Vanguard Canada to offer 5 more low-cost ETF

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Vanguard Canada to offer 5 more low-cost ETF

Post by larry81 »

Vanguard Investments Canada Inc. plans to broaden its low-cost ETFs, adding five more. The firm has filed a preliminary prospectus with Canadian securities regulators for three international equity ETFs and two international bond ETFs, as outlined below.

"We are committed to providing investors access to broadly diversified investments, managed by Vanguard's experienced team of index investment professionals, at an extremely low cost," says Atul Tiwari, managing director of Vanguard Investments Canada Inc.
  • Vanguard FTSE All-World ex Canada Index ETF - 0.25% MER
  • Vanguard FTSE Developed Europe Index ETF - 0.23% MER
  • Vanguard FTSE Developed Asia Pacific Index ETF - 0.23% MER
  • Vanguard U.S. Aggregate Bond Index ETF (CAD-hedged) - 0.20% MER
  • Vanguard Global ex-U.S. Aggregate Bond Index ETF (CAD-hedged) - 0.35% MER
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by Shakespeare »

Vanguard FTSE All-World ex Canada Index ETF - 0.25% MER
That one would look interesting for one-stop shopping but the effective MER will be higher due to tax problems.
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Re: Vanguard Canada to offer 5 more low-cost ETF

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Shakespeare wrote:
Vanguard FTSE All-World ex Canada Index ETF - 0.25% MER
That one would look interesting for one-stop shopping but the effective MER will be higher due to tax problems.
Seem to be an attempt to offer Canadian domiciled 'equivalent' to VXUS. The ETF will hold US ETF's so it will lose a layer of tax withholding. Also dont seem to hold small-cap's...
The FTSE All-World ex Canada Index is a market capitalization-weighted index representing the performance of large- and mid-capitalization stocks in developed and emerging markets, excluding Canada.
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Re: Vanguard Canada to offer 5 more low-cost ETF

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larry81 wrote:Seem to be an attempt to offer Canadian domiciled 'equivalent' to VXUS. The ETF will hold US ETF's so it will lose a layer of tax withholding. Also dont seem to hold small-cap's...
The FTSE All-World ex Canada Index is a market capitalization-weighted index representing the performance of large- and mid-capitalization stocks in developed and emerging markets, excluding Canada.
This will be pretty close to being a direct competitor to XWD (with the exception of the Cdn component) that has an MER of circa 0.47.
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by George$ »

Thank you larry81.

In looking at the Summary documents - I see that all five of the new ETFs note that they have "DRIP eligibility'. Two questions - is the DRIP generally available at all brokers? - and does the DRIP also apply to the other 16 Vanguard ETFs?
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by LadyGeek »

All of the filings are available on SEDAR. Configure the search as:

Investment Fund Search: Vanguard
Document Selection: Prospectus
Sorted: By Issuer
Date From: May 9 2014
Date To: May 9 2014

Which results in: Each link will lead to the associated documents (disclosure, prospectus, news, etc.) and group profile information.

The announcement is captured in the Bogleheads blog: Vanguard expands Canadian ETF offerings
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by IdOp »

George$ wrote:Two questions - is the DRIP generally available at all brokers? - and does the DRIP also apply to the other 16 Vanguard ETFs?
I believe the answers are Yes, and It depends(*). Have a look at the Vanguard Canada DRIP page. Note the link, near the bottom of that page, to the Plan document, (*) which has a Schedule A listing DRIP-eligible ETFs.
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by Sugerman »

Interesting! I could exchange my VDU, VEE, and VUN (combined MER of 23.8 bp) for this one holding @ 25 bp. Sure I pay 1.2 bp more but can consolidate the DRIP additions all under "one roof".

Can anyone speculate what the "tax implications" would be for this one fund as opposed to separate ETFs (like VDU, VEF, VUS, VUN, VEE...)? Would these implications occur regardless of where the funds are held (registered vs. non-registered)?

To answer another posters enquiry, I have all my Vanguard Canada ETF holdings DRIP'ing at Qtrade and CIBC Inv. Edge.
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by George$ »

Thank you LadyGreek and IdOp. More reading for me :( and :D

Share three other thoughts.

