In February 2018 Vanguard Canada launched all-in-one complete Balanced Portfolios that you can purchase by entering one ticker symbol. For example, in your discount brokerage account you would enter the symbol VBAL to get a complete, globally diversified Balanced Portfolio. The Portfolio is 60% Canadian, US and International stocks with 40% of those shock absorbers known as bonds. The Vanguard asset allocation portfolios are re-balanced on a regular schedule to keep the risk level in check.
The MER for the Vanguard asset allocation portfolios is .25%. Yes these portfolios are a game changer. The one ticket solutions are the most cost-effective managed portfolios available in Canada. This should be the final dagger in the heart of the high fee mutual fund industry. iShares also offers one ticket solutions. You’ll also find them at BMO and Horizons.
Here’s the Findependence Hub review Game changer? Vanguard Launches 3 New Asset Allocation ETFs.
Here’s the stock to bond mix for the 3 portfolios that were launched in February of 2018. Happy Birthday! The one tickets are turning 1. And speaking of the 1’s the portfolios have already reached $1 Billion in assets. They are a hit with Canadians.
They are now bringing in $100 million per month.
And recently Vanguard Unveiled 2 more Asset Allocation ETFs.
In good Canadian fashion the Vanguard One Ticket team now has 5 players, enough for a full hockey lineup (not including the goalie of course). And just like hockey, there are players that are more aggressive and players that are more defensive in nature. The aggressive portfolios have more stocks. The defensive portfolios have more bonds.
How Do You Know What Portfolio To Select?
We are now down to the most important ‘part of it all’. The Portfolios do not come with an owner’s manual for when and how to use them. Matching the appropriate portfolio to your goals and risk tolerance level and time horizon is paramount. As Ford used to say “It’s Job 1”.
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We have to invest within our risk tolerance level. That means, we have to be comfortable with the amount that the portfolio could decline in value. Are you comfortable with a portfolio that could decline by 5% in a major correction, 10%, 20%, 30%, 40% or 50%?
Remember those bonds work like shock absorbers to soften the blow and smooth out the ride during periods when the stock markets tank. And tank they can; Canadian and US and International markets have declined by some 50% or more twice in the last 20 years.
There were major corrections in 2000-2002 and in 2008-2009. There have been some very ‘minor’ corrections over the last 10 years.
The market corrections.
Here’s an example of those shock absorbers at work. Courtesy of the portfolio modelling tools at portfoliovisualizer.com (where I spend way too much time) here’s a look at an all-stock portfolio vs a 50/50 stock to bond portfolio. Dividends are reinvested. The portfolios are rebalanced on an annual schedule.
Portfolio 1 is all stocks – Canada, US and International.
Portfolio 2 is 50% stocks and 50% Canadian bonds.
The stock portfolio fell by some 50% (drawdown). The conservative portfolio was ‘only’ down by some 24%. We see that by the end of 2011 the more conservative portfolio is already in positive territory while the all-stock portfolio is still fighting its way back to the break even point.
The portfolio recovery period is important, your time horizon is important. That’s why we don’t invest shorter term monies in all-stock or stock-heavy portfolios.
To get you in the right portfolio, we’re largely trying to match the portfolio mix to your time horizon and comfort level for portfolio decline.
You’ll find a table that will help you in this MoneySense post. If categorizes the asset allocation ETFs by way of time horizon and risk tolerance.
The Core Couch Potato Portfolios
You Need a 4-5 Year Time Horizon to Even Consider Investing.
Yup. If you have monies that you need in 3 years or less, off to the bank you go for a high interest savings account or GICs.
You might invest in the more conservative Vanguard asset allocation portfolios if you a time horizon of 4-5 years or more.
In the land of the Vanguard Portfolios that would mean that the Vanguard Conservative Income Portfolio, the Vanguard Conservative Portfolio and the Vanguard Balanced Portfolio might be suitable if you check that box for your risk tolerance level.
Time Horizon of 4-5 years or more.
Stock-heavy portfolios typically take much longer to recover after a major market correction. In fact, it could take several years for a Balanced Growth or All-Equity Portfolio to get back to even Steven after a major correction. That’s why it’s suggested that you have at least 6-9 years or more to invest in a portfolio that would be 70%, 80%, 90% or 100% in stocks.
Taking on greater risk for greater return.
And there’s no guarantee that you’ll make money in any of these asset allocations over a 6-9 year period. Investing involves risks, we don’t know the future. That said market history suggests that if you invest in a sensible well-balanced portfolio and keep your fees low, there’s a high probability of positive returns.
Time Horizon of 6-9 Years or More.
Personally, I would only invest in an All-Equity Portfolio if I had a time horizon of 10 years or more.
Once again you would need to have a High Risk Tolerance Level to invest in these Growth Portfolios. You would have to be able to withstand a 40-50% portfolio decline. If we go back to that 2008-2009 correction adding 20% bonds to a portfolio would have turned that 50% drawdown into a 40% drawdown.
