VGRO - ETF Overview
A Comprehensive Guide to the Vanguard Growth ETF Portfolio (VGRO)
For individuals seeking to learn about analyzing Exchange-Traded Funds (ETFs), I suggest reviewing my earlier post that explains the fundamentals of ETFs and the analysis process.
Vanguard Growth ETF Portfolio (VGRO) - Snapshot
Overview
The Vanguard Growth ETF Portfolio (VGRO) is an all-in-one ETF designed to provide long-term capital growth by investing in a diversified portfolio of equity and fixed-income securities. It aims to offer strong growth potential with reduced volatility.
Investment Strategy
VGRO aims for an asset allocation of roughly 80% in equities and 20% in fixed income. This composition is intended to offer substantial growth via the equity component and to reduce risk through the fixed-income portion. The ETF boasts global diversification, encompassing a range of sectors, market capitalizations, and countries.
Top Holdings
The top holdings in VGRO include other major index funds such as:
Vanguard US Total Market Index ETF (VUN)
Vanguard FTSE Canada All Cap Index ETF (VCN)
Vanguard FTSE Developed All Cap ex North America Index ETF (VIU)
Vanguard Total Bond Market ETF (VAB)
The top underlying holdings include famous names such as Apple, Microsoft, NVIDIA, Royal Bank of Canada, Amazon, and so on.
Sector Allocation
VGRO is well-diversified across various sectors, with significant allocations to technology, financials, industrials, and consumer discretionary.
Risk Level
LOW-to-MEDIUM - based on the historical volatility of the ETF's returns, which have shown moderate fluctuations from year to year. Including bonds into an ETF helps balance risk as they are generally less volatile than equities. This is particularly beneficial during market downturn when equities perform poorly.
Performance
Since its inception on January 25, 2018, VGRO has achieved an average annual return of 8.11%, including dividends.
Expense Ratio
The management expense ratio (MER) for VGRO is 0.24%, which is relatively low compared to many other ETFs.
This means that for every $1,000 invested, the annual cost would be $2.40.
Dividend Yield
VGRO offers a dividend yield of 2.32%, with distributions made quarterly
This means that if you invest $1,000 in this ETF, you can expect to receive approximately $23.20 in dividends over a year, assuming the yield remains constant.
Similar Alternatives
Several alternatives to the Vanguard Growth ETF Portfolio (VGRO) are available for consideration as follows:
iShares Core Growth ETF Portfolio (XGRO): This ETF also follows an 80/20 equity/fixed income allocation and is designed for long-term growth. It has a slightly lower MER of 0.20% compared to VGRO's 0.24%.
BMO Growth ETF (ZGRO): Another all-in-one ETF with an 80/20 allocation, ZGRO offers a similar investment strategy with a MER of 0.20%.
Vanguard Balanced ETF Portfolio (VBAL): VGRO is growth-oriented, whereas VBAL provides a balanced mix with a 60/40 allocation between equity and fixed income, catering to investors who desire both growth and income.
Here's a comparison of the expense ratios, yield, and performance of the VGRO ETF and its close alternatives:
Target Investors
The Vanguard Growth ETF Portfolio (VGRO) is designed for a wide range of investors, including:
Long-term investors: Those looking to grow their wealth over an extended period.
DIY (Do-It-Yourself) investors: Individuals who prefer managing their own investment portfolios without relying on financial advisors.
Retirement savers: People saving for retirement through accounts like RRSPs, RRIFs, and TFSAs.
Young professionals: Early-career individuals with a higher risk tolerance and a longer investment horizon.
Conservative investors: Those seeking a diversified portfolio with a mix of equities and fixed income to reduce risk.
VGRO's approach, characterized by diversification, low costs, and automatic rebalancing, presents an appealing choice for those seeking to streamline their investment strategy with a focus on long-term growth.
Reason to Invest…
Diversification: VGRO provides exposure to a wide range of asset classes with exposure to over 13,000 individual securities globally, including U.S., Canadian, and international stocks, as well as bonds. This diversification helps mitigate risk.
Growth Potential: VGRO has a higher allocation to equities (80% stocks and 20% bonds), making it suitable for investors seeking long-term capital growth.
Low Fees: With an MER of 0.24%, VGRO is a cost-effective option compared to many mutual funds and actively managed portfolios.
Automatic Rebalancing: VGRO automatically adjusts its holdings to maintain the target asset allocation, making it a "set-it-and-forget-it" investment.
Strong Performance: VGRO has shown strong annualized performance over the years, making it an attractive option for long-term growth.
Dividend Income: VGRO offers a decent dividend yield, providing a steady income stream.
Professional Management: Managed by Vanguard, a reputable and experienced investment firm known for its expertise and low-cost investment solutions.
Reason Not to Invest…
Home Country Bias: VGRO allocates a significant portion (approximately 30%) to Canadian stocks, which may not accurately reflect the global market's distribution.
Limited Flexibility: VGRO's fixed asset allocation may not be suitable for investors who prefer a more customized investment strategy.
Fixed Income Exposure: The bond portion (20%) might not be sufficient for very conservative investors who prefer a larger fixed income allocation.
Market Risk: Like all equity-focused investments, VGRO is subject to market fluctuations and can be volatile in the short term.
Alternative Options: There are other ETFs with different asset allocations and lower fees that might better suit some investors' needs.
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