Not sure how accurate this is - but a big difference between Vanguard and the other ETF providers. Vanguard will reduce its MERs once it is covering the costs - whereas other ETF providers need a profit in the long run (Vanguard does not). Thus I am skeptical in the long run about Blackrocks recent reduction of its ETF mers.

In today's Globe and Mail it included the quarter magazine "Your Guide to ETF Investing" - current is Spring 2014. Atul Tiware always contributes - he is the managing director of Vanguard Investments Canada Inc.

Finally - while the Vanguard costs (mers) are rock bottom - in particular compared to Canadian mutual funds - my own experience has been to generate my own DIY portfolio at even a lower cost. But alas as I grow older and will pass the responsibility to someone else - _I'm looking to get more Vanguard ETS. But my cap gains are substantial on my holdings - and I don't want to sell and pay taxes. :cry:
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Re: Vanguard Canada to offer 5 more low-cost ETF

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George$ wrote: But alas as I grow older and will pass the responsibility to someone else - _I'm looking to get more Vanguard ETS. But my cap gains are substantial on my holdings - and I don't want to sell and pay taxes. :cry:
I think this is a dilemma for many of us here that have a lot of investments in taxable accounts.

Not quite the same issue as you bring up, but it hit home for me circa 2008 after a divorce and split of assets down the middle. My ex needed my guidance then and still does in maintaining her portfolio even though I have been guiding her towards ETFs since that time. It will take years yet to simplify her out of individual stocks. Thank goodness she does not have any DRIPs to deal with and minimal (only ETF ROC and phantom reinvested distribution) ACB adjustments to deal with. I never believed how difficult all that could be for a neophyte DIYer and how long it would/will take to simplify a taxable portfolio. The last resort would be to go to a fee for service (probably percentage of AUM) type advisor.

It has now brought a new appreciation to me about what I need to do with my own taxable portfolio over time and I am only in my mid-60s. It could take a decade or more to migrate a portfolio strictly into couch potato ETFs and that is taking tax hits each year to do so. At the very minimum, DRIPs should be shut off and new investments should be into ETFs, not new individual stocks. Failing that, be prepared to turn it over to a paid advisor, fee or otherwise, at a point in time.
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by adrian2 »

AltaRed wrote:Thank goodness she does not have any DRIPs to deal with

[...] my own taxable portfolio [...]

At the very minimum, DRIPs should be shut off
Amen :thumbsup:
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by like_to_retire »

AltaRed wrote: It will take years yet to simplify her out of individual stocks. Thank goodness she does not have any DRIPs to deal with and minimal (only ETF ROC and phantom reinvested distribution) ACB adjustments to deal with. I never believed how difficult all that could be for a neophyte DIYer and how long it would/will take to simplify a taxable portfolio.
I'm missing your thought process here.

One of the reasons I dislike ETFs and switched to individual stocks is because it's so much easier to take care of tax wise. A simple T5 every year that I know the amount before I ever receive it, and it comes in lots of time before tax season.

Contrast that with ETFs and their last minute T3's with re-invested distributions, non-eligible dividends, return of capital, capital gains, interest income, other income, regular dividends, ACB adjustments (add this, subtract that, no change to ACB).

Oy-vey, ETFs are a pain in the butt, especially to a novice in my opinion.

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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by AltaRed »

Individual stocks need monitoring and buy/sell decisions. That is a significant activity for the best of us, never mind those with minimal experience, or interest, in the markets.... and has nothing to do with the person's smarts/intelligence. Granted there are rarely ROC and ACB decisions to be made (issues like IPL, GOOG, etc aside) with individual stocks, but do not underestimate how a portfolio of 15-30 stocks spinning off dividends 4 times a year might seem to the non-DIYer, or how that looks on monthly statements, or the broker's annual statement of income and expenses. I did not understand that until I had to help someone.

If all that one has is 3-5 ETFs (and that is all one really needs), it does not take long for someone (anyone) to figure out the ACB adjustments required for that individual. A tax accountant could do that within 30 minutes. More importantly, individual buy/sell decisions are no longer required, there is minimal 'traffic' on monthly statements, and there is more incentive to learn, etc, etc.

