VGRO is one of the best growth ETFs in Canada. Let me ask you a real quick question – When there are hundreds of great Canadian ETFs, why invest in VGRO? Why not invest in others such as VCN, XIC, XUS, XAW, ZSP, VFV, XUU, XRE, VBAL, or any other growth ETF
VGRO is a balanced ETF. It contains Canadian, US, and international stocks as well as 20% bonds. VFV only contains US stocks. So if you were to buy that as well as VGRO, you’d have a higher weighting to US stocks. VGRO was designed as a one-fund solution. You don’t need any other funds because it contains all the major asset classes already.
Well, here’s the thing right – Vanguard’s VGRO and VEQT hold other Vanguard Canada ETFs. Roughly around 25% of VGRO is invested in VCN. So it’s like buying additional shares of VCN isn’t going to help you diversify.
VGRO ETF also holds VUN. About 30% of VGRO is invested in VUN. And VUN holds over 3500 US-listed stocks, including every stock in the S&P 500 Index. So you aren’t getting any additional diversification by buying an S&P 500 ETF. That’s the beauty of investing in VGRO. It pretty much covers all of your investment needs through one portfolio. In total, VGRO holds over 12,000 different stocks and bonds from around the world. That makes it remarkably well diversified. You don’t need more diversification for your individual portfolios.
In this article I’ll try my best to answer all possible questions you may have regarding Vanguard’s growth ETF VGRO and why you should probably consider investing in this ETF. Let us look at all the factors that’ll not only make investing in VGRO great but why it is something you need to consider.
Also, let’s take a look at the Pros and Cons of VGRO from an Investment perspective and learn more about why I think it’s a very good investment. Now then, let’s get started.
What Is VGRO?
First of all, one of the leading asset management companies in the world is Vanguard. As a result, it has over $6.5 trillion in total assets (AUM) in its possession and still growing. Above all, It’s got total assets of 571.8 Million and its production and income rates are growing every day.
Before we actually begin talking about the VGRO ETF, let us quickly take a look at what Vanguard’s official website has to say about VGRO – “Vanguard Growth ETF Portfolio seeks to provide long-term capital growth by investing in equity and fixed income securities”. And that’s exactly what VGRO has delivered to its investors in terms of performance.
Simply put, VGRO is extremely well-diversified and invests your money in seven of the top-performing Vanguard funds making it extremely robust and high-performance. Also, VGRO yields an excellent dividend of 2.42% annually and pays out quarterly. There’s no denial of the fact that Vanguard’s ETFs are some of the best in the market always and low-cost ETFs in Canada and the rest of the world.
| Aspect | Details |
|---|---|
| ETF Name | Vanguard Growth ETF Portfolio (VGRO) |
| Issuer | Vanguard |
| Asset Class | All-in-One ETF (Equities and Fixed Income) |
| Inception Date | January 25, 2018 |
| Management Fee | 0.25% |
| Ticker Symbol | VGRO |
| Listing Exchange | Toronto Stock Exchange (TSX) |
| Diversification | Global Exposure (Equities and Bonds) |
| Rebalancing Frequency | Quarterly |
| Dividend Distribution | Quarterly (Dividends are automatically reinvested) |
| Objective | Long-term growth with a balanced approach |
| Benchmark Index | Multiple (Combination of equity and fixed income benchmarks) |
| Geographic Focus | Global (Canada, U.S., Developed, and Emerging Markets) |
| Dividend Yield | Varies (Subject to market conditions) |
| Risk Profile | Moderate to High (Balanced risk approach) |
| Minimum Investment | Subject to broker requirements |
| Total Net Assets | As per the latest available data |
| Expense Ratio | Low (0.25% as of the latest available data) |
Why Should I Invest In VGRO?
People are interested in VGRO, not because it has some special sauce or magic stock-picking ability, but rather because it allows you to cheaply and extremely easily implement a well-known Canadian Couch Potato Strategy. This strategy is called the IMO and is a very sensible way to invest your money.
The strategy is essentially you’ll choose an asset allocation (such as stock/bond ratio) that’ll match your goals and ability to take the risk, invest in low-cost index funds, diversify broadly, don’t time the market, and rebalance periodically. VGRO does that (80% stock, 20% bond allocation).
