VGRO is one of the best growth ETFs in Canada.
Let me ask you a quick question, When there are 100’s of great Canadian ETFs, why invest in VGRO? Why not invest in others such as VCN, XIC, XUS, XAW, ZSP, VFV, XUU, XRE, VBAL or any other growth ETF
VGRO is a balanced ETF. It contains Canadian, US and international stocks as well as 20% bonds.
VFV only contains US stocks. So if you were to buy that as well as VGRO, you’d have a higher weighting to US stocks. VGRO was designed as a one fund solution. You don’t need any other funds because it contains all the major asset classes already.
Well, here’s the thing right – Vanguard’s VGRO and VEQT hold other Vanguard Canada ETFs. Roughly around 25% of VGRO is invested in VCN. So it’s like buying additional shares of VCN isn’t going to help you diversify.
VGRO ETF also holds VUN. About 30% of VGRO is invested in VUN. And VUN holds over 3500 US-listed stocks, including every stock in the S&P 500 Index. So you aren’t getting any additional diversification by buying an S&P 500 ETF. That’s the beauty of investing in VGRO. It pretty much covers all of your investment needs through one portfolio.
In total, VGRO holds over 12,000 different stocks and bonds from around the world. That makes it remarkably well diversified. You don’t need more diversification for your individual portfolios.
In this article I’ll try my best to answer all possible questions you may have regarding Vanguards growth ETF VGRO and why you should probably consider investing in this ETF. Let us look at all the factors that’ll not only make investing in VGRO great but why it is something you need to consider.
Also, let’s take a look at the Pros and Cons of VGRO from an Investment perspective and learn more about why I think it’s a very good investment. Now then, let’s get started.
What Is VGRO?
First of all, one of the leading asset management companies in the world is Vanguard. As a result, it has over $6.5 trillion total assets (AUM) in its possession and still growing.
Above all, It’s got total assets of 571.8 Million and its production and income rates are growing every day.
Before we actually begin talking about the VGRO ETF, let us quickly take a look at what Vanguard’s official website has to say about VGRO – “Vanguard Growth ETF Portfolio seeks to provide long-term capital growth by investing in equity and fixed income securities”. And that’s exactly what VGRO has delivered to its investors in terms of performance.
Simply put, VGRO is extremely well-diversified and invests your money in seven of the top-performing Vanguard funds making it extremely robust and high performance.
Also, VGRO yields an excellent dividend of 2.42% annually and pays out quarterly. There’s no denial of the fact that Vanguard’s ETFs are some of the best in the market always and low-cost ETFs in Canada and the rest of the world.
Why Should You Invest In VGRO?
People are interested in VGRO, not because it has some special sauce or magic stock-picking ability, but rather because it allows you to cheaply and extremely easily implement a well-known Canadian Couch Potato Strategy. This strategy is called the IMO and is a very sensible way to invest your money.
The strategy is essentially you’ll choose an asset allocation (such as stock/bond ratio) that’ll match with your goals and ability to take the risk, invest in low-cost index funds, diversify broadly, don’t time the market, and rebalance periodically.
VGRO does that (80% stock, 20% bond allocation).
As for returns, VGRO will generate the returns of the underlying markets minus the fund MER which 0.22%. (That’s about a tenth of what a typical mutual fund charges in Canada.) This fund is not the only way to implement that strategy nor is it the cheapest.
One can reduce the MER to maybe 0.12-0.15% using individual ETFs. But that is more work and requires people to resist the urge to tinker and to stick to their plan. Human nature being what it is, that is asking a lot.
VGRO is having an unimpressive year it is because the underlying markets are having an unimpressive year.
It isn’t reasonable to focus on the returns in a particular year and compare it, say, with long term averages or whichever mutual fund happens to be knocking it out of the park in a given year.
Remember on average, everything is having an unimpressive year when markets are.
It’s also interesting why there is so much hype about VGRO.
For a normal mutual fund, people get excited and attracted to it when it has a huge performance in some time period.
Think something like bitcoin last year or pot stocks recently.
The reason to be attracted to this fund is different. It won’t have a huge outsized return over any short-term period.
It can’t by construction and never attracts the herd based on that.
People are drawn to VGRO because it simplifies a very sensible, long-term investment process, that should provide investors with their share of market returns over time, a promise that cannot credibly be made by a high cost actively managed fund strategy or the army of advisors that peddle them.
Also, I don’t think you can put too much stock in the “since inception number” for a fund that has just been around for a year or so.
If you want longer-term performance on how an 80/20 couch potato strategy has performed, check out the numbers here.
Top 3 Reasons To Invest in VGRO
1) It is one of the few low-cost, one fund, ETF solutions in Canada.
Vanguard has a stellar reputation
Reasonable tracking to NAV
2) VGRO is run by Vanguard, which is basically a very popular fund house. There are other companies that offer the same, and maybe even for a lower cost but Vanguard is the best known.
