Investing in an exchange-traded fund or ETF is always beneficial to investors. An ETF provides you with enough diversification and lowers your risk significantly. Here, you gain exposure to a basket of stocks across multiple sectors. One Canadian ETF you can consider is the Vanguard Growth ETF Portfolio (TSX: VGRO).
This ETF is basically a fund of funds as each unit of VGRO consists of several other ETF holdings. This ETF aims to generate long-term returns by investing in equity and fixed-income securities.
Under normal market conditions, the ETF will maintain a long-term strategic asset allocation where equity will account for 80% of the total portfolio and the rest will be invested in fixed-income instruments. The underlying funds will be index funds that provide exposure to broad-based equity and fixed income markets.
VGRO ETF was introduced in January 2018
The VGRO ETF was launched back in January 2018 and has since gained 32.3%. Comparatively, the S&P 500 ETF is up 53.5% in this period. As the Vanguard Growth ETF Portfolio has exposure to fixed income securities investors should not expect it to beat the broader equity indexes, making it a top fund for Canadians nearing retirement.
The VGRO ETF has exposure to the below funds:
Vanguard US Total Market Index ETF: 32.9%
Vanguard FTSE Canada All Cap Index ETF: 24.1%
Vanguard FTSE Developed All Cap ex North America Index ETF: 16.7%
Vanguard Canadian Aggregate Bond Index ETF: 11.7%
Vanguard FTSE Emerging Markets All Cap Index ETF: 6.6%
Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged: 4.5%
Vanguard US Aggregate Bond Index ETF CAD-hedged: 3.5%
Stocks in the financial sector account for 19.2% of the VGRO ETF, followed by technology, consumer discretionary, industrials, and healthcare at 18.5%, 13.1%, 12.7%, and 8.6%, respectively.
This fund of funds holds over 12,600 stocks that have a median market cap of US$60 billion. As of February 28, 2021, the price to earnings multiple of VGRO was 22 while its price to book ratio stood at 2.3. Comparatively, the ETF’s return on equity stands at 13.7% while its earnings growth rate is a healthy 12.9%.
Top holdings of the Vanguard Growth ETF
The VGRO ETF’s top holdings Shopify that accounts for 1.76% of the fund. The other top holdings include Apple, Royal Bank of Canada, Microsoft, and Toronto-Dominion Bank that account for 1.53%, 1.49%, 1.45%, and 1.35% respectively of the VGRO ETF. We can see that the top five holdings comprise less than 8% of the VGRO.
This ETF is one of the most diversified funds in the world. Investors do not have to rebalance their portfolio and can derive passive gains by buying the VGRO ETF. Further, you can also benefit from a dividend yield of 1.8% which means a $25,000 investment in this ETF will help you derive $450 in annual dividend payouts.
Similar to other Vanguard Funds, the VGRO has a low management expense ratio of just 0.25%. Here, your risk is diversified across equities and bonds in different industries and geographic regions.