As for returns, VGRO will generate the returns of the underlying markets minus the fund MER which is 0.22%. (That’s about a tenth of what a typical mutual fund charges in Canada.) This fund is not the only way to implement that strategy nor is it the cheapest.
One can reduce the MER to maybe 0.12-0.15% using individual ETFs. But that is more work and requires people to resist the urge to tinker and to stick to their plan. Human nature being what it is, that is asking a lot. VGRO is having an unimpressive year it is because the underlying markets are having an unimpressive year.
It isn’t reasonable to focus on the returns in a particular year and compare it, say, with long-term averages or whichever mutual fund happens to be knocking it out of the park in a given year. Remember on average, everything is having an unimpressive year when markets are.It’s also interesting why there is so much hype about VGRO. For a normal mutual fund, people get excited and attracted to it when it has a huge performance in some time period.
Think something like bitcoin last year or pot stocks recently. The reason to be attracted to this fund is different. It won’t have a huge outsized return over any short-term period. It can’t by construction and never attracts the herd based on that.
People are drawn to VGRO because it simplifies a very sensible, long-term investment process, that should provide investors with their share of market returns over time, a promise that cannot credibly be made by a high-cost actively managed fund strategy or the army of advisors that peddle them.
Also, I don’t think you can put too much stock in the “since inception number” for a fund that has just been around for a year or so. If you want longer-term performance on how an 80/20 couch potato strategy has performed, check out the numbers here.
Top 3 Reasons To Invest In VGRO
1) It is one of the few low-cost, one fund, ETF solutions in Canada.
Vanguard has a stellar reputation
Low MER
Well diversified
Reasonable tracking to NAV
Reasonable liquidity
2) VGRO is run by Vanguard, which is basically a very popular fund house. There are other companies that offer the same, and maybe even for a lower cost but Vanguard is the best known.
3) Even though Vanguard offers three versions of this one-fund solution for different levels of risk. I attribute a large part of this to the fact that many investors here are relatively new to the markets and the markets have been nothing but amazing for years with some of the worst losses in the last 5 years being very manageable and no big deal.
ETFs Vs Mutual Funds Vs GICs
Exchange-traded funds (ETFs), mutual funds, and guaranteed investment certificates (GICs) are all types of investment vehicles, but they have some key differences.
ETFs are a type of investment fund that is traded on stock exchanges, like individual stocks. They typically track an index, such as the S&P 500, and offer diversification and liquidity.
Mutual funds are also a type of investment fund, but they are not traded on stock exchanges. Instead, they are bought and sold at the end of the trading day at the net asset value (NAV) price. Mutual funds also offer diversification and professional management.
GICs are a type of savings vehicle that are offered by banks and other financial institutions. They typically offer a fixed rate of return and are considered to be a low-risk investment. They also generally have a fixed term, and if you withdraw the money before the term is up, you will likely receive a penalty.
In summary, ETFs and mutual funds are both types of investment funds that offer diversification and professional management, but ETFs are traded on stock exchanges and mutual funds are not. GICs are savings vehicles that offer a fixed rate of return and are considered low-risk.
Vanguard Group As An Investment Firm
First of all, Vanguard is one of the world’s largest and leading asset management companies, with more than $6 trillion in assets under management globally.
Vanguard has 100’s of mutual funds and ETFs under its portfolios in each of the different sectors and risk types.
Below is a quick snapshot of the Vanguard Fund House:
| Founded: | 1975 |
| Total assets under management: | $6.6 trillion |
| Funds offered: | 191 in the U.S., and 222 funds in markets outside the U.S. |
| Headquarters: | Valley Forge, Pennsylvania, USA |
| Chairman and CEO: | Mortimer J. Buckley |
| The number of employees: | More than 17,600 worldwide. |
Vanguard Investments Canada Inc.