3) Even though Vanguard offers three versions of this one-fund solution for different levels of risk. I attribute a large part of this to the fact that many investors here are relatively new to the markets and the markets have been nothing but amazing for years with some of the worst losses in the last 5 years being very manageable and no big deal.
Vanguard Group As An Investment Firm
First of all, Vanguard is one of the world’s largest and leading asset management companies, with more than $6 trillion in assets under management globally.
Vanguard has 100’s of mutual funds and ETFs under its portfolios in each of the different sectors and risk types.
Below is a quick snapshot of the Vanguard Fund House:
|Total assets under management:||$6.6 trillion|
|Funds offered:||191 in the U.S., and 222 funds in markets outside the U.S.|
|Headquarters:||Valley Forge, Pennsylvania, USA|
|Chairman and CEO:||Mortimer J. Buckley|
|The number of employees:||More than 17,600 worldwide.|
Vanguard Investments Canada Inc.
|Total assets under management:||$17 billion|
|Funds offered:||39 ETFs and 4 mutual funds|
|Headquarters:||Bay Adelaide Centre
22 Adelaide St. West
Toronto, ON M5H 4E3
|Managing director:||Kathleen C. Bock|
|The number of employees:||56|
VGRO Growth ETF – Key Fund Facts
Let’s quickly take a look at the VGRO ETFs Fund Facts –
Inception date : 25-01-2018
Net assets: $490.9 M
12-month trailing yield: NA
Distribution yield: NA
Dividend schedule: Quarterly
Distribution per unit: $0.217646
Eligibility: RRSP, RRIF, RESP, TFSA, DPSP, RDSP
VGRO’s Investment Strategy
VGRO’s Investment Strategy is fairly simple and straight forward for anyone to get a hold of.
VGRO ETF seeks to achieve its investment objective by primarily investing in equity and fixed-income securities. It may do so either directly or indirectly through investment in one or more exchange-traded funds managed by the manager or an affiliate or certain other investment funds.
In seeking to achieve the investment objective (under normal market conditions), the sub-advisor will strive to maintain a long-term strategic asset allocation of equity (approximately 80%) and fixed income (approximately 20%) securities.
VGRO’s portfolio asset mix may be reconstituted and rebalanced from time to time at the discretion of the sub-advisor.
The underlying funds are expected to be index funds that provide exposure to broad-based equity and fixed income markets.
VGRO Trading Information – TSX (Toronto Stock Market)
Below is the trading information of the VGRO ETF:
Ticker symbol: VGRO
CUSIP : 92207X105
Exchange: Toronto Stock Exchange
What Are The Fees Associated With VGRO?
As you might already know, when trading with ETFs, fees are the most important expenses you need to look at before picking the stock.
VGRO’s Management Fee and MER are not the best in the industry when it comes to fees but still, it’s not too expensive either. Every ETF in the market is associated with a fee.
In case you are not aware of what fees are and why ETF fees are charged in the first place?
Here’s a quick answer – In order to run and manage the ETFs portfolio, every fund house such as Vanguard or Blackrock usually associates the ETFs with a fee.
Again, ETF fees vary from one to another. So do check that out before you pick any ETF for investment.
1. Management fee of 0.22%
2. MER (Management Expense Ratio) of 0.25%
You might notice that the MER Fee Ratio for VGRO is only 0.25%, However, when we talk about the Management Expense Ratio or MER, it’s an extremely important financial metric of any ETF you want to invest in. why so?
Let’s talk about it here – let’s compare VGRO’s MER with say for example with an ETF X or Y here, even when there’s a small MER difference, about .1%, which will compound over 30 years.
On a $30,000 portfolio initially, the cost difference would be about $30,000*.1% or $30.
Compounded over 30 years this would mean that the account balance would be about $900 more.
I’m pretty sure no one would be invested for so long in one ETF portfolio and you ‘ll be making switches every now and then.
But, still, that is a valid point when it comes to MER and picking the right ETF, savings over the time-frame.
VGRO Top 10 Holdings
Below is the list of the top 10 Largest Holdings of the VGRO ETF and of course they are all blue-chips and the heavyweights of their individual sectors.
|1||Royal Bank of Canada|
|4||Bank of Nova Scotia|
|5||Canadian National Railway Co.|
|7||Suncor Energy Inc.|
|9||Bank of Montreal|
That means to only say that, all of your investments are pretty much safe in the short to the long run and keep growing over-time.
Do remember that all of the big companies or blue chips make more profits over time, increasing dividends and thus return more to the fund houses or the investors at the end of the day. So, it is all good here!
VGRO Allocation To Underlying Vanguard Funds
Please read this information carefully, as it is super important. This is where things get interesting. In this section, I’ll talk about where exactly is VGRO investing your money into and how it grows.
Did you notice how well VGRO is diversified into multiple sectors?
This is what I was talking about in the previous section. All of your hard-earned money is split across different portfolios across – The US Blue chips, Canadian Blue chips, Emerging markets – like Japan and India.
By diversifying into multiple sectors – your money is not only that much safer but you gain the benefit of market fluctuation and currency hedging.
