Author Topic: Canada - 3 new simplified Vanguard funds  (Read 1590 times)

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Canada - 3 new simplified Vanguard funds
« on: February 03, 2018, 08:23:45 PM »
I was wondering if anyone has assessed the 3 new Canadian Vanguard ETFs that are simplified using 7 different funds. I was in the midst of reviewing investment options today, and I just noticed that there are three new Vanguard ETFs depending on risk tolerance.  The MER for each is .22.  How would you  assess them versus purchasing units in individual Vanguard funds as Iíve been doing with the Couch Potato approach with VAB, VCN and VXC in RRSP, TFSA and RDSP accounts?  I've recently purchased some VDY in a non-registered account.

https://www.vanguardcanada.ca/individual/articles/education-commentary/vanguard-voices/simple-and-balanced-vanguards-new-etfs.htm

I would appreciate any feedback you might have. 

Thanks!

K-ice

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Re: Canada - 3 new simplified Vanguard funds
« Reply #1 on: February 03, 2018, 08:55:46 PM »
Posting to hear what others have to say.

But my quick response is that this sounds like a good idea for someone starting out but not great for a larger portfolio.

It would limit your ability to choose asset location.

For example I have more:

VXC in TFSA because I expect greater growth.
VAB in RRSP because I expect less growth & it will be taxed one day
Canadian dividend stocks in non registered account for the tax credit.

That said. These might be great for an RESP.

Curious to hear others as well. 




Eucalyptus

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Re: Canada - 3 new simplified Vanguard funds
« Reply #2 on: February 04, 2018, 01:59:15 AM »
Similar products to the four that Vanguard launched in Australia late last year. We also got a "High Growth" version with 90 stock/10 bonds. This included some international small cap which is cool. Your Canadian initial MER is better than ours (.22 vs .27).


One thing that I and a few others (in the Aus thread) pointed out was that unfortunately these don't allow you to adjust your bond allocation based on any sort of glide path technique (eg, extremely aggressive 100% equities far out from retirement, accumulating bonds in the last couple of years prior to FIRE, then selling the bonds off more aggressively in the first 5-10 years of FIRE to avoid an early bad sequence of returns, ensuring SWR success. Or various other methods). It would be great to see vanguard do a very aggressive 100% stocks option, giving people the ability to glide path while still keeping their portfolios pretty simple and easy to manage. I mean, vanguard has target-retirement funds that essentially are glide path ratio type funds, its not like they don't believe in the method.

Freedomin5

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Re: Canada - 3 new simplified Vanguard funds
« Reply #3 on: February 04, 2018, 03:02:35 AM »
It sounds like theyíre just wraparound funds (similar to TD Comfort Portfolio but with a much more reasonable MER), which are all the rage now. They just invest in existing Vanguard ETFs and then charge you several basis points more to manage it for you. If youíre a savvy investor capable of doing a bit of math and rebalancing your own portfolios once per year, then itís not really necessary. If youíre an average person who doesnít want to know or learn about rebalancing portfolios or read Canadian Couch Potato, then these funds are a good option and it may be worth paying more to have Vanguard manage your portfolio for you.

RichMoose

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Re: Canada - 3 new simplified Vanguard funds
« Reply #4 on: February 04, 2018, 02:20:08 PM »
I was wondering if anyone has assessed the 3 new Canadian Vanguard ETFs that are simplified using 7 different funds. I was in the midst of reviewing investment options today, and I just noticed that there are three new Vanguard ETFs depending on risk tolerance.  The MER for each is .22.  How would you  assess them versus purchasing units in individual Vanguard funds as Iíve been doing with the Couch Potato approach with VAB, VCN and VXC in RRSP, TFSA and RDSP accounts?  I've recently purchased some VDY in a non-registered account.

https://www.vanguardcanada.ca/individual/articles/education-commentary/vanguard-voices/simple-and-balanced-vanguards-new-etfs.htm

I would appreciate any feedback you might have. 

Thanks!
I think they are a fantastic option for the vast majority of savers. For the slightly higher cost (probably around 10 bps) than managing separate ETFs yourself, you get all the benefits of automatic re-balancing plus it's much easier to manage your portfolio. There's no selling, thinking about when to re-balance, triggering tax events, etc.

I think most people would be less likely to "screw up" these new wrap ETFs. It's the closest thing we've got to the Vanguard LifeStrategy mutual funds our American friends get to enjoy.

Separate ETFs could be considered for tax efficiency, but this will mostly apply to aggressive Mustachian savers who utilitize multiple accounts (TFSA, RRSP, NR). I think most Canadians would consider themselves to be good savers if they just fill a TFSA and RRSP.