| Founded: | December 2011 |
| Total assets under management: | $17 billion |
| Funds offered: | 39 ETFs and 4 mutual funds |
| Headquarters: | Bay Adelaide Centre 22 Adelaide St. West Suite 2500 Toronto, ON M5H 4E3 |
| Managing director: | Kathleen C. Bock |
| The number of employees: | 56 |
VGRO Growth ETF – Key Fund Facts
Let’s quickly take a look at the VGRO ETFs Fund Facts –
Inception date :25-01-2018
Net assets: $490.9 M
12-month trailing yield: NA
Distribution yield: NA
Dividend schedule: Quarterly
Distribution per unit: $0.217646
Eligibility: RRSP, RRIF, RESP, TFSA, DPSP, RDSP
VGRO ETF Performance Since Inception
As you can see from the below screenshot, you can definitely expect a descent to good growth for the money you have invested in VGRO. The reason being, VGRO so well-diversified and bang on for your buck.
Like I said before when you are investing with VGRO you are pretty much investing in VCN (25%), VUN and over a 12,000 stock portfolio. That’s how well diversified this ETF really is.
VGRO’s Investment Strategy
VGRO’s Investment Strategy is fairly simple and straight forward for anyone to get a hold of.
VGRO ETF seeks to achieve its investment objective by primarily investing in equity and fixed-income securities. It may do so either directly or indirectly through investment in one or more exchange-traded funds managed by the manager or an affiliate or certain other investment funds.
In seeking to achieve theinvestment objective (under normal market conditions), the sub-advisor will strive to maintain a long-term strategic asset allocation of equity (approximately 80%) and fixed income (approximately 20%) securities.
VGRO’s portfolio asset mix may be reconstituted and rebalanced from time to time at the discretion of the sub-advisor.
Theunderlying funds are expected to be index funds that provide exposure to broad-based equity and fixed income markets.
VGRO Trading Information – TSX (Toronto Stock Market)
Below is the trading information of the VGRO ETF:
Ticker symbol: VGRO
CUSIP :92207X105
SEDOL:BF7ML33
ISIN: CA92207X1050
Exchange: Toronto Stock Exchange
Currency: CAD
What Are The Fees Associated With VGRO?
As you might already know, when trading with ETFs, fees are the most important expenses you need to look at before picking the stock.
VGRO’s Management Fee and MER are not the best in the industry when it comes to fees but still, it’s not too expensive either. Every ETF in the market is associated with a fee.
In case you are not aware of what fees are and why ETF fees are charged in the first place?
Here’s a quick answer – In order to run and manage the ETFs portfolio, every fund house such as Vanguard or Blackrock usually associates the ETFs with a fee.
Again, ETF fees vary from one to another. So do check that out before you pick any ETF for investment.
1. Management fee of 0.22%
2. MER (Management Expense Ratio) of 0.25%
You might notice that the MER Fee Ratio for VGRO is only 0.25%, However, when we talk about the Management Expense Ratio or MER, it’s an extremely important financial metric of any ETF you want to invest in. why so?
Let’s talk about it here – let’s compare VGRO’s MER with say for example with an ETF X or Y here, even when there’s a small MER difference, about .1%, which will compound over 30 years.
On a $30,000 portfolio initially, the cost difference would be about $30,000*.1% or $30.
Compounded over 30 years this would mean that the account balance would be about $900 more.
I’m pretty sure no one would be invested for so long in one ETF portfolio and you ‘ll be making switches every now and then.
But, still, that is a valid point when it comes to MER and picking the right ETF, savings over the time-frame.
VGRO Top 10 Holdings
Below is the list of the top 10 Largest Holdings of the VGRO ETF and of course they are all blue-chips and the heavyweights of their individual sectors.
| Rank | Holdings |
|---|---|
| 1 | Royal Bank of Canada |
| 2 | Toronto-Dominion Bank |
| 3 | Enbridge Inc. |
| 4 | Bank of Nova Scotia |
| 5 | Canadian National Railway Co. |
| 6 | Microsoft Corp. |
| 7 | Suncor Energy Inc. |
| 8 | Apple Inc. |
| 9 | Bank of Montreal |
| 10 | Amazon.com Inc |
As you just saw, the top 10 holdings of VGRO are all the biggies in the industry and reputed blue-chip companies from the US and Canadian stock markets.
That means to only say that, all of your investments are pretty much safe in the short to the long run and keep growing over-time.
