Vanguard is a well-known low-cost ETF provider around the world with a diverse lineup of ETFs available for Canadians to purchase. VBAL and VGRO are two ETF portfolios that are both offered by Vanguard, although you may not be aware of the key differences between the two.
Although mutual funds continue to experience net redemptions, Canadian ETFs have grown in assets. ETF growth has increased from $1.85 billion in the month of September 2022 to $3.35 billion in the month of October 2022.
In this head-to-head comparison, I will go over which ETF portfolio is best across the following categories:
- Fees
- Performance
- Yield
- Length of track record and fund size
- Risk
I will outline VBAL vs VGRO below and go through how the two ETFs compare across the above criteria.
Understanding All-In-One ETF Portfolios
VBAL and VGRO are both all-in-one ETF portfolios as part of a full suite from Vanguard. These portfolios are typically differentiated by their allocation to equities and to fixed income. ETF portfolios have different stock and bond weightings based on the fund’s advertised risk profile.
All-in-one ETFs have standard naming conventions and usually look something like this:
- Very Conservative
- Conservative
- Balanced
- Growth
- Maximum Growth
A very conservative ETF will likely be close to 100% invested in fixed income while a maximum growth ETF will be closer to a 100% investment in stocks. Be mindful that VBAL is a balanced portfolio while VGRO is a growth portfolio.
VBAL vs VGRO: Fees
Both the Vanguard Balanced ETF Portfolio and the Vanguard Growth ETF Portfolio are offered by Vanguard at identical management fees and management expense ratios.
Currently, both VBAL and VGRO are offered at a management fee of 0.22% and a management expense ratio of 0.24%.
Relative to most ETFs and mutual funds, both VBAL and VGRO are offered at very low fees. This helps you to grow your money over long periods of time at a higher rate because of a lower fee drag.
Fees verdict – VBAL and VGRO are tied since they are both offered at identical management fees and identical management expense ratios.
VBAL vs VGRO: Performance
Performance is always an important topic of conversation when comparing ETFs, mutual funds, or even stocks. VBAL and VGRO have had a substantial difference in performance when comparing the two since their inception (they were both launched on the same day).
A critical thing to keep in mind when looking at the performance between VBAL and VGRO is that it is not an apples-to-apples comparison.
VGRO has a higher allocation to equities (or stocks), while VBAL has a higher allocation to bonds. Stocks as an asset class have substantially outperformed bonds in terms of return.
When comparing the performance between VBAL and VGRO over three years and one year, VGRO has outperformed in both cases.
Keep in mind that during a rising rate environment, bonds tend to perform extremely poorly. This is reflected in the short-term performance of VBAL, which has a higher allocation to bonds than VGRO.
Although VBAL is positioned as a lower-risk alternative to VGRO, the rapid rate of interest rate increases around the world has caused the portfolio to actually drop in value more than VGRO. The lower-risk characteristic is more appropriate to consider over longer periods of time.
Performance verdict – VGRO has outperformed VBAL significantly over most periods of time, making it the clear winner. Keep in mind that VGRO is a more aggressive portfolio, meaning that it is intended to offer a higher rate of return. Note that this does not guarantee any higher performance by VGRO over VBAL in any given short-term period.
VBAL vs VGRO: Yield
Investors that are looking for yield from their investments will be interested to know how often and what sort of distribution yield to expect from their investment.
Both VBAL and VGRO offer investors distributions on a quarterly basis.
Since VBAL has a higher allocation to bonds, it can be expected to have a slightly higher distribution yield. When looking at the current 12-month yields for both VBAL and VGRO, VBAL’s yield is slightly higher.
Keep in mind that the yield does not paint a full picture when it comes to returns. Although VGRO has a lower 12-month yield, it is expected to reward investors more in the form of capital gains (or the value of the ETF increasing).
Yield verdict – both VBAL and VGRO offer quarterly distributions, but VBAL is the winner due to its marginally higher 12-month yield, which is likely due to holding more bonds than VGRO.
VBAL vs VGRO: Length of Track Record and Fund Size
Two key things that investors should be concerned with when investing in an ETF or a mutual fund are the length of the fund’s performance track record (how long since the fund was launched) as well as how large the fund is (measured by assets under management).