P.S. With my 'new' SO who had her RSP and TFSA accounts in different places, mostly advised by bank and/or full service reps, I convinced her to consolidate it all into one DIY brokerage and convert to a few ETFs, an HISA and a GIC ladder. It will perform better collectively than what she had been in previously and is neat, small and tidy. I even produced a few simple Asset Allocation pie charts for her. If I got hit by a bus this afternoon, she'd be able to deal with it. In her case, everything is in registered accounts, so of course, ACB is not relevant.
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by Bylo Selhi »

AltaRed wrote:
George$ wrote: But alas as I grow older and will pass the responsibility to someone else - _I'm looking to get more Vanguard ETS. But my cap gains are substantial on my holdings - and I don't want to sell and pay taxes. :cry:
I think this is a dilemma for many of us here that have a lot of investments in taxable accounts.
And for those of us who want to simplify our investments, either to simplify our lives or (more importantly IMO) to simplify the lives of spouses and children who stand to inherit our complicated portfolios.

As I understand it, you can exchange identical stock on a capital gains tax deferred basis. Suppose you have VCE and want to convert to VCN. If Vanguard accepted shares of VCE, converted them into “creation baskets” of the underlying FTSE Canada shares, then converted those into shares of VCN, then the overlapping shares (the top 78 shares that constitute 96% of VCE) should transfer to VCN on a capital tax deferred basis. Thus Vanguard could facilitate the conversion of shares from their original, relatively narrow indexes to the new, broader ones.

They could make a tender offer for shares of competitive ETFs for conversion to Vanguard's nearest, lower-MER equivalent. This would enable them to raise assets at their competitors' expense while at the same time helping us to reduce our costs.

I suppose they could also accept shares of underlying stocks from individuals who have positions in the top TSX stocks for conversion to ETF shares. This could incur some CG tax because the weights would be different from from the index. (Or maybe not so much if there was a general tender offer that lasted for some period of time that attracted "the market.") But in any case the immediate CG tax liability to the individuals would be a lot less than if they'd sold shares and used the proceeds to buy ETFs.

Now this would entail some bookkeeping hassles for Vanguard and for the individuals who tender shares. But I'd think that a spreadsheet from Vanguard would probably solve that issue.

Anyway, I'm just brainstorming... Perhaps there's some esoteric reason why this wouldn't fly with CRA. (Also recall my criticism of the Cons in promising to defer CG taxes when people sell one investment to buy another, then reneging on that promise. If only they'd followed through there would no longer be any need to brainstorm ways to convert from one ETF into a similar or even identical but lower-cost ETF.)
like_to_retire wrote:One of the reasons I dislike ETFs and switched to individual stocks is because it's so much easier to take care of tax wise. A simple T5 every year that I know the amount before I ever receive it, and it comes in lots of time before tax season. Contrast that with ETFs and their last minute T3's with re-invested distributions, non-eligible dividends, return of capital, capital gains, interest income, other income, regular dividends, ACB adjustments (add this, subtract that, no change to ACB).
Not all stocks. REITs and other trusts give rise to T3s that rival ETFs in complexity, lateness and errors.

But yes, I agree that this stuff results in tax reporting errors, especially double taxation of capital gains. The ETF sponsors could go a lot further to simplify this. For example they could provide a sample spreadsheet for tracking the ACBs of their ETFs, with the ROC and RD factors prefilled. They could also provide some guidance on how to track ACBs using Quicken, etc.
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Re: Vanguard Canada to offer 5 more low-cost ETF

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Bylo Selhi wrote:Also recall my criticism of the Cons in promising to defer CG taxes when people sell one investment to buy another, then reneging on that promise. If only they'd followed through there would no longer be any need to brainstorm ways to convert from one ETF into a similar or even identical but lower-cost ETF.
I'm going to swallow my tongue and not reply in kind. :evil:

If you're curious about what my reply would have been, open a Watercooler thread.
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Re: Vanguard Canada to offer 5 more low-cost ETF

