VGRO ETF Review
Exchange-traded funds (ETFs) make it easy for investors to achieve a diversified portfolio at a low cost. There are thousands of ETFs available from well-known investment firms like Blackrock or Horizons, but one of the most popular funds is Vanguard’s VGRO ETF.
VGRO offers investors exposure to a diversified blend of stocks and bonds with a focus on long-term growth and a medium risk level. In this VGRO ETF review, I’ll provide an overview of the fund and explore what makes it an attractive option for investors.
What Is Vanguard?
Vanguard is one of the world’s largest investment management companies, with over $8 trillion in assets under management. It’s the world’s largest provider of mutual funds and the second-largest ETF provider. While Vanguard is a US-based company, it entered Canada in 2011 and offers several ETFs specifically for the Canadian market. Their one-fund ETF solutions, like VGRO, have become increasingly popular among investors.
VGRO is designed to provide long-term growth through a mix of 80% equities and 20% bonds, appealing to those seeking a balance between risk and reward. Given its diversification and relatively low management fees, VGRO has become an increasingly popular choice among Canadian investors.
What Is VGRO?
The Vanguard Growth ETF Portfolio, or VGRO, is an all-in-one Exchange Traded Fund (ETF) that provides a mix of 80% equity and 20% bonds. It’s designed for investors who want long-term growth at a medium risk level. The portfolio is fully diversified, offering exposure to both Canadian and global markers, and is automatically rebalanced. With an average MER of only 0.25%, VGRO is also known for its low fees
VGRO ETF At-A-Glance
What Is It? An asset allocation ETF offering a complete portfolio solution in a single fund.
- Ticker: VGRO
- Exchange: Toronto Stock Exchange
- Inception Date: January 25, 2018
- Net Assets: $4.1 billion
- Distribution: Quarterly
- Management Fee: 0.22%
- MER: 0.24%
- Number of Stocks: 13,619
- Price/Earnings Ratio: 15.3X
- Number of Bonds: 18,996
VGRO ETF Fund Overview
VGRO ETF Investment Objective
According to Vanguard, (VGRO) “seeks to provide long-term capital growth by investing in equity and fixed-income securities.” It aims to achieve this objective by investing primarily in broad-based index funds. While the target asset mix is 80% stock and 20% bonds, the fund manager may adjust the mix occasionally.
VGRO ETF Holdings
Because VGRO is an all-in-one ETF, its holdings are a mix of individual Vanguard ETFs, which means that it indirectly invests in the stocks and bonds those ETFs hold. At the time of writing, VGRO holds the following ETFs:
Underlying ETF Weighting
- Vanguard U.S. Total Market Index ETF 35.41%
- Vanguard FTSE Canada All-Cap Index ETF 23.60%
- Vanguard FTSE Developed All Cap ex North America Index ETF 15.46%
- Vanguard Canadian Aggregate Bond Index ETF 11.75%
- Vanguard FTSE Emerging Markets All Cap Index ETF 5.59%
- Vanguard Global ex-U.S. Aggregate Bond Index ETF (CAD-hedged) 4.20%
- Vanguard U.S. Aggregate Bond Index ETF (CAD-hedged) 3.98%
VGRO’s geographic exposure includes Canada, the U.S., internationally developed markets, and emerging markets. Equity holdings include the following industry sectors: financials, technology, healthcare, and consumer sectors.
Here are the top 10 equity holdings of the fund:
- Apple, Inc.
- Microsoft Corp.
- Royal Bank of Canada
- Toronto-Dominion Bank
- Amazon.com., Inc.
- NVIDIA Corp.
- Enbridge Inc.
- Canadian Natural Resources Ltd.
- Canadian Pacific Kansas City Ltd.
- Canadian National Railway Co.
VGRO ETF Performance
Keeping in mind that past returns are not indicative of future performance, here is a summary of VGRO’s recent performance:
- In 2020, it posted a return of 10.89%.
- In 2022, it posted a return of 14.97%
- In 2023, it posted a return of (11.21%)
- The average annual return since inception is 5.20%.
VGRO ETF Fees
One of the biggest drawing factors of any ETF is its low fees, and VGRO is no different. Its Management Expense Ratio (MER) is 0.24%, much lower than what you would pay for an asset allocation mutual fund.
