I’m a huge fan of Vanguard. The company is essentially a non-profit asset management firm since all of the profits are returned to investors in the form of lower fees.
The Vanguard VGRO ETF is one of my favorite ones in this series. Let’s go over the reasons why:
Use: ETF Portfolio
Wealthawesome Score: 4.8/5
- Easy to use and purchase
- Set it and forget it
- Provides diversification in one neat package
- Lower MER than robo-advisors and much lower than mutual funds
- Unlike a mutual fund, VGRO can be traded like a stock on an exchange.
- The country mix might not be what you wanted. I think the weighting towards Canadian assets is too high.
- Fees are slightly higher than a competitor such as iShares’ XGRO
Vanguard VGRO is a growth ETF portfolio that automatically rebalances at a low annual MER.
What is the VGRO ETF?
VGRO is a growth exchange-traded-fund (ETF) portfolio that has been trading on the Toronto Stock Exchange since January of 2018.
There is already $919 million in assets in the fund, which signifies investors growing appetite for an easy passive investing solution with low fees.
What types of investments are inside of VGRO?
VGRO consists of several different Vanguard ETFs. The asset mixes are designed to give you worldwide exposure, as you can see here:
For VGRO’s asset allocation, 56.6% is split between US and Canada equities, with international equities and emerging markets taking up around 23.2%. The rest consists of bonds.
VGRO Asset Allocation:
Currently, there are five different types of Vanguard portfolios, ranging in allocations from conservative to all equity.
VGRO has an 80/20 split, making it 80% equities and 20% fixed income, which is why it is classified as a growth type of investment.
One of the best features of these portfolios is that you don’t need to rebalance it, as you would have to if you were to make the portfolio yourself.
Because of this feature, you will save on trading fees, plus you never have to worry about monitoring your asset mix.
VGRO has a management fee of 0.22% and an MER of 0.25%. Even though this MER is higher than if you were to buy individual ETFs, I like it for several reasons:
- The portfolio is automatically rebalanced, so you never have to worry about your asset mixes getting misaligned from what your original goals are.
- The MER for VGRO is much lower than mutual funds
- The MER for VGRO is even lower than robo-advisors.
As of September 30, 2019:
- 12-month trailing yield: 2.20%
- Distribution yield: 2.05%
- Dividend schedule: Quarterly
There isn’t much data on VGRO since it just started in 2018. However, there shouldn’t be too many surprises with performance, since the ETFs will perform its duties of mirroring the markets.
Here is the performance so far, no surprises are so far given the underlying ETFs, with a YTD return up to September 30th of 12.86%.
The top 10 holdings consist of top blue-chip stocks in Canada and the U.S as you can see below.
Because you are basically getting exposure to the entire world of stocks, the entire holdings consist of thousands of stocks.
You will always be diversified if you purchase VGRO, and can rest assured that it will be large companies that will be around for a while.
Cons of VGRO
I personally feel there is too much Canadian exposure in VGRO. U.S stocks tend to outperform Canadian stocks in the long run, so I would have liked to see an even higher weighting to the U.S.
You don’t have control over what sectors or countries you would like to overweight.
XGRO vs VGRO
iShares Core Growth ETF Portfolio, or XGRO, is a similar product that is offered by Blackrock. XGRO has slightly lower MER than Vanguards VGRO at 0.20% vs 0.25%, and a slightly different asset mix also, seen here:
The U.S and international weighting are slightly more, and Canadian and emerging markets are slightly less.
Overall, there isn’t much of a difference, and you can’t go wrong with either. However, until Vanguard lowers its fees to be the same as this iShares one, I think I would have to side with iShares. I like that it has a higher U.S weighting also.
Who should buy VGRO?
If you have a higher risk tolerance and have a TFSA or RRSP account that you just want to set and forget, VGRO could be the perfect ETF for you.
You won’t have to worry about rebalancing the portfolio, just contribute to it regularly and watch your assets grow.
Vanguard’s VGRO is a great option for investors who want worldwide diversification, and to have passive index investing without need to monitor the account at all.
I like to think of investing like exercising. If the gym that you go to is difficult to get to and out of the way, the less likely you are to go to it.
Same with investing, if it is too confusing or you need to monitor too much, many people just won’t bother with investing at all.
That’s why I think these new Vanguard portfolio series are so great: just buy it and forget it, and watch your account grow over the years!