Vanguard Launch of Balanced Asset Allocation ETFs

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kukucanuck
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by kukucanuck »

Putting VGRO in perspective:

Based on funds held within VGRO, the weighted average MER is 0.14736%. Let us round it off to 0.15%. This basically assumes if one bought underlying ETFs individually and in the same proportion as held in VGRO.

The indicated MER for VGRO is 0.22 percent.

This means that for a one million dollar portfolio invested entirely in VGRO one stop shopping, the MER cost would be $150 if invested individually in underlying funds vs $220 in VGRO (excluding taxes etc.). This implies that one can do seven trades a year for rebalancing of assets (at TDDI for example or more at Questrade), if one was to buy underlying ETFs individually. VGRO includes asset rebalancing by Vanguard.

The impact would be somewhat less for VCNS and VBAL (fewer trades available for, rebalancing) due to higher MERs of fixed income portion.

One can choose different asset allocation percentages using the same seven ETFs than VCONS,VBAL and VGRO. By creating these new funds, Vanguard offers a good guide as a starting point.

By comparison, the annual cost a Robofund charging MER of 0.50 percent the cost is $500, or $1000 for MER of 1 percent.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by scomac »

kukucanuck: You are out by a factor of ten for your costs on a $1M portfolio
  • .15%=$1500
  • .22%=$2200
  • .5%=$5000
  • 1%=$10000
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by snowback96 »

kukucanuck wrote: 08 Feb 2018 11:19 This means that for a one million dollar portfolio invested entirely in VGRO one stop shopping, the MER cost would be $150 if invested individually in underlying funds vs $220 in VGRO (excluding taxes etc.). This implies that one can do seven trades a year for rebalancing of assets (at TDDI for example or more at Questrade), if one was to buy underlying ETFs individually. VGRO includes asset rebalancing by Vanguard.
All your calculations are off by a factor of 10x. For example, on a $1 million portfolio, the estimated 0.07% MER difference is $700, not $70. That's a lot of trades!
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by Irwin »

Since no one else wants to, I shall volunteer to nitpick.

Management fees for these Vanguard ETFs are 0.22%

MERs yet to be determined, but estimated at 0.25%.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by AltaRed »

I dare say that even with the correct numbers for 'costs', most investors would still be better off holding that $1 million in one holding of VGRO. Most DIYers (albeit likely not most FWFers) will likely botch their trade decisions enough to underperform VGRO (or Mawer equivalent) on a rolling 10 or 20 year average simply because they will try to market time their re-balancing decisions, never mind their selection of individual holdings in the first place.

The product is well suited to set a new standard against competing offerings, including robo-advisors.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by kukucanuck »

Yes, my mistake. I was indeed off by a factor of 10. My apologies.
So, the calculation would indicate 70 trades a year for rebalancing. If we use a suggested MER of 0.25 percent, it would mean 100 trades based on TDDI rates.
That is lot of trades for passive investments. one would be better off holding a portfolio of seven or even 10 index ETfs even for a portfolio of size as low as $250K. One could rebalance the entire portfolio twice a year and still be ahead.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by AltaRed »

If you are smart enough and disciplined enough to re-balance methodically without emotion, or assuming you can outsmart the market. Most cannot do that consistently. Personal judgement and all of its flaws enter the equation.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by BRIAN5000 »

Which of these would perform better?

VAB 3% return
GIC 3% RETURN
DGS 10% including dividends

@ 40/60 portfolio

100k VAB + 60K Dividend Growth Stocks
100k GIC + 60k dividend growth stocks
160k VCNS according to PDF 10 year return would be about 5.5%

VAB, because of premium bonds, is taxed worse in a non-registered account then a registered account. If VCNS is held in a non-registered account does the way Vanguard attribute costs inside ETFs lessen the tax on VAB? sort of :?
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by longinvest »

BRIAN5000 wrote: 18 Feb 2018 16:25 Which of these would perform better?

VAB 3% return
It's simply impossible to predict VAB's total return between now and any day in the future.

I don't know where this 3% comes from, but I'm sure it's not a guaranteed total return ahead (without, even, a timeframe for the prediction).

I've often seen senseless comparisons between the yield-to-maturity of a bond fund and the interest rate on a guaranteed investment certificate on internet forums, but I'm sure FWF members know better.

;)
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by BRIAN5000 »

longinvest wrote: 18 Feb 2018 17:25
BRIAN5000 wrote: 18 Feb 2018 16:25 Which of these would perform better?

VAB 3% return
It's simply impossible to predict VAB's total return between now and any day in the future.

I don't know where this 3% comes from, but I'm sure it's not a guaranteed total return ahead (without, even, a timeframe for the prediction).

I've often seen senseless comparisons between the yield-to-maturity of a bond fund and the interest rate on a guaranteed investment certificate on internet forums, but I'm sure FWF members know better.

