The Best Indexing Solution? All-in-One Balanced Vanguard Indexed ETFs

When I wrote an article about how my American friends can easily index their portfolio with Vanguard Target retirement funds, I was wondering when/if these products would come to Canada.

To rewind a little, the Vanguard retirement funds allow you to pick a fund based on the year that you want to retire. The fund will then automatically adjust your asset allocation of indexed equity/bonds as you get closer to retirement.  All of this for a fee of less than 0.16% – cheaper than what we would pay for a basket of index ETFs in Canada.

Up until recently, Canadians could almost mimic these all-in-one balanced ETFs with either Tangerine mutual funds with a MER of around 1%, or via a Robo Advisor that would charge a fee of at least 0.40% + ETF MERs.  These fees are reasonable, and the products are great, but can we do better with just as much convenience?

Vanguard has created three new ETFs that I believe are game changers for passive index investors out there.  These three ETFs are essentially balanced ETFs with set asset allocation and will rebalance automatically to maintain the set ratio of equity/bonds.

No more doing calculations then buying/selling positions to maintain your asset allocation –  simply keep buying one ETF and forget it!  Oh and get this, the MER is 0.25% which is not far off from what you’d pay for a basket of low-cost index ETFs – which you would need to rebalance yourself.  To lower costs even further, consider a discount brokerage that offers commission-free ETF trades.

Vanguard All-in-One ETFs

Here are the three Vanguard ETFs straight from the Vanguard website:

Vanguard ETFInvestment objectiveTickerStrategic asset allocation
Vanguard Conservative ETF PortfolioSeeks to provide a combination of income and moderate long-term capital growth.VCNS40% equity/
60% fixed income
Vanguard Balanced ETF PortfolioSeeks to provide long-term capital growth with a moderate level of income.VBAL60% equity/
40% fixed income
Vanguard Growth ETF PortfolioSeeks to provide long-term capital growth.VGRO80% equity/
20% fixed income

View the Best All-in-One ETFs in Canada

View our comprehensive comparison of the best all-in-one ETFs in Canada to decide which is best suited for your needs.

The Holdings

Vanguard Conservative ETF Portfolio (VCNS – 40% equity/60% fixed income)

  • 35.4% Vanguard Canadian Aggregate Bond Index ETF
  • 14.9% Vanguard US Total Market Index ETF
  • 14.3% Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged
  • 11.8% Vanguard FTSE Canada All Cap Index ETF
  • 10.7% Vanguard US Aggregate Bond Index ETF CAD-hedged
  • 9.9% Vanguard FTSE Developed All Cap EX North America Index ETF
  • 3.0% Vanguard FTSE Emerging Markets All Cap Index ETF

Vanguard Balanced ETF Portfolio (VBAL – 60% equity/40% fixed income)

  • 23.8% Vanguard Canadian Aggregate Bond Index ETF
  • 22.4% Vanguard US Total Market Index ETF
  • 17.8% Vanguard FTSE Canada All Cap Index ETF
  • 14.8% Vanguard FTSE Developed All Cap EX North America Index ETF
  • 9.5% Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged
  • 7.2% Vanguard US Aggregate Bond Index ETF CAD-hedged
  • 4.5% Vanguard FTSE Emerging Markets All Cap Index ETF

Vanguard Growth ETF Portfolio (VGRO – 80% equity/ 20% fixed income)

  • 29.9% Vanguard US Total Market Index ETF
  • 23.8% Vanguard FTSE Canada All Cap Index ETF
  • 19.9% Vanguard FTSE Developed All Cap EX North America Index ETF
  • 11.9% Vanguard Canadian Aggregate Bond Index ETF
  • 6.1% Vanguard FTSE Emerging Markets All Cap Index ETF
  • 4.8% Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged
  • 3.6% Vanguard US Aggregate Bond Index ETF CAD-hedged

Final Thoughts

As you can see from how I opened the article, I’m pretty bullish about these ETFs.  Vanguard has created a product that offers a globally diversified indexed portfolio by purchasing a single low-cost ETF.  I’m not sure it can get much better than this for a passive investor.

