Vanguard Canada Delivers Couch Potato ETFs

If you’re a Canadian, and you want a single ETF that operates like Vanguard USA’s Target Retirement Funds, Vanguard Canada has finally delivered.

These cost 0.22% per year.1

They provide a full couch potato portfolio in one fund, with Canadian stocks, Canadian bonds, US stocks, developed world international stocks and emerging market stocks.

If you don’t already have a portfolio of ETFs, and you aren’t using a group like WealthBar, let these be your one-stop shop. Vanguard will dispassionately rebalance for you.

I’ve been asking for these for years. I’m glad that Vanguard has finally delivered.

Choose the fund, from those below, that fits your risk tolerance.

Image by Pixabay

More information

 

Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

You may also like...

31 Responses

  1. Jen says:

    Would the 80% equity not have a medium to high risk?

  2. Duncan says:

    Hello Andrew,

    Great news thanks.
    I just wonder if these funds are tax efficient in a regular account (taxable account).

    The reason I am asking is that I am currently an Expat but going back to Canada in April 2018.
    My contribution to a TSFA and RRSP are irrelevant unfortunately so my only choice is to invest in a taxable account (being living in Oman for the last 15 years) .

    Any thoughts on that matter.

    Cheers

    Duncan

    • Duncan,

      They would be tax-efficient in a taxable account. But buying the lagging index each month (in a taxable account) might be slightly more tax efficient because you would not have to do much rebalancing if you did that. But once again, I’ll give you my favorite quote of the day: you’re measuring the weight of the hair on a marathon runner’s legs.

      Cheers,
      Andrew

  3. Dave says:

    Good morning Andrew,

    Really nice find.

    I have a question regarding which bond fund to use in a taxable account (I am a Canadian)
    As you may already know Bond funds are very inefficient in a taxable account

    I just wanted to have your opinion on the following Bond ETF that was recommended by an advisor. This Bond fund is apparently tax efficient in a taxable account. (the advisor was paid a one time fee so i think there is not conflict of interest)

    Bond name: ZDB (BMO discount bond fund)
    Below a small review of the fund in question

    “ZDB: This fund is interesting because it focuses on bonds with small coupons, generating minimal interest income. The resulting tax-adjusted performance is actually higher than the nominal performance. This is the same tax-efficient strategy that I follow when I purchase bonds individually. It also has reasonably high government bond composition and mostly AAA and AA exposure. However, it has high securities lending and this adds to its overall risk.”

    Would appreciate your thoughts on this particular bond fund.

    Cheers

    Dave

    • Hi Dave,

      That bond ETF would be fine. But I also think you are weighing the hair on a marathon runner’s legs. This is probably the least important decision you’ll ever make.

      Cheers,
      Andrew

  4. Index says:

    Hi All,
    I have a slightly different question but this seems like a good place to ask it.
    I am a 47 year old Brit resident in the UAE.
    I have term life insurance that I purchased through my bank years ago. I suspect I am paying over the odds for it. Can anyone recommend a good provider?
    Same question also for medical insurance.
    Index

  5. Yoko Takahashi says:

    I have an upcoming 500K to invest. NON-registered account. 5-15 years. I am looking for ease and simplicity, hence my first thought was a robo-advisor. But with these new Vanguard funds, I thought this could be even better. Justin Bender wrote in his blog that it is not advisable for a taxable account. I like your quote about the hair on a marathoner’s leg, and I am hoping you are going to tell me the same? (BTW, I thank YOU for changing my financial life – I escaped from Friends Provident – Thank you endlessly!)

  6. Divo says:

    @Andrew Hallam These options are attractive as I’m just starting out with investing as a 45 year old Canadian ex-pat who will have a pension. After reading your books, I’m leaning towards the swap-based portfolio as it seems to offer the most tax efficient earning potential. Are options like VBAL attractive mostly because they are easy to use, or are they somehow more cost effective because there are no fees/commissions incurred through rebalancing every year? I’m guessing that the financial benefits of not incurring fees through rebalancing would be minimal and that the low expense ratio of the swap-based portfolio and the saved taxes on dividends would ultimately offer greater earning potential than these options, but I don’t have enough experience to really understand all the intricacies. I’d love to hear your thoughts. Thanks!

    • Divo,

      You are right. The swap-based products would win in the end. Now remember to save as much money as possible, every single month, no matter what the markets are doing. That’s going to make the biggest impact. I meet plenty of expats that worry about unimportant things (like which ETFs to choose) but they don’t save enough. So…save hard, my friend. You can rock this!

      Cheers,
      Andrew

    • Vito says:

      A little clarification,

      I am aware that Vanguard rebalances for you, but ultimately doesn’t the rebalancing (selling the winners and buying the laggards) eventually incur charges that ultimately get passed down to the investor OR is that simply part of the 0.22% MER?

      By the way, I can’t remember where I read it, but was told that the 0.22% is really more like 0.25% when factoring in fund costs and taxes, not sure this is accurate.

      • Vito,

        The TER is about 0.25%, and that includes rebalancing costs. Few DIY investors will match the performance of these funds over their lifetime, even if such DIY investors pay fees as low as 0.10 percent per year. I have met few people with that kind of discipline. That’s why I love these products.

        Cheers,
        Andrew

        • Vito says:

          Hi Andrew,

          Please pardon my ignorance here, is the TER (Trading Expense Ratio OR total expense ratio ?) in addition to the MER, so 0.25% + 0.22% = total cost of 0.47%? CAN YOU PLEASE CLARIFY THIS, ITS REALLY BUGGNG ME.

