# New ETFs From Vanguard



## larry81 (Nov 22, 2010)

As many of you already know, Vanguard Canada has announced a new suite of ETFs:

http://canadiancouchpotato.com/wp-content/uploads/2013/06/Vanguard-ETFs.pdf
http://canadiancouchpotato.com/2013/06/27/the-wait-is-over-new-etfs-from-vanguard/

I am very enthusiastic about the new Vanguard FTSE Canada All Cap and plan to switch my VCE holding (in a tax harvesting position if the market continue to drop). VTI + VXUS + Canada All Cap = Wow !!!

The new Canadian domiciled Vanguard U.S. Total Market is also very interesting but i personally plan to keep adding to US listed VTI.

Please discuss


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## mrPPincer (Nov 21, 2011)

I didn't know. Thanks for the update!
arrgh.. TDWH is making a lot more in brokerage fees off me than anticipated for 2013.. ah well, 1st world problems.. :ambivalence:

I've already sold my VUS two weeks ago (lucky timing)
Now in all likelyhood I'll be trading my VCE in for the Vanguard FTSE Canada All Cap after it becomes available

If by then I think VDY's holdings are overvalued I might take the profit and trade in that one at the same time, 
the MER of the Canada All Cap will no doubt be lower than VDY's, so I'd have greater diversification + small-cap + maybe an annual $50+/- MER savings by switching.


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## My Own Advisor (Sep 24, 2012)

Big fan of VTI and VXUS already, since I use those in the RRSP.

Not sure I will use the new ETFs, in TFSA or other accounts, but more low-cost choices are a great thing and great of Vanguard to do it.


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## eulogy (Oct 29, 2011)

I like that they're introducing new products. I would like to see some of the details on MER. The FTSE Canada All Cap is an interesting and appealing choice if the MER is in the right place. I also like that they're going to have an non-hedged version of VUS. But like My Own Advisor said, VTI is just such a better product. When it comes to US equities and international equities, VTI and VXUS are just such great deals.

I love the choices though. And I do feel bad that even since I'm just starting to jump into ETFs with my portfolio and I haven't touched Vanguard Canada.


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## favelle75 (Feb 6, 2013)

Would the VTI or VXUS be suitable for a TFSA?


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## andrewf (Mar 1, 2010)

They're fine in a pinch. You do lose withheld foreign taxes.


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## leeder (Jan 28, 2012)

This news is sort of underwhelming to me, to be honest. In fact, it borders gimmicky if the MER is consistent with other ETF products (VFV/ZSP/XUS and ZCN). 

For example, if you compare VTI and VOO, their performances are virtually the same. Yes, VTI holds close to 3500 stocks while VOO holds about 500 stocks. However, the other 3000 stocks that VTI holds (that VOO doesn't hold) probably gives a +/-0.5% in return. I would think it would be similar with the all-cap Canadian ETF, since the sector allocation (per MSCI index) is about the same as the S&P/TSX composite, which holds 250 stocks.

Unless Vanguard decides to drop the MERs to a more attractive level for both of these new products, I don't see the point of anyone switching over from their current index ETF holdings.


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## Belguy (May 24, 2010)

Buy, hold, rebalance and prosper and don't keep switching every time that someone comes out with a new product!! Are you after lower fees or are you chasing after performance?

The particular ETF's that you hold in your 'Easy Chair Portfolio' are not nearly as important as getting your ASSET ALLOCATION right in the first place according to your circumstances and risk tolerance.


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## favelle75 (Feb 6, 2013)

andrewf said:


> They're fine in a pinch. You do lose withheld foreign taxes.


Only on the dividends though, right? Is there a US ETF that doesn't have any dividends that would be more suitable?


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## lonewolf (Jun 12, 2012)

Belguy said:


> Buy, hold, rebalance and prosper and don't keep switching every time that someone comes out with a new product!! Are you after lower fees or are you chasing after performance?
> 
> Buy
> hold
> hope


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## lonewolf (Jun 12, 2012)

I am very enthusiastic about the new Vanguard FTSE Canada All Cap and plan to switch my VCE holding (in a tax harvesting position if the market continue to drop). VTI + VXUS + Canada All Cap = Wow !!!