Keep in mind that we don’t know the future, of course. Major corrections could be less than that 50% threshold or more than that 50% haircut range.
Potential Declines of More Conservative Portfolios.
- VCIP – potential decline of 5-10%
- VCNS – potential decline of 10-20%
- VBAL – potential decline of 15%, 20%, 30%
Keep in mind these are general frameworks or guidelines based on market history. As my friends in compliance like to write, past performance does not guarantee future returns – or future performance characteristics.
You Might Use The Vanguard Portfolio Selector Tool
You can use the Asset Allocation (Portfolio Selector) tool at Vanguard.
Once again, the keys will be to match the Portfolio to your time horizon, your objective and risk tolerance level. You can also complete the online portfolio selector at Tangerine.
You will be offered a portfolio recommendation displaying the stock to bond allocation. You could use that as a guideline for selecting the appropriate Vanguard One Ticket Portfolio. Keep in mind that the Tangerine Portfolios are also simple index-based Portfolios and might be a great solution for you if you do not want to self-direct at a discount brokerage. They can be beneficial when you have a more modest portfolio value as there are no costs to buy and sell. The MER is 1.07%.
If you need more help and advice you might contact one of the Canadian Robo Advisors where you will get access to lower cost portfolios and various levels of advice – yes human advice. If you have taxable monies and a more complicated scenario you might even consider getting more robust advice by way of a fee-for-service financial advisor.
Please ensure that you know what you’re doing before you self-direct. If you don’t know what you’re doing, don’t do it.
If you have any questions on how to select the right Vanguard asset allocation portfolio please use that contact form.
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I do not believe in having bonds. I would rather decrease my monthly investing and double up during a correction period. I believe that we have crossed the midpoint of the current market cycle which will end with a dip in 2022. I would invest 75% of the monthly allocation in February and 50% in March, April and May. I would adjust the dollar cost averaging depending on market conditions in June.
Thanks psoans, yes some will want or need no bonds, some will need ‘a lot’. I have no idea where we are in the ‘cycle’. I believe we should simply invest on a regular schedule within our risk tolerance level. Dips are good as you write. Buying on Sale is good as Mr. Buffett reminds us, but we can’t time that event.
All-in-One ETFs – thank you, very interesting info!
What are the tax implication of these All-in-One funds that are funds of funds?
Also, I find that most analysis of various investments are made for people in the accumulation phase with dividends/distributions reinvestment.
It is difficult to find info on good income funds that provide interesting income for retirees. Any suggestions?
Hi Mary, thanks for the question. Given that they are total return driven (not income) they might be somewhat efficient on the equity side. Canadian tax credit will also apply. Bonds are taxed as income of course. A more aggressive portfolio can deliver greater tax efficiency and greater return potential.
That said we don’t have the control that we’d have if we were self directing with stocks or ETFs. These will create cap gains on rebalancing etc in taxable accounts.
If you have considerable taxable amounts it may be more beneficial to select your own ETFs. There may be better ways to strategically create tax efficient income for retirement. It may be wise to get some advice at the right cost. One can look for a fee-for-service advisor of course. In retirement or approaching retirement I think we all owe it to ourselves to get a professional opinion on retirement funding. They can also run the programs to let you know of the most efficient order for withdrawing funds and creating income, RRSP vs TFSA vs Non Reg. vs Private Pensions vs Public pensions OAS vs Real estate income vs home downsizing vs inheritance and more. Most anyone with portfolios assets should pay for some retirement advice IMHO.
Thank you Dale, makes sense to go with individual ETFs, etc.
About ‘for fee only advisors’, it’s difficult to find… and get reviews so you pick the right one. Many say that’s what they are but will only do it if they manage your money for a 1% annual fee. This is in addition to the chosen investments fees, even if these are low.
Hi Mr. Roberts,
VGRO ETF seems not to be efficient in a RRSP, because all of the holdings are Vanguard Canadian ETF and that most of these ETF, simply hold their US counterpart. So, full withholding tax apply to dividends. Is it not better to hold US stock individually ?
Thank you.
Hi Martial, you are correct it would be better to hold the US assets in a US dollar account. Justin Bender did a post on the savings with that separation of assets. I’ll find that for you and re-post here.
Ditto for the fund of funds such as XUU that I have on my model portfolio page.
All said, most do no want the hassle and prefer the simplicity of a One Ticket. We don’t have to be perfect, just great.
But if you have the ability and know-how, certainly separate those assets.
Dale
Also I will be writing on Creating that Retirement Portfolio with ETFs, that’s up next. It’s easy in the tax sheltered world of course. Simply create the most portfolio growth while managing the sequence of returns risk and personal risk tolerance level. The One Ticket Solutions would be great. I’d suggest VGRO or lower, not all equity models for retirement (under most conditions).