Both VBAL and VGRO were launched on January 25, 2018, meaning that the length of both of their track records is identical. With a performance track record of a few years, both ETFs are fairly new and have a short performance track record.
When it comes to fund size, both VBAL and VGRO are very large ETFs, with over one billion dollars in assets under management. VBAL currently has more than $2 billion in assets under management, while VGRO has over $3.5 billion in assets under management. VGRO is a substantially larger ETF when it comes to assets.
Fund size is more important when considering newer funds that are very small in size (single-digit millions of assets under management). Funds that are unable to attract enough capital from investors early on run the risk of having to close down early due to profitability issues. This is not a risk for either VBAL or VGRO.
Length of track record and fund size verdict – when it comes to the length of track record and fund size, both VBAL and VGRO have identical-length track records but VGRO is the winner with a much larger asset base.
VBAL vs VGRO: Risk
Risk is another important factor to consider before investing in an ETF. Higher-risk investments come with higher potential returns but typically greater price swings in the short term. All ETFs are required by law to disclose a risk rating within their fund facts documents.
When it comes to both VBAL and VGRO’s fund facts documents, both ETFs are outlined as carrying a low-to-medium risk. In reality, VGRO is a riskier investment because of its higher allocation to equities (which are considered higher risk relative to bonds).
VBAL aims to have an asset allocation of roughly 60% equities and 40% fixed income. VGRO, on the other hand, aims for an asset allocation of approximately 80% equities and only 20% fixed income. Among the two funds, VBAL is a more conservative option and comes with a lower risk.
Choosing a lower-risk investment is not always the best course of action, especially if you are an investor with a high-risk tolerance and a long investment time horizon.
Risk verdict – when it comes to the riskiness of both ETFs, VBAL and VGRO have identical risk ratings. Since VBAL has a lower equity allocation, it is a lower-risk option and is the clear winner here.
Frequently Asked Questions
VBAL vs XBAL
VBAL is Vanguard’s balanced all-in-one ETF portfolio, while XBAL is iShares’ core balanced all-in-one ETF portfolio. They are very similar in terms of structure and function and mainly differ in terms of asset manager provider (Vanguard and Blackrock).
You can find more details in both my overview of iShares’ all-in-one ETF series and Vanguard’s all-in-one ETF series.
ZGRO vs VGRO
VGRO is Vanguard’s growth all-in-one ETF portfolio, while ZGRO is BMO’s growth all-in-one ETF portfolio. Again, they are similar in structure and function and mainly differ in terms of the investment manager (Vanguard and BMO Global Asset Management).
You can find more details in both my overview of BMO’s all-in-one ETF series and Vanguard’s all-in-one ETF series.
VCN vs VGRO
Although both VCN and VGRO are offered by Vanguard, they are very different ETFs in terms of structure and purpose.
The VCN ETF aims to invest in the broad Canadian stock market and holds mainly stocks within its portfolio. VCN will likely be inappropriate as a one-ticket solution within your portfolio because it leaves you under-diversified across asset classes and geographical regions.
The VGRO ETF is an all-in-one ETF that invests in multiple underlying ETFs in an attempt to build a holistic portfolio for investors with a growth objective from their portfolio. VGRO is a fund-of-funds and is positioned as a one-ticket portfolio solution.
Our Final Verdict
Although the comparison is not exactly apples-to-apples, VGRO is an overall winner relative to VBAL, mainly since it has managed to outperform VBAL even during periods of market volatility (during which VBAL should theoretically outperform).
Despite this, there are specific situations in which to consider investing in either VBAL or VGRO.
Consider investing in VBAL if:
- You do not have a high-risk tolerance (as VBAL is the less-risky option)
- You are looking for a high yield
- You do not have an extremely long investment time horizon
Consider investing in VGRO if:
- You have a high-risk tolerance (as VGRO is the riskier option)
- You are less concerned with yield from your investments
- You have a very long-term investment time horizon
Both ETF portfolios from Vanguard remain excellent choices as all-in-one ETF portfolios.
Make sure to read my Vanguard all-in-one ETF series to learn more about VBAL, VGRO, as well as the other all-in-one ETF portfolio solutions available from Vanguard.