Please discuss [/QUOTE]

When a new product comes out to get the last investment dollar buyer beware.


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## My Own Advisor (Sep 24, 2012)

Not a huggge fan of VCE, since top-10 holdings, if you have a large enough portfolio, might as well own them outright:

Top 10 holdings
As of close 31-05-2013
Rank	Holdings
1	Royal Bank of Canada
2	Toronto-Dominion Bank
3	Bank of Nova Scotia
4	Suncor Energy Inc.
5	Canadian National Railway Co.
6	Bank of Montreal
7	Potash Corp. of Saskatchewan Inc.
8	Canadian Natural Resources Ltd.
9	TransCanada Corp.
10	Enbridge Inc.

Top-10 holdings = 43% of portfolio. Own the top-10, that almost a proxy for the ETF.


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## Belguy (May 24, 2010)

The TSX index itself is concentrated and not well diversified by sector. How much of your portfolio should be invested in an index like that if one of your main objectives is diversification?

The S&P500 is much superior!!!

Would anyone judge that VTI+VXUS+Vanguard Canada All Cap would represent too much diversification???

Over the past twelve months, VTI is up 21.42% while VOO is up 20.56%. Do you think that this is indicative of anything longer term?

Over the past 12 months, my international ETF investment, VEA, is up 18.61% compared to VXUS's return of 13.40%. Is the latter too diversified?


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## My Own Advisor (Sep 24, 2012)

@Belguy, "Would anyone judge that VTI+VXUS+Vanguard Canada All Cap would represent too much diversification???"

Nope. 

For an investor who doesn't want to mess with individual stock ownership, it's solid.


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## leeder (Jan 28, 2012)

@ Belguy: Your question, "how much of your portfolio should be invested in an index like [TSX] if one of your main objectives is diversification?" piqued my interest, as I had given this thought when I began index investing. I would agree the S&P 500 index is more balanced in terms of the underlying sector diversification. But in the past 10-15 year timeframe, S&P TSX composite has outperformed the S&P 500 by a significant margin. One can argue that I am looking retrospectively. However, who is to say that the TSX won't outperform the S&P 500 again?

Overdiversification is, in my opinion, a trivial issue. If you compare the performance of VTI and VOO, they are virtually the same, even though VTI has about 3500 stocks and VOO has about 500 stocks. For new investors, it's probably better to invest in the broader product (VTI). For investors already holding products, such as VOO (or VFV/ZSP/XUS), which have little to no small or mid caps, I don't think it's worth selling those products to buy the new product, unless the MER is substantially lower with the new products.

On a note of technicality, it's probably not fair to compare VEA and VXUS straight up. VEA contains only EAFE and has no emerging markets. If anything, you should take 80% of VEA's performance and add in 20% of VWO's performance. You will get a closer comparison to VXUS.


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## andrewf (Mar 1, 2010)

favelle75 said:


> Only on the dividends though, right? Is there a US ETF that doesn't have any dividends that would be more suitable?


Only less vanilla ETFs, like those that use futures/swaps. For instance, Horizons has an S&P 500 ETF that is not subject to withholding tax: HXS. The MER is higher than for funds like VTI.


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## dime (Jun 20, 2013)

*yields lower than expected on new Vanguard ETF's*

I've really been attracted by Vanguard's low MER and bought some for that reason. But has anyone else noticed the yields so far have been too low so far on the funds that are less than a year old? 

For example VRE is paying only about half of what it should be (based on past 6 distributions). The index it follows is yielding 4.75% VDY has been distributing at a rate of about 2.5%, but it's index shows 4.47%.

Anyone else noticing this? Will the yields start to match by the end of the year? They've got some catching up to do!


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## Belguy (May 24, 2010)

And so, considering all of the above comments, does the following Couch Potato portfolio represent the ULTIMATE in low fee, broad based index investing?

Vanguard FTSE Canada All Cap (coming soon!)+VTI+VXUS

All critiques welcome!!


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## leeder (Jan 28, 2012)

Belguy said:


> And so, considering all of the above comments, does the following Couch Potato portfolio represent the ULTIMATE in low fee, broad based index investing?
> 
> Vanguard FTSE Canada All Cap (coming soon!)+VTI+VXUS
> 
> All critiques welcome!!