Then we’d take on the risk that we can handle. And again the order of income creation from RSP vs TFSA vs Non Reg and other assets will come into play.
It’s not about the actual income from assets. It’s total return, risk managed. Though I know we love our income, me too. I love my big juicy dividends.
Thanks, Dale
Great, I’ll be reading about it eagerly!
I have a small amount of VGRO in an RRSP. My company’s group retirement saving is with Manulife and we’re stuck buying mutual funds with high MER. I transferred out in December to Questrade and bought VGRO. My last day with the company will be on Friday but they’re a couple of months behind with the group RRSP transfer in so I figure I’ll wait a bit to make sure it’s all there and then transfer the remaining funds to buy more VGRO. No sense getting hit with any more $25 withdrawal fees than I need to! Or maybe Manulife will send me a letter telling me when I have to get the $$ out. It’s a little over $3000 invested in VGRO and I like having some in my portfolio but not enough to invest in my TFSA or stock account!
Thanks Cheryl, glad to read that you are breaking free of fees. They are not often too quick to do that transfer thing, ha. Thanks for stopping by, don’t be shy to leave comments and questions. 🙂
Hmmm. Hard to figure out Manulife sometimes. From my previous EHC experience with them, they sucked big time. Deny everything, and then only pay after a call to a claims manager. My Group RSP was also with them and among the usual GIC and money market fund offerings were a number of index funds with Beuter Goodman, with a 0.18 MER. That was pretty hard to beat fifteen years ago to the present. Upon retirement last May, I called TDDI and they directed me to an online copy of the required transfer out form. Completed it, emailed it to Manulife in Montreal, and the cash value was in my TDDI personal RRSP within the week.
Hi Mary, the fee-for-service advisors will typically charge you a flat fee for specific service and advice and they send you on your way. This is a great option, especially if you are comfortable managing the investments. You only pay for the advice that you need. You then move onto low fee investments. That can include One Ticket Solutions. I’ve been chatting with an advisor that uses One Ticket almost exclusively. Do you need a name or three?
I would love a name or three:)
Hi Mary, please email me at cutthecrapinvesting@gmail.com
Well written article but I’m a little surprised you didn’t mention the all in one ishares solutions that were launched in Dec 2018. Did you not mention them because they are almost redundant? (I know they are different but the concept is the same).
Thanks Michael. That’s correct. I will do a comparison article in the near future. But it may be an Apples and Apples and Apples comparison. They are all good, very good. But we’ll look at the slight differences. Thanks for stopping by. Don’t forget to share the good word on the One Ticket Options.
I will since I own both the VGRO and XGRO.
I’m investing in the Vanguard All In One Funds thru my CIBC Investors Edge account and there’s no option for a synthetic DRIP. Apparently CIBC can not offer a dividend reinvestment for these ETFs today. I’m wondering if that’s a common issue with newer products like this? Does it have to be a top 50 volume ETF? I was certainly surprised when speaking to a CIBC trader.
As per our Twitter communication they are available for DRIPs according to Vanguard docs. CIBC is not yet up to speed? Again, I will check with other brokerages.
I’ve been a DIY devotee of indexing since the Toronto Index Participation Units. Also a devotee of both Fred Vetesse and Milevski and Macqueen (not the annuity part). Retired last year and spent quite a bit of time to researching the new All-in-Ones. My only knock on them was the lack of REIT and Preferred Share exposure. The solution was to park 80% of the stash in one of the the 80/20 “GRO” options, with another 10% each to REIT and Preferred Share ETFs. Voila, a balanced 60/40 retirement portfolio in three funds with a little more diversity in the fixed income component. Quite happy with 14% for 2019. Looking forward to reading your upcoming “Creating that Retirement Portfolio with ETFs”
Thanks Rob, I’m with you on that add the REIT. Not so much with the pref’s. Ha.
For greater income, one might look to divs and then the BMO covered call ETFs – with Canada, US and International options …
Dale
Hi Dale,
I happened to find your website searching for advice on investing my wife’s Canadian retirement accounts funds and her mother’s taxable account. Wow, what a great wealth of information!
The funds mentioned above had been managed by a fee-based advisor that we decided to leave last year. The funds are now in cash in TD Brokerage Accounts. My task is to get the funds invested. I am a novice investor, having used a financial advisor for our US accounts.
I am attracted to the simplicity of the one-ticket ETFs and was wondering if you have any advice on making selections. My wife is 56 and won’t need income from the funds for some time. My mother-in-law lives on a pension, so the funds are more of a legacy for her children.
I have hesitated to dive in given the market uncertainty with the pandemic. Would you recommend investing in the most conservative funds to get some return and look for a buying opportunity to move toward a growth-oriented fund as the market outlook clarifies?
Sincerely,
New to Canadian Investing