All-in-one ETF portfolios such as Vanguard Balanced ETF Portfolio (VBAL) have made self-directed investing easier than ever.
Also referred to as ‘single-ticket’ or ‘one-ticket’ solution funds, these asset allocation ETFs offer investors simplicity and hassle-free portfolio management at a low cost.
VBAL holds stocks and fixed income assets at a 60:40 allocation, so you enjoy long-term growth and income at the same time.
While the fund would probably suffer less volatility than its counterparts with a heavier equity weighting (i.e. VGRO and VEQT), it is not as conservative as VCIP and VCNS.
This VBAL review details its holdings, management expense ratio, pros and cons, how to purchase VBAL in Canada, and how it compares to XBAL.
What is VBAL?
VBAL is Vanguard’s balanced ETF portfolio and one of five all-in-one portfolios offered by the company. The others are:
- Vanguard Conservative ETF Portfolio (VCIP): 80% fixed income and 20% stocks
- Vanguard Conservative ETF Portfolio (VCNS): 60% fixed income and 40% stocks
- Vanguard Growth ETF Portfolio (VGRO): 80% stocks and 20% fixed income
- Vanguard All-Equity ETF Portfolio (VEQT): 100% stocks
VBAL has a target allocation that is 60% stocks and 40% fixed income securities. This portfolio is designed for investors who are seeking long-term capital growth as well as some income.
The ETF is traded on the Toronto Stock Exchange under the ticker symbol “VBAL”. It was launched on January 25, 2018, and has a risk rating of ‘low to medium.’
Key fund facts for VBAL as of July 31, 2020, are:
- Net assets: $1.1 billion
- Eligible accounts: RRSP, RRIF, RESP, TFSA, and non-registered accounts
- Management fee: 0.22%
- MER: 0.25%
- Listing currency: CAD
- 12-month trailing yield: 2.09%
- Distribution yield: 2.18%
- Return on Equity: 11.5%
- Price/Earnings Ratio: 16.2x
- Price/Book Ratio: 1.6x
- Earnings Growth Rate: 11.0%
VBAL Asset Allocation
This fund tries to balance your exposure to the bond and stock markets and may be suitable for investors with average risk tolerance.
As of July 31, 2020, VBAL holdings were made up of 60.46% stocks, 39.48% bonds, and 0.06% in short-term reserves (cash equivalents).
The funds constituting the portfolio are other Vanguard ETFs including:
VBAL underlying funds | Allocation |
|---|---|
Vanguard US Total Market Index ETF | 24.70% |
Vanguard Canadian Aggregate Bond Index ETF | 23.70% |
Vanguard FTSE Canada All Cap Index ETF | 18.40% |
Vanguard FTSE Developed All Cap ex North America Index ETF | 12.60% |
Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged | 8.50% |
Vanguard US Aggregate Bond Index ETF CAD-hedged | 7.30% |
Vanguard FTSE Emerging Markets All Cap Index ETF | 4.80% |
For the equities allocation, financials, technology, industrials, consumer services, and healthcare, stocks make up a majority of the equities exposure.
The bond components are mostly AAA, AA, and A rated funds with BBB and lower-tier bonds making up just 13% of fixed income assets.
As you would expect for an asset allocation ETF portfolio, VBAL offers investors risk management through global diversification.
The top-10 market allocation for stocks held by the fund as of July 31, 2020, are:
A total of 12,413 stocks from 50 countries are held by VBAL.
The top-10 market allocation for fixed income assets held by the fund as of July 31, 2020, are:
A total of 15,190 fixed income assets from 64 different markets are held by the fund.
Related: Best Money Management Apps in Canada
VBAL Returns
Generally, when you are looking at whether a fund is a good investment, you want to take a look at its returns.
As of August 31, 2020, VBAL had returned 4.43% year-to-date and 8.26% in the last one year.
It should be noted that historical returns do not guarantee future performance.
In addition to the returns history, you should also consider your risk tolerance, investment objectives and time horizon when choosing a fund for your portfolio.
VBAL has only been around since 2018. If you want, you can also dig a bit further into what its historical performance looks like by analyzing how its constituent funds have performed over time.
VBAL Fees
VBAL has a 0.22% management fee and a total Management Expense Ratio (MER) of 0.25%. This is similar to the fees you pay for VGRO and VEQT as well.
Compared to purchasing a mutual fund from your bank, it goes without saying that you could save a lot in management fees by choosing an appropriate one-ticket ETF portfolio.
We are talking about 0.25% for VBAL vs. 2% or more for a traditional mutual fund.
Compared to a robo-advisor, you also save some money. For example, Wealthsimple Invest would cost you 0.60% to 0.70% per year after including the inbuilt ETF MER.
That said, robo-advisors offer other perks including free financial advice. Also, you won’t have to worry about your trading frequency and associated brokerage commissions.
