Vanguard’s Asset Allocation ETFs offer One Stop Shopping for broad diversification and low fees

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Vanguard Asset Allocation ETFs

I don’t normally suggest one company’s products, but the newish (February, 2018) Vanguard Asset Allocation ETFs are so good that they deserve special mention. As of now, they have attracted over $800 million in investments. Not bad for a product that has been available for 9 months. Full disclosure – I have bought them for my daughter’s medium and long term investing accounts.
What you get with one purchase, is a choice of 3 broadly diversified ETF packages, which each contain 7 underlying ETFs. You choose between the more aggressive VGRO (80% stocks/20% bonds) through to Conservative VCNS (40% stocks/60% bonds), or Balanced VBAL (60% stocks/40% bonds). The 7 underlying ETFs give you both the stocks of the world as well as the bonds of the world.

Management Expense Ratio (MER) of .22%
There are two additional advantages. First, the ETFs automatically rebalance their holdings, so there is no buying and selling for you to do. Second, this is all offered at an extremely reasonable Management Expense Ratio (MER) of .22%. Compare that to BMOs Smartfolio with a MER of around .9% or Tangerine’s funds, with a MER of 1.07 %. Clearly, Vanguard, which for decades has positioned itself as the low-cost leader of the investing world, is throwing down a challenge for others to try to match. To date, I am not aware of any other company which comes close. For example, actively managed “Balanced” international mutual funds, which offer similar diversification, carry a MER of around 2%, almost 10 times the Vanguard ETFs. One fund, the Templeton Balanced Global Fund has a MER of 2.31% (1.2% if no trailing commissions are paid to a broker or financial adviser). Unfortunately, research by S&P Index Versus Active (SPIVA) has shown that 95% of actively managed Canadian international funds have underperformed their respective indexes over a ten-year period, mainly because the managed funds cannot overcome their high expenses.

For more information, visit the Vanguard website here:

Vanguard Canada

 

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