In the landscape of Canadian exchange-traded funds, two have steadily gained prominence among long-term investors: iShares’ Core Growth ETF Portfolio (XGRO) and Vanguard’s Growth ETF Portfolio (VGRO). Both funds offer diversified exposure to global markets with a slight tilt towards equities for aggressive growth. But how do you decide which one better fits your investment goals? In the battle of XGRO vs VGRO many factors come into play, including fund composition, fees, and historical performance.
Understanding XGRO and VGRO
XGRO and VGRO, both introduced in 2018, are designed to deliver long-term capital growth by investing in a mix of equity and bond exchange-traded funds (ETFs). They adopt an 80/20 allocation towards equities and fixed income, respectively. Both funds serve as an excellent one-fund solution for investors seeking growth and diversification in their portfolios. However, despite the apparent similarities, there are subtle differences.
Fund Composition
While both XGRO and VGRO are built on a portfolio of ETFs that represent various market segments, they differ in their underlying ETF components. XGRO has a more significant exposure to U.S. equities (about 38.27%), followed by Canadian equities (24.19%), International equities (23.47%), and Emerging markets (6.52%). The remaining 7.55% is dedicated to Canadian and Global bonds.
VGRO, on the other hand, has a slightly lower exposure to U.S. equities (around 32.7%) and a higher allocation to International equities (26.3%), and Canadian equities (24.1%). Emerging markets represent 6.3% of the portfolio. VGRO’s bond allocation (10.6%) is slightly higher than XGRO’s and is primarily invested in Canadian bonds.
Expense Ratios and Dividend Yields
Another critical factor to consider when choosing between XGRO and VGRO is the expense ratio. This is the annual fee that all funds or ETFs charge their shareholders. As of the current data, XGRO’s management expense ratio (MER) is 0.20%, while VGRO’s is slightly higher at 0.25%. Even though this difference might seem negligible, over the long term, a lower ratio can have a significant impact on net returns.
The distribution yield is another important aspect. XGRO and VGRO both offer distributions that can be automatically reinvested to buy more units. VGRO has a slightly higher yield at around 2.1%, compared to XGRO’s yield of 1.7%.
Historical Performance
Past performance, while not indicative of future results, can provide valuable insights into the historical performance of investment funds like XGRO and VGRO. Analyzing their past performance across different market conditions can help investors assess the funds’ resilience and potential for future growth. As of the most recent data, both XGRO and VGRO have demonstrated comparable performance, with XGRO slightly outperforming VGRO.
However, it is important to recognize that market dynamics and investment outcomes can evolve over time, and past performance should not be relied upon as a definitive predictor of future results. Market conditions, economic factors, and other variables can impact the performance of investment portfolios, underscoring the need for continuous monitoring and informed decision-making. Investors are encouraged to consider a range of factors, including risk tolerance, diversification, and long-term investment goals, when evaluating investment options.
Which One Fits Your Investment Goals?
The choice between XGRO and VGRO ultimately boils down to your individual investment goals and preferences. If you prefer a slightly more U.S.-centric portfolio and a lower expense ratio, XGRO might be a better fit for you. However, if you are looking for a slightly higher yield and are comfortable with a slightly higher ratio, VGRO could be a more suitable choice.
Remember, your time horizon, risk tolerance, and financial goals should always guide your investment decisions. You should also consider seeking advice from a financial advisor or conducting further research before making any investment decisions.
