial advisor
- Self-directed (DIY) through a discount brokerage (usually the cheaper option). I use Questrade to trade mine since they are free to purchase.
If you are wondering where to invest money in Canada, Vanguard is a fantastic option to consider.
Vanguard funds in Canada have some of the lowest fees and diverse ETF products for Canadians.
Mutual fund companies are scared because companies like Vanguard lower profit margins.
But Canadian investors should celebrate the increase in competition and lowering of fees that companies like Vanguard bring.