Since 2018, Canadian investors have been given a golden opportunity to take control of their investment portfolios, moving away from expensive mutual funds and underperforming financial advisors.
Thanks to Vanguard and other fund providers, the introduction of comprehensive, all-in-one exchange-traded funds (ETFs) has revolutionized the DIY investing landscape. These ETFs offer a complete, premade investment portfolio solution, simplifying the process for individuals looking to manage their own investments effectively.
Today, we’re turning our spotlight on one of the most popular and well-regarded options in this category: Vanguard Growth ETF Portfolio (TSX: VGRO).
If you’re considering integrating VGRO into the core of your portfolio, there are two key aspects you’ll want to be aware of before buying. Let’s dive into two reasons why VGRO might just be one of the best ETFs for Canadian investors looking to grow their wealth over the long term.
It’s incredibly diversified
VGRO’s approach to diversification is nothing short of remarkable, utilizing an “ETF of ETFs” structure to provide a broad range of investment exposures. By holding seven different Vanguard ETFs, VGRO spans a comprehensive spectrum of the global market.
On the equity side, VGRO allocates across U.S., Canadian, international developed, and emerging market stocks with respective weightings of approximately 35.86%, 23.68%, 15.38%, and 5.34%. This wide coverage ensures investors have a stake in all 11 market sectors and across the full spectrum of company sizes, from large caps to small caps.
In terms of fixed income, VGRO includes Canadian, international, and U.S. bonds, with allocations of 11.79%, 4.04%, and approximately 3.91%, respectively. This blend provides exposure to both government-issued and investment-grade corporate bonds, further broadening the ETF’s diversification.
Periodic rebalancing keeps the portfolio aligned with its target allocations, ensuring that the mix remains consistent with the fund’s strategic objectives. Collectively, VGRO offers exposure to an astounding 13,508 stocks and 18,991 bonds. This level of diversification is virtually unparalleled, making VGRO an ideal choice for investors looking for extensive global market coverage in a single investment.
It’s very affordable
VGRO’s expense ratio of 0.24% might not seem exceptionally low at first glance, especially when considering that a $10,000 investment would incur $24 in annual fees. However, the value provided by this fee structure becomes evident upon a closer look.
Firstly, the 0.24% expense ratio encompasses all the fees of its underlying seven ETFs. This means Vanguard is not “double dipping”; the single fee covers the entire suite of investments within VGRO, providing a streamlined cost without additional charges for each underlying fund.
Secondly, the convenience factor plays a significant role. Managing seven different ETFs individually would not only be cumbersome but could also introduce hidden costs, even in an era of commission-free trading. These hidden costs often manifest in the form of bid-ask spreads that can accumulate significantly over time, especially when frequent rebalancing is required to maintain a specific asset allocation.
Finally, there’s the aspect of peace of mind. For many investors, the assurance that comes with holding a well-diversified, professionally managed portfolio is worth the expense ratio. VGRO offers arguably the most diversified ETF option on the market, spanning a wide range of asset classes, geographies, and sectors.