In a nutshell, VGRO is well diversified across geographies and into multiple high performing funds of different sectors.
So It’s definitely safer and sound, and you can definitely expect decent to excellent growth over the period of time. Please remain invested for a longer period of time, that’s how you can actually see the greater returns, by compounding.
The annual dividend yield of VGRO ETF is 2.42%. The stock’s currently trading at 26.90 CAD.
Dividends are paid out on a quarterly basis.
Below is the screenshot of the VGRO Price In TSX:
Here’s a quick snapshot of the VGRO Dividends:
VGRO Market Capitalization In Funds (Percentage-Wise)
I’ve listed below the fund allocation and percentage for VGRO ETF
72.54% Of VGRO’s Funds Are In Large-Cap Funds
VGRO Investment Strategy
If you prefer the 90/10 equities to bonds split you can very well purchase 50% VGRO and 50% VEQT.
That way overall your money would be in 90% stocks and 10% bonds.
If you want to risk even more and invest all in VGRO, then you’ll have to sell 50% of the value and buy VEQT with it to get to 90/10. Otherwise, you can probably start exclusively buying only VEQT to bring the percentage in line over time.
The asset allocations in the funds themselves don’t vary from the specified percentages so if you want your own custom allocation you have to switch between multiple ETFs to get your overall percentages where you want them.
You may have to rebalance periodically to keep your allocations where you want it depending on the fund’s performance and your ongoing contributions to each of the ETFs.
Definitely do your homework and shop around though, there are lots of ETFs on the market and quite a few are designed to be an all-in-one solution.
Another way to look at investing in VGRO is through Dollar Cost Averaging or Lump Sum Amount at regular intervals.
DCA (Dollar Cost Averaging) vs. Lump Sum investing debate is a never-ending debate. Right now, it seems crazy to put a large lump sum into the market.
The problem is that the market is a forward-looking pricing machine and is totally irrational. There is no way for the average investor to know for certain that the terrible economic news coming out right now isn’t already priced into the market expectations/market prices right now.
I, for one, am a proponent of the Lump Sum strategy. If I had a plan to DCA over 12 months and I saw the market flying upwards, I would be kicking myself for not getting in earlier, as it would be clear that I was missing out on gains. I would rather just get all in with the lump sum windfall and then continue along with my monthly contributions as a means of DCAing (by still sticking to my investment strategy).
Whether you DCA over 12 months or Lump Sum, it will likely not matter at all in 30 years.
How To Buy VGRO?
If you are wondering which platforms offer the best rates (commission-free) to purchase ETFs or VGRO in general, let’s look at that in this section.
Wealthsimple Trade – Wealthsimple trade offers commission-free trading whether its stocks or ETF. You do not pay commissions to buy or sell stocks or ETFs. Wealthsimple Trade is highly reputable and the #1 auto investing app in Canada. It’s very similar to Robinhood in the US. Also, the UI is extremely intuitive and easy to search for “VGRO” and purchase. My #1 choice to buy VGRO or any Canadian ETF is “Wealthsimple Trade” for sure. The simple reason being, you can save so much more in fees and use the same money to invest instead.
Questrade – Questrade is another Canadian platform and brokerage firm you can choose to buy VGRO. Questrade again offers commission-free ETF trading. Meaning you do not have to pay to buy ETFs in Questrade.
Banks – If you feel banks are the safest instruments to hold your investments/savings, I am with you on this. There’s nothing better than banks for safety. However, note that banks charge a one-time fee of $10 to buy and $10 to sell ETFs or VGRO in this case. Also, there’s the annual maintenance fee that banks usually charge with low account balances. Each bank has different prices, so do check out their websites to determine which is the best bank with minimal fees based on your preference.
I’ve pretty much-covered everything about VGRO here, also mentioning few other great picks from the Vanguard fund house in this article.
ETFs are bought just like normal securities on a brokerage. You can buy and sell them anytime during the trading day just like a stock.
Questrade is a favorite amongst Canadians as they offer free ETF purchases:
If you’re under the age of 25
You have a minimum $5,000 account balance
You are willing to trade for a certain dollar value of transactions per quarter
Moreover, you can start with $20 if you really wanted to since you’re not paying fees on buying the ETFs with Questrade, but you’ll pay commission fees if you’re selling them.
As I’ve been saying throughout the post, VGRO is really good for your investments – Be it in your TFSA’s, RRSP’s or brokerage. The kind of returns seen here are really good, also the overall objective of this ETF is robust with 75% of large-cap US and Canadian stocks.
Also, we saw that VGRO is globally diversified across multiple asset types and markets. If you are looking at growth ETFs alone, you might also want to consider ETFs like ZSP or VFV which actively tracks the US S&P 500 Index. ZSP especially is extremely volatile and the returns since inception are very good.
If you like the content of this article, please share it on social media and help spread the word. Also, don’t forget to let me know your thoughts and comments in the comment box below. Thanks for reading!
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Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.