Market Analysis by Tony Dong covering: Vanguard Growth Portfolio. Read Tony Dong's Market Analysis on Investing.com
) is a bad ETF. For the vast majority of self-directed investors, it’s a big step up from the pricey mutual funds that the “financial advisors” at big bank branches love to shill.
Vanguard says this heavy tilt towards Canadian stocks promotes tax efficiency, reduces historical volatility, and lowers currency risk. As for currency risk, if that’s really a concern, then why aren’t the non-Canadian equity ETFs in VGRO—U.S., international developed, and emerging markets—currency hedged? Wouldn’t that do more to reduce currency risk than overweighting Canada by 10 times?
My main issue is cost. Both of the underlying ETFs that VGRO uses for this allocation are relatively expensive. You also lose some of the distributions to foreign withholding tax, which eats into your returns. On top of that, both funds are currency hedged, adding an additional drag to performance. For example, the iShares Core Growth ETF offers the same 80/20 allocation as VGRO but with a 0.20% MER. Even cheaper is the TD Growth ETF Portfolio , which offers a 90/10 allocation at just 0.17%.
Reduce the Canadian equity allocation to 20-25%. This would strike a better balance between home-country bias and global diversification, avoiding the current 10x overweight to Canadian stocks.
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