You can purchase VBAL and the other all-in-one ETFs directly using a self-directed discount brokerage, such as Wealthsimple Trade and Questrade.
Questrade does not charge a fee to purchase ETFs. When you sell, a $4.95 to $9.95 per trade commission applies.
Wealthsimple Trade offers a no-commission platform for trading ETFs and stocks. When you purchase or sell VBAL, you don’t pay trading fees.
Related: How To Purchase ETFs for Free in Canada
Pros and Cons of VBAL
Here are some of the benefits and downsides of investing in VBAL:
Pros
- Hassle-free portfolio management that eliminates the need for frequent rebalancing.
- Lower management fees compared to expensive mutual funds.
- A balanced portfolio that is not too risky or aggressive.
Cons
- Trading fees can add up if your broker charges brokerage commissions. The effect of trading fees is more pronounced if you are investing small amounts on a regular schedule. In this case, you may want to consider middle-of-the-road index fund portfolios.
- If you need to update the risk characteristics of your portfolio (e.g. change from balanced to conservative), you may need to sell your entire VBAL holdings in order to purchase new assets. This could have tax implications.
VBAL vs. XBAL
Blackrock’s iShares Core Balanced ETF Portfolio (XBAL) is similar to VBAL in that it also seeks to provide long-term capital growth and income.
XBAL has a target allocation of 60% equities to 40% bonds as well and a low-to-medium risk rating.
The fund has been around for longer than VBAL and is the updated version of an older fund, the iShares Balanced Income CorePortfolio Index ETF (CBD).
The underlying funds making up XBAL as of September 3, 2020 are:
Ticker | XBAL underlying funds | Allocation |
|---|---|---|
ITOT | ISHARES CORE S&P TOTAL U.S. STOCK | 28.59% |
XBB | ISHS CORE CAD UNIV BND IDX ETF (CA | 24.93% |
XIC | ISHARES S&P/TSX CAPPED COMPOSITE | 14.79% |
XEF | ISHARES MSCI EAFE IMI INDEX | 14.18% |
XSH | iShares Core CAD ST Cor Bd Index | 6.43% |
USIG | ISHARES BROAD USD INVESTMENT G | 3.84% |
GOVT | ISHARES US TREASURY BOND ETF | 3.76% |
IEMG | ISHARES CORE MSCI EMERGING MARKETS | 3.16% |
CAD | CAD CASH | 0.34% |
USD | USD CASH | 0.04% |
XBAL has a 0.18% management fee and total fees (MER) of 0.20%. Similar to VBAL, you can purchase XBAL on Wealthsimple Trade and Questrade.
How To Buy VBAL in Canada
Brokerage platforms including Wealthsimple Trade (aka Canadian ShareOwner), Questrade, Qtrade, BMO InvestorLine, ScotiaiTrade and several others offer access to buy and sell Vanguard ETFs.
You can also purchase VBAL through a financial advisor.
Self-directed investors can save money on management fees by purchasing VBAL directly using an online brokerage account.
1. Buy VBAL on Wealthsimple Trade
Wealthsimple Trade is a commission-free platform for buying and selling stocks and ETFs.
After opening an account, search for “VBAL” and place a market, limit, or stop-limit buy order. There are no trading commissions for buying and selling VBAL on the platform.
As a reader of Savvy New Canadians, you get a $10 cash bonus when you sign up for an account and deposit and trade at least $100 worth of stocks.
2. Buy VBAL on Questrade
You can use Questrade to buy and sell stocks, ETFs, mutual funds, options, and more. They do not charge a fee for ETF purchases, however, you pay $4.95 to $9.95 per trade when you sell ETFs.
To get started, open a self-directed account and search for “VBAL” or the ticker symbol of any ETF you want to purchase.
You can place market orders, limit orders, and many other types of orders on the platform.
Our readers get $50 in free trades when they sign up here.
Is VBAL a Good Investment?
As per Vanguard, VBAL is for people who “…are looking for long-term capital growth and a moderate level of income” and who can “handle the ups and downs of the stock market.”
In short, you should be investing with a long-term mindset and be willing to see your portfolio fluctuate up and down. Volatility is expected for any portfolio that has a heavy weighting in stocks.
That said, VBAL is not as aggressive as VEQT or VGRO, and may suffer less volatitlity during market corrections.
VBAL can be a good investment if it matches your risk tolerance, time horizon and returns expectations.
Related: The Best Investment Accounts in Canada
VBAL REVIEW: VANGUARD BALANCED ETF PORTFOLIO
Summary
The Vanguard Balanced ETF Portfolio VBAL is one of five all-in-one funds offered by Vanguard. Learn about VBAL ETF returns, fees, and how to buy it in Canada.
Pros
- Automatic rebalancing eliminates the hassle of self-directed investing.
- Lower management fees compared to mutual funds.
- Tax-efficient in registered investment accounts.
Cons
- Broker commissions can add up if you don’t use a commission-free trading platform.
