VBAL ETF Review

The VBAL ETF is a balanced ETF fund providing exposure to both equity and fixed income securities.

The ETF offers long-term capital growth as well as income to investors. The fund invests in one or more ETFs managed by the Vanguard Canada or its affiliates.

VBAL maintains a long-term strategic asset allocation of equity (~60%) and fixed income (~40%) securities. The underlying funds provide exposure to broad-based equity and fixed income markets.

It’s considered a one-stop balanced ETF for investors.

Pros of Vanguard VBAL ETF

  • Invests in more than 13,000 stocks and 17,400 bonds currently.
  • Passive balanced portfolio. 
  • VBAL provides exposure to ETFs that are diversified across regions and asset classes.
  • Provides both long-term capital growth and a moderate level of income.

Cons of Vanguard VBAL ETF

  • A little expensive ETF with an MER is 0.24%. Its contemporaries iShares XBAL, Blackrock’s ZBAL, and Horizon’s HBAL, all have lower MERs.
  • VBAL has a relatively lower distribution yield of 1.66% compared to XBAL’s relatively higher yield of 1.76%.
  • Provides exposure to equity ETFs managed only by Vanguard.

Vanguard VBAL ETF Facts

  • Inception Date: January 25, 2018
  • Benchmark: nternal Composite
  • Net Assets: $1,774M
  • MER: 0.24%
  • Distribution Yield: 1.66%
  • Dividend Schedule: Quarterly

Vanguard VBAL ETF MER – Management Expense Ratio 

VBAL’s management fee stands at 0.22% and MER is 0.24%.Its contemporaries iShares XBAL, Blackrock’s ZBAL, and Horizon’s HBAL have MERs of 0.20%, 0.20%, and 0.15%, respectively.

The MER is what Vanguard takes to manage the fund for you. It’s much cheaper than mutual funds and in some cases cheaper than investing on your own.

Mutual funds can charge over 2% and it robs you of your returns. It’s time to ditch your mutual funds and switch to ETF ASAP. Many brokers such as Questrade offer free ETFs. Couple the free ETFs with low MER and you are ahead of many.

Vanguard VBAL ETF Performance

The annual rate of return for Vanguard VBAL ETF since inception is more than 7%. It has, however, underperformed the broader S&P500 index in the last two years.

Investing in the S&P500 is simple and works. The only question is whether you hedge or not.

The debare over CAD-Hedged or not is out there and most of it is based on your understanding and expectation of the USD currency. It’s not worth fussing over it in my opinion.

Take your TFSA account as an example. The rules are the same for everyone and I mean everyone. The growth is ultimately a factor of your investment performance provided you make your TFSA contribution limit every year. The annual performance of an ETF matters as you can see below the growth over 20+ years.

wdt_ID Year Yearly Limit Cumulative 5% Growth 10% Growth Dividend Earner Spousal
1 2009 5,000 5,000 5,250 5,500 Not Tracked Not Started
2 2010 5,000 10,000 10,762 11,550 Not Tracked Not Started
3 2011 5,000 15,000 16,550 18,205 Not Tracked Not Started
4 2012 5,000 20,000 22,628 25,525 Not Tracked Not Started
5 2013 5,500 25,500 29,534 34,128 $41,742 Not Started
6 2014 5,500 31,000 36,786 43,590 $52,820 Not Started
7 2015 10,000 41,000 49,125 58,949 $56,307 Not Started
8 2016 5,500 46,500 57,356 70,984 $70,200 Not Started
9 2017 5,500 52,000 65,999 84,034 $78,900 $13,308
10 2018 5,500 57,500 75,074 98,487 $96,937 $58,818
11 2019 6,000 63,500 85,128 114,986 $129,467 $82,596
12 2020 6,000 69,500 95,684 133,030 $153,993 $95,906
13 2021 6,000 75,500 106,769 152,933 $181,601 $113,194
14 2022 6,000 81,500 118,407 174,827 $169,702 YTD $128,018 YTD
15 2023 6,500 88,000 131,152 199,459
16 2024 6,500 94,500 144,536 226,555
17 2025 6,500 101,000 158,587 256,361
18 2026 6,500 107,500 173,342 289,147
19 2027 7,000 114,500 189,359 325,762
20 2028 7,000 121,500 206,177 366,038
21 2029 7,000 128,500 223,836 410,342
22 2030 7,500 136,000 242,902 459,626
23 2031 7,500 143,500 262,923 513,838
24 2032 7,500 151,000 283,944 573,472
25 2033 7,500 158,500 306,016 639,069
26 2034 7,500 166,000 329,192 711,226
27 2035 7,500 173,500 353,526 790,599
28 2036 7,500 181,000 379,078 877,909
29 2037 7,500 188,500 405,906 973,950
30 2038 7,500 196,000 434,077 1,079,595

Vanguard VBAL ETF Holdings

Below are the top ten holdings of VBAL ETF at the time of writing. VBAL ETF invests ~60% in equities and ~40% in fixed income. The portfolio asset mix may be reconstituted and rebalanced from time to time at the discretion of the sub-advisor. 

The ETF has ~84% exposure to large-cap funds, followed by ~6% in medium-cap funds, and ~3.6% in small-cap funds. The balance allocation is in medium-large and medium-small cap funds.

VBAL invests in financials (20%), technology (~17%), industrials (~13%), consumer discretionary (~13%), healthcare (~8%), basic materials (~7%), energy, utilities, consumer staples, telecom, real estate sectors. Some of its top holdings are RBC, Shopify, TD Bank, Microsoft, Apple, Amazon, Bank of Nova Scotia, CNR, etc.

wdt_ID Sector Ratio
1 VAB - Canadian Aggregate Bond Index ETF 23.23
3 VIU - FTSE Developed All Cap ex North America Index ETF 12.16
4 VCN - FTSE Canada All Cap Index ETF 18.17
5 VEE - FTSE Emerging Markets All Cap Index ETF 4.52
6 VBG - Global ex-U.S. Aggregate Bond Index ETF (CAD-hedged) 9.11
7
9 VBU - U.S. Aggregate Bond Index ETF (CAD-hedged) 7.18
12 VUN - U.S. Total Market Index ETF 25.63

Why hold Vanguard VBAL ETF

VBAL offers a balanced allocation of 60% equity and 40% bonds. It may be what you are looking for and it could be a good fit.

The ETF provides a good opportunity to long-term investors who want to limit their investment risk, as opposed to investing 100% either in equity or in bonds. Its fees, automatic portfolio rebalance, and asset and region diversification is cherry on top.

If you want the dividends, it’s not clear you will get the same growth but the the best banks and the best utility stocks will give you more income.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.