Do remember that all of the big companies or blue chips make more profits over time, increasing dividends and thus return more to the fund houses or the investors at the end of the day. So, it is all good here!
VGRO Allocation To Underlying Vanguard Funds
Please read this information carefully, as it is super important. This is where things get interesting. In this section, I’ll talk about where exactly is VGRO investing your money into and how it grows.
| Fund Name | Percentage |
|---|---|
| Vanguard US Total Market Index ETF | 32.1% |
| Vanguard FTSE Canada All Cap Index ETF | 24.0% |
| Vanguard FTSE Developed All Cap ex North America Index ETF | 17.9% |
| Vanguard Canadian Aggregate Bond Index ETF | 11.7% |
| Vanguard FTSE Emerging Markets All Cap Index ETF | 6.1% |
| Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged | 4.4% |
| Vanguard US Aggregate Bond Index ETF CAD-hedged | 3.8% |
Did you notice how well VGRO is diversified into multiple sectors?
This is what I was talking about in the previous section. All of your hard-earned money is split across different portfolios across – The US Blue chips, Canadian Blue chips, Emerging markets – like Japan and India.
By diversifying into multiple sectors – your money is not only that much safer but you gain the benefit of market fluctuation and currency hedging.
In a nutshell, VGRO is well diversified across geographies and into multiple high performing funds of different sectors.
So It’s definitely safer and sound, and you can definitely expect decent to excellent growth over the period of time. Please remain invested for a longer period of time, that’s how you can actually see the greater returns, by compounding.
VGRO Dividends
The annual dividend yield of VGRO ETF is 2.42%. The stock’s currently trading at 26.90 CAD.
Dividends are paid out on a quarterly basis.
Below is the screenshot of the VGRO Price In TSX:
Here’s a quick snapshot of the VGRO Dividends:
VGRO Market Capitalization In Funds (Percentage-Wise)
I’ve listed below the fund allocation and percentage for VGRO ETF
| Fund Allocation | Fund |
|---|---|
Large | 72.54% |
Medium/Large | 3.02% |
Medium | 12.40% |
Medium/Small | 5.33% |
Small | 6.70% |
Total | 100.0% |
That’s a 72.54% allocation into Large-cap funds. What more do you want me to say?
72.54% Of VGRO’s Funds Are In Large-Cap Funds
Large-cap funds or companies are the safest possible investments and your money is that much more likely to grow over time. Examples of large-cap companies In Canada are – RBC, CIBC, Enbridge etc.
According to Investopedia – A large-cap(sometimes called “big cap”) refers to a company with a marketcapitalizationvalue of more than $10 billion. Large-capis a shortened version of the term “largemarket capitalization.”
Market capitalization is calculated by multiplying the number of a company’s shares outstanding by its stock price per share. A company’s stock is generally classified as large-cap, mid-cap or small-cap.
72% of VGRO Funds are held in the Large Cap Funds, followed by 3% in Medium/Large Cap Funds.
VGRO ETF Characteristics
The total number of stock holdings in the VGRO ETF is a staggering 12,143 stocks!
Out of that, we’ve only seen the top 10 large-cap holdings in the previous section.
Do notice the Earnings Growth Rate – it is 8.27% which is seriously good!
Many people tell young investors that they don’t need fixed income but others (like Justin Bender, Dan Bortolotti, and Andrew Hallam) who have observed how novice investors react to the markets are a lot more cautious about that kind of advice. They know that a good risk assessment balances timeframe with knowledge, experience, and tolerance for volatility and that it is possible that your risk tolerance may increase as you get older.
| Fund | |
|---|---|
| Number of shareholdings | 12,143 |
| Median market cap | 1.0 B |
| P/E ratio | 12.8 x |
| P/B ratio | 1.4 x |
| Return on equity | 11.37% |
| Earnings growth rate | 8.27% |
VGRO Market Allocation Exposure By Region
VGRO is a well-diversified stock geographically.
Over 70% of your money is invested in US & Canadian stocks, with other major holdings in Japan, UK, and China.