;)
That's just a wild guess from a DARI, what yield number do you use on your spreadsheet to get an estimate of yield? I feel I need some number for comparison/ballpark return.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by longinvest »

The simple answer is that we don't know which investment will have the highest return over our own investment and withdrawal horizon. We must learn to live with this uncertainty.

Those who are unable to deal with uncertainty can use a guaranteed investment certificate (GIC), at the cost of losing liquidity, and get certainty for a while (the maturity of the GIC).

In my spreadsheet, I use 1.5% real as a general return trend for total-market bond ETFs (nominal and inflation-indexed), and 5.5% real as a general return trend for total-market stock ETFs (domestic and international). These crude trends are not return predictions; they're simply used to calibrate my crude planning calculations, with full knowledge that actual returns will be different, possibly significantly so.

The trick is to make sure that calculations are used in a flexible manner by adapting to actual returns after the fact. VPW is an example of this.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by longinvest »

There's a big tradeoff between potential rewards (or losses) and more certainty. Bonds are contracts to pay specific amounts of money on specific dates. As such, they offer more certainty than stocks, despite their fluctuating market value. Stocks are merely titles of partial ownership entitling their holder to a fair share of unknown future dividends.

The return of broad-market stock and bond ETFs can't be predicted, but mathematics allow us to know that broad-market stock ETFs will be more volatile than broad-market bond ETFs.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by BRIAN5000 »

TDDI is showing a little more info on these now dividend date of April 4 2018.
Dividends of
vcns .20
vbal .26
vgro .32

Maybe they will adjust as these gain some time in the market.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by Shakespeare »

? From Vanguard https://www.vanguardcanada.ca/individua ... s=balanced
Balanced ETF Portfolio .064366



Conservative ETF Portfolio .049535



Growth ETF Portfolio .078897


TD is x4. Probably should be about x6 given inception date.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by OnlyMyOpinion »

Shakespeare wrote: 28 Mar 2018 17:58TD is x4. Probably should be about x6 given inception date.
Right. TDDI reports annual dividend. Vanguard is reporting quarterly payment.
Div yield reported by TDDI today is:
VCNS 0.80%
VBAL 1.06%
VGRO 1.31%
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by Shakespeare »

I would expect more like 1.6% for VBAL when correctly annualized.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by big easy »

It's ironic that the growth portfolio yields more than the conservative portfolio. I suspect the investment in global bonds is dragging things down. Yields are bad enough here without adding a 30yr German bond at 1.2%.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by AltaRed »

big easy wrote: 31 Mar 2018 12:55 It's ironic that the growth portfolio yields more than the conservative portfolio. I suspect the investment in global bonds is dragging things down. Yields are bad enough here without adding a 30yr German bond at 1.2%.
I don't see that higher yield in VGRO is ironic. One would expect VGRO to have a higher yield AND a higher overall total return long term as the risk premium for higher risk and volatility. The more conservative options are more about protection of capital, than return on capital.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by adrian2 »

big easy wrote: 31 Mar 2018 12:55 Yields are bad enough here without adding a 30yr German bond at 1.2%.
At least it's not negative.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by big easy »

AltaRed wrote: 31 Mar 2018 13:30
big easy wrote: 31 Mar 2018 12:55 It's ironic that the growth portfolio yields more than the conservative portfolio. I suspect the investment in global bonds is dragging things down. Yields are bad enough here without adding a 30yr German bond at 1.2%.
I don't see that higher yield in VGRO is ironic. One would expect VGRO to have a higher yield AND a higher overall total return long term as the risk premium for higher risk and volatility. The more conservative options are more about protection of capital, than return on capital.
I had thought that bond yields normally exceeded dividend yields - but maybe I was wrong:

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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by adrian2 »

big easy wrote: 31 Mar 2018 14:41 I had thought that bond yields normally exceeded dividend yields
Until the early 60's the common wisdom was that bonds should yield less than stocks, because they are safer.

We may be heading back there.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by AltaRed »

The long bond bull market as a result of double digit interest rates to tackle inflation can be deceiving. The bulk of the baby boomers and elders never had fixed income investing so good.....until very recently.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by Shakespeare »

From behind the G&M pay wall:

https://www.theglobeandmail.com/investi ... -obsolete/
vbal.png
vbal.png (54.46 KiB) Viewed 1633 times
Robos do all the work for you, while the Vanguard ETFs do a lot of work. There’s definitely room for both in the investing world.
Note: VBAL is 30% of my portfolio.
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Re: Norbert, your wish has been granted [Vanguard launching cheap balanced index ETFs]

Post by Beezy »

I think I will be selling off my 4 E-Series funds and buying VBAL or VGRO and the same with my wife's portfolio.

The biggest thing for me is re-balancing and keeping emotions out of it.

I feel like I am very disciplined, yet I still struggle with only 4 funds!

Is there any point of waiting a bit more for the fund to have some more history?

Trading volume average is around 35,000.
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