If you are an investor with a long timeline before retirement, consider VGRO which has a higher percentage of equities. As you get closer to retirement, you may want to reduce the volatility in your portfolio by increasing your bond allocation by switching to either VBAL or VCNS.  Or you could buy a bond ETF to supplement the portfolio – whichever is easier for you.

Are there any downsides?  I’m not sure if this would be considered a downside, but there are tax implications that you should be aware of.  Since these ETFs automatically rebalance between equity/bonds on a regular basis to maintain their ratios, they will incur capital gains tax (in addition to taxation on their distributions) if they are held in a taxable account.  Because of this, I would recommend keeping these ETFs within tax-sheltered accounts.  I wonder if Blackrock (iShares) will counter with a similar product.

For more reading on passive investing, here are 6 other ways to index your portfolio.

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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2 years ago

Oh, one more thing when I pro-rate the MER of each underlying ETF against the asset allocation % of each ETF, I get a total blended VGRO MER of 0.16%. Is the difference between this value and the VGRO MER the price to pay for the auto-balancing? Or is there a problem with the pro-rating approach?

If the pro-rating approach is ok, could I do the same to predict the potential 5yr VGRO return?

2 years ago
Reply to  FT

thanks for confirming :)

2 years ago


Thanks for the great posts, always interesting to read :)

With such a new ETF is there any concern regarding the returns or lack of historical returns? I’m considering VRGO but am having difficulty gauging what sort of return to expect, the inception to date return is not showing strong but 1 yr is not long enough to really be indicative of what this ETF is capable of over the long term. VRGO is no doubt a simple option with a great MER but I’m not clear on the aspect of returns.

Anyhow, I would appreciate your thoughts.

Thanks in advance.

2 years ago
Reply to  Mike

That is because the fund is less than one year old. As per Vanguard website, “Canadian law does not allow the display of performance data for ETFs less than one year old. Performance data will be provided after the Vanguard ETF has distributed securities for at least one year.”

2 years ago
Reply to  moneyhelp

Thanks for the reply. So given the lack of performance history, are people looking at the underlying ETFs to determine what sort of returns can be expected from a balanced ETF like VGRO?

2 years ago

My daughter will be entering University in 4 years, would these ETFs be a good choice if my timeline is about 4 years?

3 years ago

Hi, are there equivalent rebalancing ETFs if one wanted to keep everything in USD?

3 years ago
Reply to  FT

Thanks for the reply. Volatility is not a concern at all as I want to maximize growth. I guess I’ll just stick with VGRO. I hope Vanguard comes up with a socially responsible version of VGRO soon!

3 years ago

I currently hold mutual funds and today I submitted a request to move all of my investments to a discount brokerage (Questrade). I am about 20 years away from retirement so my plan is to heavily invest in VGRO. Would it make sense to invest in VCNS as well when markets are bearish, and then invest in VGRO when markets are bullish? Do I minimize risk doing it this way? I want to maximize growth as much as possible.

Michael CPO
3 years ago

I live overseas as a non resident… Therefore I do not need to pay any Taxes back home… Therefore would it be possible for me to pay for Vanguard directly from America Via online… And if so which companies would I use? Would I just sign up for Vanguard directly online orse also some other online companies? I assume I would be liable for American taxes?

3 years ago

For these ETFs, do you just constantly purchase them on a regular basis independent of the price?

zudora linzer
3 years ago

Is there a way to purchase these funds via an automatic investing plan? I currently have those Tangerine mutual funds in TFSA and set to contribute X$ weekly/monthly etc… I find this super convenient but realize they are higher in MER. I did look into the TD e-series and I think there is some way to make purchases automatic, but again somewhat higher in fees.

I’m keen on the commission free brokerages out there, but I assume I still have to remember to make those purchases manually?