K-ice

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Re: Canada - 3 new simplified Vanguard funds
« Reply #6 on: February 06, 2018, 08:18:44 AM »
Thank you everyone for your comments and the thinks to other articles.
I came across this article this morning through Moneysense weekly newsletter about the three new ETFs by John Chevreau http://findependencehub.com/vanguard-canada-launches-3-new-asset-allocation-etfs/ 

beee

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Re: Canada - 3 new simplified Vanguard funds
« Reply #7 on: February 08, 2018, 11:39:29 AM »
I don't plan to use them personally for 2 reasons:
Too much Canada (we're 20% Canada, 80% everything else),
Too much bonds (we're 100% stocks now).

But it's a nice move overall.

Prairie Stash

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Re: Canada - 3 new simplified Vanguard funds
« Reply #8 on: February 08, 2018, 01:46:56 PM »
That said. These might be great for an RESP.

Curious to hear others as well.
I'm thinking this is perfect for RESP. On a $50,000 portfolio you'll miss out on $50 with the higher MER over the lower MER cost of direct buying.

However, would you make that up on the auto balance? Do most of us truly autobalance really small amounts or let it slide? Human nature probably has most of us ignoring our small accounts. Personally I'm really bad since I tend to only look it once a year when I toss more money at it. 

Prairie Stash

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Re: Canada - 3 new simplified Vanguard funds
« Reply #9 on: February 08, 2018, 01:49:49 PM »
http://canadiancouchpotato.com/model-portfolios-2/

Is there any point to the Tangerine or TD funds in the CCP anymore? Can anyone explain why the TD fund could be better? I'm curious, it seems these funds are direct replacements with lower MER.

jambongris

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Re: Canada - 3 new simplified Vanguard funds
« Reply #10 on: February 08, 2018, 02:16:07 PM »
http://canadiancouchpotato.com/model-portfolios-2/

Is there any point to the Tangerine or TD funds in the CCP anymore? Can anyone explain why the TD fund could be better? I'm curious, it seems these funds are direct replacements with lower MER.

These seem more like a replacement for the Tangerine funds than for the TD e-Series funds. How would you vary your asset location using the new Vanguard ETFs? Wouldn't you be stuck with the same asset allocation in each account? You couldn't have your bonds in one type of account and your Canadian equity in another based on preferential tax treatment.

Prairie Stash

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Re: Canada - 3 new simplified Vanguard funds
« Reply #11 on: February 08, 2018, 02:52:08 PM »
http://canadiancouchpotato.com/model-portfolios-2/

Is there any point to the Tangerine or TD funds in the CCP anymore? Can anyone explain why the TD fund could be better? I'm curious, it seems these funds are direct replacements with lower MER.

These seem more like a replacement for the Tangerine funds than for the TD e-Series funds. How would you vary your asset location using the new Vanguard ETFs? Wouldn't you be stuck with the same asset allocation in each account? You couldn't have your bonds in one type of account and your Canadian equity in another based on preferential tax treatment.
That's fair, young people would be stuck since they lack in TFSA or RRSP room. By the age of 27 though you wouldn't be, you could have all the money inside your TFSA ($5500/year from age 18). Or all in your RRSP, or a combination depending on tax brackets and refunds.

As I understand the TD, its ideal for accounts between $15-50k total. After hitting $50K the CCP promotes vanguard funds over TD and then asset location could be achieved more efficiently.

You are definitely correct though, some individuals in their early 20's would find these limiting if they lack registered account room.

RichMoose

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Re: Canada - 3 new simplified Vanguard funds
« Reply #12 on: February 08, 2018, 08:12:02 PM »
These seem more like a replacement for the Tangerine funds than for the TD e-Series funds. How would you vary your asset location using the new Vanguard ETFs? Wouldn't you be stuck with the same asset allocation in each account? You couldn't have your bonds in one type of account and your Canadian equity in another based on preferential tax treatment.
You could put VGRO.TO in the growthy accounts like TFSA and VBAL.TO or VCNS.TO in the RRSP to balance out your overall risk. The Canadian equity thing is another story. Even in the Vanguard fund the Canadian stock exposure is really high.

Small prices to pay for an easy, generally bulletproof investment though. I think buying one ETF and sticking to that purchase with no re-balancing worries is probably worth a lot to >90% of investors.

Made me think of a thread on MMM Forum a month back where people were suggesting they might not re-balance as per their regular schedule this year because they want to up their stock exposure and keep the run on. Possibly regretting that decision now...

sieben

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Re: Canada - 3 new simplified Vanguard funds
« Reply #13 on: February 09, 2018, 08:35:04 PM »
I think these are a fantastic solution for tons of people who either shouldn't or don't want to fiddle with their portfolios.
They aren't for me, at least right now I enjoy trying to squeeze out the extra tax/fee advantages that I can.
I will be recommending them to my friends and family though.

Here are two articles from CCP and CPM in case they haven't been posted yet.
Lot's of discussion there for the interested.

http://www.canadianportfoliomanagerblog.com/vanguards-hip-new-asset-allocation-etfs/
http://canadiancouchpotato.com/2018/02/05/vanguards-one-fund-solution/