Complete Stats below:
| Market Allocation | Fund |
|---|---|
| United States | 40.4% |
| Canada | 30.6% |
| Japan | 5.5% |
| United Kingdom | 3.6% |
| China | 2.3% |
VGRO Sectorise Breakup
In this section, let us look at the sector-wise breakup for VGRO (I mean to say what sectors does this ETF invest your money in?)
As I said before, VGRO is a very well-diversified ETF Portfolio. You can see for yourself here with the sectors in that your money will be invested in:
| Sector | Fund |
|---|---|
| Financials | 26.4% |
| Industrials | 13.4% |
| Technology | 12.1% |
| Consumer Services | 10.7% |
| Consumer Goods | 8.8% |
| Oil & Gas | 8.6% |
| Health Care | 7.8% |
| Basic Materials | 6.1% |
| Utilities | 3.5% |
| Telecommunications | 2.6% |
| Other | 0.0% |
| Total | 100.0% |
VGRO ETF Returns
In this section, let’s quickly look at the VGRO returns since inception and for the past couple of years using the standard template.
Below is the screenshot showing the VGRO returns over time:
VGRO Growth of $10,000 over the years:
As you can see from the above performance charts, VGRO has returned a staggering 17.77% to its investors for the past year alone.
From the second chart above, you can see that VGRO Returns were extremely good until the Pandemic hurt its rally. Just look at how quickly your $10,000 invested in March 2019 would have grown to just shy of $11000 in Jan 2020 (that’s on 9 months). That’s VGRO for you.
That is way better than the average mutual funds or any industry leader ETF (sector-wise) returns over a similar time frame.
Also, don’t forget the annual dividend of 2.72% which adds on top of this. Do you seriously need any more considerations to invest in this ETF? Are you still not convinced here?
Pros Of VGRO
Below are some of the pros of investing in VGRO:
1. Cost-effective: VGRO portfolios are extremely low cost compared to others. Low-cost portfolios usually return big profits. VGRO ischeap. People love the low MER and there are many platforms that also offer free ETF purchases.
2. Assets management: VGRO’s assets mix are designed to meet the requirement of every investor
3. Detailed diversification: Fixed markets of income and equity will help to bring a sustainable and risk-free return. That’s the dream of every investor. VGRO is very welldiversified. 80/20 Securities/FI split, it’s globally diversified, and from a risk management perspective that’s a fantastic idea.
4. Regular Maintenance: Folks at Vanguard VGRO always keep rebalancing the rates and Interest percentages. As a result, you save all the headaches and costs of the rebalancing stuff
Cons Of VGRO
Below are some of the cons of investing in VGRO:
1. Even though VGRO is well-balanced and diversified across the globe and sectors, still it has a high-risk basket of stocks.
If you do not prefer high-risk securities, then avoid VGRO as their only holdings – but should diversify ( All I mean to say is don’t go all-in with VGRO).
Again, age is not the only factor in determining the risk levels of investors. If you are looking for investments with lower risk types you have many other options, in the Vanguard family if you need it.
2. Next, VGRO is not tax efficient. This may not be a bummer to you, but still, this is something you need to be aware of before you invest
3. Again, VGRO is not the lowest-cost solution (remember the MER and Management Fee we spoke about earlier – that’s what I’m referring to here), but for the small-time investors and portfolios with less capital infusion, it is certainly one of the best in terms of market growth, robustness and stability.
4. Fourth, and the last one here, one of the cons of VGRO is that it only holds high market cap stocks (blue-chips) and a small number of bonds too.
5. You get little to no small-cap securities exposure.
6. VGRO has a much heavier equity weighting with only about 20% fixed income and 80% equity. VBAL has about 40% fixed income and 60% equity. And VCNS has 60% fixed income and 40% fixed income.
7. VGRO will have much higher swings. When the market is up, it’ll be up more. But when the market is down, the downs will be much lower too
There is this market sentiment that bonds are not always the right portfolio mix because of their lower yield, however, there is nothing wrong in holding a mix of equities and bonds to balance out the risk involved (which is actually true).
That said, for a small portfolio investor with capital less than $50,000, always pick your investments in a way that you are covered for the worst scenario.
VGRO vs. XGRO
First of all, XGRO is from the Blackrock family and it stands for the “ISHARES CORE GROWTH UNT ETF”.