          Also, I have already been index investing for about one year in a TFSA (thanks to you!) using a 3 ETF portfolio (XAW, VCN & VSB – 50%, 20% and 30%, respectively) and have only been rebalancing using fresh money, never sold any shares; and now I’m starting an RRSP, but I am thinking of going with VGRO mainly for the sake of further simplicity, although I don’t find my TFSA difficult to manage at all; in fact, every 1st of the month (including today) I buy more of the above shares based on my allocation and keep doing so every month; so I know I can do this even for my RRSP, but I was just curious to see how well it would perform over say 3-5 years and decide whether to stick with it or move back to a 3 ETF like my TFSA.

          I’m curious, I know your wife is American and you’ve stated or written (can’t remember if it was in a podcast/radio show/this or other blog) that she is invested in a Target Date fund with Vanguard, but I’m curious, if you love these products (ie. VGRO, etc) are you using them? If not, is it because you can’t as a Canadian expat? I don’t know all the rules or laws, just like I don’t understand some of the comments made on this blog about how if a Canadian expat were to invest into an RRSP that can somehow affect their Canadian residency status? I’m sorry, just confused with this one.

          Thank you for replying back and all your continued support.

          ps. PLEASE PLEASE PLEASE, I know I’ve said this before in other threads, but if you ever do a talk in Toronto, it can be at a library, a school, or in a bar over a Leaf’s game, I WILL come to the event, please let us know if that day comes.

          • Hi Vito,

            It would be cost prohibitive for me to trade out of my individual ETFs to buy an all-in-one because I have my money in an offshore brokerage. It doesn’t charge a flat fee for trades. The larger the trading sum, the bigger the commission. Plus, I’m an oddball with the discipline to rebalance annually, with purchases, or manually when markets drop. I have learned that very few people can do that. If you think you could smile when stocks drop 40%, then you could do the same. If not…the all-one-one would be the best solution for you.

            TER include the TOTAL fees incurred.

            Cheers,
            Andrew

  7. Maria says:

    For a Canadian expat, what are the differences between this service and Wealthbar?

    • Hi Maria,

      This isn’t a service. It’s just a single ETF wrapped up with different ETFs, making a complete portfolio. You would have to physically buy it online each time. Dividends wouldn’t get reinvested.
      WealthBar is an investment firm that can build you a portfolio and offer a financial advisor as part of the package. You wouldn’t have to make the transaction/trades. WealthBar would do it for you.

      Cheers,
      Andrew

  8. Maria says:

    Thank you. So there would be no fees, as compared to Wealthier.. But the tax implications would be the same?

    • Hi Maria,

      There’s no such thing as an investment that doesn’t charge fees. Vanguard’s all-in-one portfolios cost 0.22% per year. WealthBar’s fees are low, but they are higher than that. You can check the fees on their website (they differ, based on how much money you have).

      Cheers,
      Andrew

  9. Armand says:

    Hello Andrew,
    I recently came across your interview on DubaiEye, wish I would have came across your “teachings” much earlier…
    Currently living in Dubai bus likely to relocate to Canada within a 2-year horizon. I have 300K CAD sitting in a bank savings account in Canada. I am considering to move it to either (a) WealthBar for investing into ETFs or (b) Internaxx (former TD Direct International) for investing into index funds. What’s best? Tax impacts?

  10. Spa says:

    Hi. I have started to invest in index funds. I started with Tangerine’s INI220 but now that I’m at more than $50 000 I’m starting to think I could do better because of MER of 1.07 and because I’m about to triple my investment.

    Which option do you think is best?
    1. stay with INI220 Balanced fund
    2. Switch to TD e-series 40% TDB 909, 20% TDB 900, 20% TDB 902, 20% TDB 911 with MER of 0.44
    3. Switch to Vanguard Balanced ETF Portfolio (VBAL) 60% equities to 40% fixed income with MER of 0.22

    I have a pension so I’m not relying on this investment for income. Just hoping it can make some money (5% is my goal) to help my kids and grandchild in the future. I am 53 years old. I’m hoping to let the investment sit long term (10-20 years) without touching it but feel I can manage to rebalance yearly for the TD funds.

    Can you please compare the above options and advise on the winner.

    Thanks for your time.

  11. Jill says:

    Hi Andrew,
    I have to pay $10 per trade so it doesn’t make sense for me to contribute monthly to my VGro tfsa and rrsp. Would contributing 3 times per year be reasonable when it comes to paying the $10 trading fees? I have saved 60,000 to invest.
    Thanks for your help

  12. Miwo says:

    Hello Andrew,

    I am beginning to see that my kids should just buy VGRO in their TFSA accounts when they turn 19 years old and that might be almost all that they will need for retirement. Given enough time with decades, these small investments would be massive. And no tax to boot except for the foreign withholding tax.

    They can keep aside some emergency funds in cash and leave the rest of their retirements investments in VGRO.

    It won’t impact their working incomes, pensions, government benefits etc.

    Do you see any huge red lights with this scenario currently? We all know things can change in the future but these products in a TFSA given decades to grow seem quite optimal to me right now.

  13. Oj Junior says:

    Hey Andrew thank you very much for your support. I read you book “ Millionaire Teacher” 2nd edition and that changed my life. My RRSP and TFSA are max and all in VGRO.TO. My taxable account has div paying stocks but wanna change to ETFs. This month Aug 2018 Horizon came up with the same funds but they are swap- based. HBAL 70/30. My question : Which one of these two VGRO or HBAL would be ideally for my Corporation Margin Account? Thank you for your time and your teaching.
    Note: I’m Canadian and I use corporation margin account as incorporated self employee.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.