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larry81 wrote:
Shakespeare wrote:
Vanguard FTSE All-World ex Canada Index ETF - 0.25% MER
That one would look interesting for one-stop shopping but the effective MER will be higher due to tax problems.
Seem to be an attempt to offer Canadian domiciled 'equivalent' to VXUS. The ETF will hold US ETF's so it will lose a layer of tax withholding. Also dont seem to hold small-cap's...
The FTSE All-World ex Canada Index is a market capitalization-weighted index representing the performance of large- and mid-capitalization stocks in developed and emerging markets, excluding Canada.
I wish they would have simply offered a Canadian-domiciled version of VT, which has a piddling 3% Canada weighting. VT's MER is 0.18% so they could probably do the Canadian clone at 0.20%, maybe less.
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by LadyGeek »

Would any of these funds be appropriate to build a lazy portfolio? If so, consider updating finiki: Portfolio design and construction - finiki, the Canadian financial wiki
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by epson600 »

brucecohen wrote:I wish they would have simply offered a Canadian-domiciled version of VT, which has a piddling 3% Canada weighting. VT's MER is 0.18% so they could probably do the Canadian clone at 0.20%, maybe less.
+1
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Re: Vanguard Canada to offer 5 more low-cost ETF

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brucecohen wrote:I wish they would have simply offered a Canadian-domiciled version of VT, which has a piddling 3% Canada weighting. VT's MER is 0.18% so they could probably do the Canadian clone at 0.20%, maybe less.
See finiki or Foreign Withholding Tax: Which Fund Goes Where?
Canadian Couch Potato wrote:A. Canadian mutual fund or ETF that holds US or international stocks directly.
B. US-listed ETF that holds US stocks.
C. US-listed ETF that holds international stocks.
D. Canadian ETF that holds a US-listed ETF of US stocks.
E. Canadian ETF that holds a US-listed ETF of international stocks.

US Equities
For non-registered accounts choose A, B or D.
For RRSPs choose B. Avoid A and D.

International equities
For non-registered accounts choose A. Avoid C and E.
For RRSPs choose A or C. Avoid E.
A Canadian-domiciled version of VT would be a roughly 50/50 mix of D and E, to be avoided in almost all cases (the only acceptable option would be in a non-registered account, for the American half). The extra dead weight in taxes is significantly higher than the MER itself.
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Re: Vanguard Canada to offer 5 more low-cost ETF

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LadyGeek wrote:Would any of these funds be appropriate to build a lazy portfolio? If so, consider updating finiki: Portfolio design and construction - finiki, the Canadian financial wiki
The new Vanguard All World ex Canada, when available, will be ideal for building a simple, highly diversified Three Fund Portfolio. 33/33/34 Canada/International/Bonds (VCN/V??/VAB) for as little as 0.19% in management fees. Awesome!
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Re: Vanguard Canada to offer 5 more low-cost ETF

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Any news or updates on when these new ETFs will be available for purchase? Sent an email to Vanguard directly through their website, but no reply after a few days
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by BRIAN5000 »

These started trading today :lol: 8)
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by Shakespeare »

Since VXC is an "ETF of [US] ETFs", there will be some tax loss. If the withholding is 15% and the yield is 2%, then the effective MER is .25%+.3%, or about .55%.

Added: that's still .2% cheaper than XWD, which has the same problem. It's better to hold VT in a registered account if you convert the currency cheaply.
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Re: Vanguard Canada to offer 5 more low-cost ETF

Post by Thanak »

Right now my stocks asset are :

40% VCN (0,12% MER)
25% VDU (0,28% MER, around 0,90% with the double dip withholding tax)
25% VUN (0,15%MER or around 0,45% with the withholding tax)
10% VEE (0,33% MER, around 1,03% with the double dip withholding tax)

I have around 44k$, the non VCN stuff is in registered account.

I was wondering if I should move to only 2 ETF (VCN anx VXC). The way I understand it you still gonna have double did withholding tax with the non US portion of VXC so overall the return should be the same but I would save on commission.

Another scenario I was looking at was keeping VCN, VUN and VEE but replacing VDU with ZEA from BMO wich hold the fund directly to save .3% MER on the develop market stuff.

I'm not really big enough to play with Norbert Gambit and hold stuff in US$.

What do you guys recommand ?
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