Just in case you don’t know, VGRO was around before XGRO, so it’s more well known. In fact, VGRO has become a proprietary eponym (like Kleenex, Bandaid, Hoover, etc) for an 80/20 growth ETF with low fees.
I personally went with XGRO because it has a slightly lower MER and skews toward the US more than Canada, but the differences are negligible. There’s also ZGRO now, too.
How Do the XGRO Returns compare to that of VGRO?
Next, let’s look at the chart comparing the “Maximum” timeframes Of VGRO and XGRO for the returns:
As you can see from the above chart, VGRO is a clear winner here. Nothing more to say. Hands down.
Below is the XGRO Returns Since Inception for your reference:
As you can see from the above chart, the returns of XGRO is not all that bad at all, in fact, its extremely good.
Look at the returns of XGRO since inception, it’s a mind-boggling 32.55%. Also, look out for returns for the past 10 years, it is 67%. Woohoo! What more do you need?
Since we are only comparing VGRO and XGRO here, even though both these stocks look almost similar, VGRO is way better in terms of growth and making use of your hard-earned money better. That’s what I feel at least.
VGRO vs. VCN
Both VGRO and VCN are from the same fund house, Vanguard Inc.
Again, both are excellent Canadian ETFs with diversified portfolios. I’ve already extensively talked about VGRO and VCN in the previous sections.
Here, let’s quickly compare the market returns when it comes to VGRO Vs. VCN and see which one is the actual winner for your buck.
As you can see from the above screenshot, VGROs market returns are slightly above and better than VCNs return, when it comes to the overall market returns (I’ve selected the max time frame for better understanding over longer-timeframes).
One important aspect you need to see is, since the COVID-19 outbreak and the market rebound, VGRO seems to be doing extremely well in terms of bouncing back than VCN.
Just look at the last part of the graph in the above screenshot. (Blue line is VGRO). That’s something to consider as well, especially when the markets are bottomed out and looking for a rebound. VGRO seems to be doing better than VCN here.
In the above screenshot, a quick comparison of the dividends of VGRO Vs. VCN. At the moment VCN’s dividend is slightly above and better than VGRO.
VGRO vs. VFV
VFV is the Vanguard’s S&P 500 ETF.
Let’s quickly compare VGRO with VFV and see which one is actually better than the other in terms of the overall market returns.
1. The first chart I am going to share is the YTD Returns (VGRO Vs. VFV)
As you can see from the above chart, not much of a difference right in terms of percentages? True. But hold on a second until you see the next screenshot.
2. In the second screenshot, I’ve changed the timelines to reflect the maximum time frame for both the ETFs (VGRO and VFV)
Now that’s quite a difference in terms of returns, right?
With VFV, you’re getting far better returns as compared to VGRO for the same time frame. Now, why is that so? It’s quite simple – VFV tracks the largest and the best US S&P 500 stocks Index.
Also, remember the one thing that I’ve said at the start of this article about VGRO which summarizes all these comparisons –
Vanguard’s VGRO and VEQT hold other Vanguard Canada ETFs. Roughly around 25% of VGRO is invested in VCN. So it’s like buying additional shares of VCN isn’t going to help you diversify.
VGRO ETF also holds VUN. About 30% of VGRO is invested in VUN.
And VUN holds over 3500 US-listed stocks, including every stock in the S&P 500 Index. So you aren’t getting any additional diversification by buying an S&P 500 ETF. That’s the beauty of investing in VGRO. It pretty much covers all of your investment needs through one portfolio.
In total, VGRO holds over 12,000 different stocks and bonds from around the world. That makes it remarkably well diversified. You don’t need more diversification for your individual portfolios.
VGRO vs. VEQT
First of all, I am comparing VEQT vs. VGRO here coz I’ve been reading a lot of people really interested in VEQT and comparisons everywhere on which one is better than the other.
Last 10 years VEQT made you a lot of money. However, the next 10 years could be very different. We could be looking at very choppy equity returns going forward. Even being young with decades on the horizon I’d still probably drop that assumption equity markets will outpace all other asset classes. That’s really starting to look like not a guarantee.
What Is the VEQT ETF all about?