For example, take TD’s Comfort Growth Portfolio (TDB888). Like VGRO, the fund is a “fund-of-funds” with an 80%/20% mix of equity and income and aims to provide a complete portfolio solution in a single fund. However, the MER on TD’s fund is 2.13%, making VGRO the far cheaper option.
Single broad-based index ETFs can achieve even lower MERs than VGRO, but they don’t offer the same level of diversification, leaving the investor in charge of portfolio rebalancing. With VGRO, you’re paying a slight premium for the added simplicity.
VGRO vs. XGRO
Many investors struggle to choose between VGRO and another popular Canadian all-in-one ETF, XGRO, from BlackRock iShares. The iShares Core Growth ETF Portfolio has a lot in common with VGRO. Here’s a closer look at how the two funds compare:
Risk and Volatility: Both VGRO and XGRO ETFs have a similar asset allocation, with 80% in equities and 20% in bonds, making their risk profiles quite alike. However, XGRO has slightly more exposure to US equities (36.5% vs. 31%) and less Canadian equity (20.51% vs. 23.2%). If you believe strongly in the long-term prospects of the U.S. market over the Canadian market, you may want to consider holding XGRO in your portfolio.
Historical Returns: Since 2019, XGRO has slightly outperformed VGRO. For example, in 2019, XGRO delivered a return of 17.96% vs. 17.66% for VGRO. In 2022, XGRO had a negative return (-11.0%), while VGRO was slightly worse at -11.21%. Part of the difference lies in the fact that XGRO has a slightly lower MER, but the fact that XGRO has more exposure to the U.S. market also played a role.
Again, keep in mind that past performance does not guarantee future results.
Distribution Yield: VGRO’s distribution yield is currently 2.08%, which is higher than XGRO’s yield of 1.71%. Both ETFs include stock dividends and bond interest payments in their distribution yields.
The bottom line is that both VGRO and XGRO have similar risk profiles and asset allocations, but there are slight differences in their equity exposure and historical returns. To find the best fit for your portfolio, I recommend choosing the one that aligns best with your investment goals and risk tolerance.
Where Can I Buy VGRO?
The easiest way to buy shares of VGRO is through a self-directed online brokerage. There is no shortage of online brokers to choose from in Canada, but you will save money by selecting a brokerage that allows you to purchase ETFs commission-free.
For this, I recommend Questrade, one of the largest independent brokerages in Canada. The nice thing about Questrade is that it offers free ETF purchases, including VGRO (There is a small fee to sell ETFs).
Wealthsimple Trade also offers commission-free trading. The user-friendly platform is suitable for investors who don’t need access to more sophisticated market research tools and advanced trading dashboards.
If you’re not concerned about trading fees, TD Direct Investing is Canada’s largest online brokerage and boasts top-notch research capability and advanced trading dashboards. However, you will pay a hefty $9.95 trading fee for every ETF purchase you make.
What are the VGRO’s top equity holdings?
VGRO’s top equity holdings include companies like Apple, Microsoft, and Amazon, as well as Canadian stocks like Royal Bank of Canada and Toronto-Dominion Bank. It also invests in international markets and various types of bonds, giving you a balanced mix of assets in your portfolio.
How does VGRO compare to VEQT?
VGRO and VEQT are both popular Vanguard all-in-one ETFs, but they have different investment objectives. VGRO is a slightly more conservative option, with a mix of stocks and bonds, while VEQT invests exclusively in equities. As a result, VEQT may offer higher potential returns, but it also comes with a higher level of risk, making it better suited for those with a higher risk tolerance and a longer investment horizon.
Is investing in VGRO considered low-risk?
While VGRO is considered a balanced and diversified investment option, it is essential to remember that no investment is entirely risk-free. VGRO is designed to provide a mix of stocks and bonds, which can help moderate the overall level of risk in your portfolio, but its value will fluctuate, and there is always a risk that you could lose money.
How often does VGRO distribute dividends?
VGRO currently distributes dividends quarterly. These payments are collected from both stock dividends and bond interest payments held within the ETF. However, the dividend yield and the payment amount might vary throughout the year, depending on market conditions and the performance of the underlying assets.