VEQT is the All Equity Portfolio ETF from Vanguard. Here’s the fund objective from Vanguard themselves “Vanguard All-Equity ETF Portfolio seeks to provide long-term capital growth by investing primarily in equity securities.”
VEQT is 100% equities white VGRO is 80% equities and 20% bonds and has some REITs in there too.
VEQT being a pure equity play would in general be more volatile, but could potentially give you higher gains over the long term. It could potentially not too.
Opinions are pretty divided and people will cherry-pick certain time periods to show when equities outperformed bonds or vice versa, but from most of what I’ve read the 20% bonds allocation in VGRO smooths out some of the volatility without being a big drag on performance.
Automatic rebalancing will work in your favor too. So I’d recommend VGRO over VEQT personally for an all-in-one solution. The fund is still very new and was only launched in Jan 2019 with not much data to analyze the returns over time.
As it is an all-equity stock, VEQT allocates 99% into stocks (US & Canadian) and 0.33% into Short-term reserves.
Here’s a quick summary of where VEQT invests your money in:
Fund Name/Percentage allocation (out of 100%)
1. Vanguard US Total Market Index ETF 40.70%
2. Vanguard FTSE Canada All Cap Index ETF 30.10%
3. Vanguard FTSE Developed All Cap ex North America Index ETF 21.80%
4. Vanguard FTSE Emerging Markets All Cap Index ETF 7.40%
VGRO Vs. VEQT (Maximum time frame selected for the best analysis of market return)
Again comparing both in terms of growth and dividends, VGRO wins hand down. When it comes to the dividend, VEQT pays no dividends, while VGRO does at 1.92% currently.
VGRO vs. ZSP
While VGRO is from the Vanguard Fund House, ZSP is from BMO.
ZSP ETF tracks the S&P 500 US returns.
In this section, let’s quickly look at the returns of ZSP and compare it with VGRO.
For the comparison, I’ve selected the maximum timeframe for both the ETF returns. As you can clearly see, ZSP wins here with almost 32% returns over time, while VGRO returns a mere 12.75%.
VGRO is more diversified when compared to ZSP. If that’s something you are looking for before you invest.
VGRO is slightly better than ZSP in terms of dividends paid. But, that’s a fractional increase when compared to ZSP.
VGRO vs. VBAL vs. VCN
When you compare VGRO to the likes of VBAL and VCNS, which are other great picks when it comes to ETFs – The advantage you get with VGRO is that – almost 80% of the portfolio is made of equities or stocks and the rest 20% into bonds.
VGRO has an 80/20 allocation for stock and bonds, VBAL has 60/40 and VCN majority into Canadian stocks. You should also know that VCN has been around much longer than the other two and has a much lower management fee (MER). Again, all three are really good picks. It all depends on what your needs are – at the end of the day.
Here’s a possible model portfolio you may consider:
First Option: 100% VBAL
Second Option: 100% VGRO
Option 3: VCN + XAW + ZAG (Canadian Couch Potato Approach)
Like I said, Option 3 is the Canadian couch potato model portfolio. If you set your bonds ratio at 20% or 40% its performance should be very close to that of VGRO or VBAL (remember – its slightly lower fees but more work for you).
Option 3 also has the flexibility that allows you to adjust your allocation for stocks/bonds to any ratio that you want (That should do the trick for your correct?. I mean in case you are a little confused on which ones to pick of the three here)
As a matter of fact, more weightage into the equities is always better if your intention is inclined towards faster investment growth, especially a mix of US, Canadian and Emerging Markets.
Again, it all depends on various factors of the individual investing – what kind of an investor you are, what is your age, risk appetite, how long is your investment plan, what are your other considerations.
For example – A 50-year-old investor may find ETFs with more exposure to Bonds to be safer for his risk appetite. Right? That’s fair too.
Therefore it all depends on what your individual choice is and where you want to park your hard-earned money. My only goal is to provide knowledge that will help you along the path. I’m no expert here sitting and preaching things.
At the end of the day, whether you’re going to pick VGRO, VBAL, VCNS or any others like XRE, XAW (different fund house), it’s your choice. Better have a complete understanding before you invest. Once you have invested always leave it for the long term. By long term I mean to say more than 5-10 years at least for the investment/s to mature and grow compunded over time.
VGRO Investment Strategy
If you prefer the 90/10 equities to bonds split you can very well purchase 50% VGRO and 50% VEQT.
That way overall your money would be in 90% stocks and 10% bonds.
If you want to risk even more and invest all in VGRO, then you’ll have to sell 50% of the value and buy VEQT with it to get to 90/10. Otherwise, you can probably start exclusively buying only VEQT to bring the percentage in line over time.
The asset allocations in the funds themselves don’t vary from the specified percentages so if you want your own custom allocation you have to switch between multiple ETFs to get your overall percentages where you want them.
You may have to rebalance periodically to keep your allocations where you want them depending on the fund’s performance and your ongoing contributions to each of the ETFs.
Definitely do your homework and shop around though, there are lots of ETFs on the market and quite a few are designed to be an all-in-one solution.
Another way to look at investing in VGRO is through Dollar Cost Averaging or Lump Sum Amounts at regular intervals.
DCA (Dollar Cost Averaging) vs. Lump Sum investing debate is a never-ending debate. Right now, it seems crazy to put a large lump sum into the market.
The problem is that the market is a forward-looking pricing machine and is totally irrational. There is no way for the average investor to know for certain that the terrible economic news coming out right now isn’t already priced into the market expectations/market prices right now.
I, for one, am a proponent of the Lump Sum strategy. If I had a plan to DCA over 12 months and I saw the market flying upwards, I would be kicking myself for not getting in earlier, as it would be clear that I was missing out on gains. I would rather just get all in with the lump sum windfall and then continue along with my monthly contributions as a means of DCAing (by still sticking to my investment strategy).
Whether you DCA over 12 months or Lump Sum, it will likely not matter at all in 30 years.
How To Buy VGRO?
If you are wondering which platforms offer the best rates (commission-free) to purchase ETFs or VGRO in general, let’s look at that in this section.
Wealthsimple Trade – Wealthsimple trade offers commission-free trading whether its stocks or ETF. You do not pay commissions to buy or sell stocks or ETFs.
Wealthsimple Trade is highly reputable and the #1 auto investing app in Canada. It’s very similar to Robinhood in the US. Also, the UI is extremely intuitive and easy to search for “VGRO” and purchase. My #1 choice to buy VGRO or any Canadian ETF is “Wealthsimple Trade” for sure. The simple reason being, you can save so much more in fees and use the same money to invest instead.
Questrade – Questrade is another Canadian platform and brokerage firm you can choose to buy VGRO. Questrade again offers commission-free ETF trading. Meaning you do not have to pay to buy ETFs in Questrade.
Banks – If you feel banks are the safest instruments to hold your investments/savings, I am with you on this. There’s nothing better than banks for safety. However, note that banks charge a one-time fee of $10 to buy and $10 to sell ETFs or VGRO in this case. Also, there’s the annual maintenance fee that banks usually charge with low account balances. Each bank has different prices, so do check out their websites to determine which is the best bank with minimal fees based on your preference.
Final Words
I’ve pretty much-covered everything about VGRO here, also mentioning few other great picks from the Vanguard fund house in this article.
ETFs are bought just like normal securities on a brokerage. You can buy and sell them anytime during the trading day just like a stock.
Questrade is a favorite amongst Canadians as they offer free ETF purchases:
If you’re under the age of 25
You have a minimum $5,000 account balance
You are willing to trade for a certain dollar value of transactions per quarter
Moreover, you can start with $20 if you really wanted to since you’re not paying fees on buying the ETFs with Questrade, but you’ll pay commission fees if you’re selling them.
As I’ve been saying throughout the post, VGRO is really good for your investments – Be it in your TFSA’s, RRSP’s or brokerage. The kind of returns seen here are really good, also the overall objective of this ETF is robust with 75% of large-cap US and Canadian stocks.
Also, we saw that VGRO is globally diversified across multiple asset types and markets. If you are looking at growth ETFs alone, you might also want to consider ETFs like ZSP or VFV which actively tracks the US S&P 500 Index. ZSP especially is extremely volatile and the returns since inception are very good.