Depends on what the MER is on the new FTSE Canada All Cap. Couple other things to consider:

1) VXUS has more stock holdings, but a small % is made up of Canadian stocks. If you were trying to allocate a 20% Cdn, 20% US, 20% International, and 40% bond portfolio, your portfolio really would actually be roughly 23% Cdn, 20% US, 17% International, and 40% bond.

2) I would also argue that it is actually cheaper buying VEA and VWO separately (assuming yearly balancing) rather than VXUS. 

VEA = 0.10% MER
VWO = 0.18% MER
VXUS = 0.16% MER 

VXUS is roughly about 80% EAFE and 20% emerging markets. If you were investing $25,000 in international ETF and you were to split VEA and VWO into 80% and 20% proportions, this is how I calculate it out (again, assuming yearly balancing):

VEA: 80%x25,000x0.10%+9.99 (trading commission) = $29.99 
VWO: 20%x25,000x0.18%+9.99 = $18.99
Total: $41.98

VXUS: 25,000x0.16%+9.99 = $49.99

Much cheaper for the VEA/VWO split if you were investing with Questrade, where ETF purchases are commission free.


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## andrewf (Mar 1, 2010)

Belguy said:


> And so, considering all of the above comments, does the following Couch Potato portfolio represent the ULTIMATE in low fee, broad based index investing?
> 
> Vanguard FTSE Canada All Cap (coming soon!)+VTI+VXUS
> 
> All critiques welcome!!


Honestly, it makes no difference. Why do you keep on asking about alternatives?


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## favelle75 (Feb 6, 2013)

andrewf said:


> Only less vanilla ETFs, like those that use futures/swaps. For instance, Horizons has an S&P 500 ETF that is not subject to withholding tax: HXS. The MER is higher than for funds like VTI.


HXS looks interestin...awfully close to its 52-week high though. But I guess in the long run, that matters not...


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## Belguy (May 24, 2010)

Thanks for your response, leeder! As I am already holding VEA plus VWO, I will likely stay with them and not bother with VXUS. I will also keep an eye on when the Vanguard Canada All Cap is up and running and determine from it's cost whether to consider using it for my Canadian equity allocation.

As for a U.S. equity allocation, I think VTI is the way to go unless there are compelling reasons for considering alternatives????

But then, as Andrewf states, it really doesn't make any difference which ones you choose. It makes me wonder why the Canadiancouchpotato website even bothers to list it's various model portfolios????

That said, I do agree that getting your asset allocation right, according to your circumstances and risk tolerance, is more important than which individual investments you choose for your portfolio.


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## leeder (Jan 28, 2012)

VTI is pretty much the standard broad based US ETF. iShares and Schwab have something similar to VTI as well. VTI holds more stocks than both iShares and Schwab though.

Regarding your other question about Canadian Couch Potato's model portfolios, you have to keep in mind that CCP displays the 'model' portfolios. They guide new investors in constructing the lowest cost and broad ETF portfolios currently available in the stock market. They also guide current investors, who have restricted, messy, and high risk portfolios in constructing effective, diverse, and low cost portfolios. That said, the portfolios also represent CCP's opinion. People may have different opinions on portfolio construction. Consider this, if you are a pure index investor, should you not be investing only in index funds or ETFs that track major indices? If so, why did CCP add in 10% REITs into his Complete Couch Potato portfolio? Why specifically REITs? Aren't these portfolios speculative once it has branched out of the major index ETFs? Now, is it wrong to add something other than index ETFs? All rhetorical questions, of course... The ultimate answer is it depends on you, as the investor, on what you want in your portfolio and how much risk you can stomach.


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## eulogy (Oct 29, 2011)

> Thanks for your response, leeder! As I am already holding VEA plus VWO, I will likely stay with them and not bother with VXUS. I will also keep an eye on when the Vanguard Canada All Cap is up and running and determine from it's cost whether to consider using it for my Canadian equity allocation.


There is obviously an argument about a few basis points here and there, but at the end of it you're probably going to end up in the same place which ever combination you go with. I wouldn't sweat it.

And the truth be said, Vanguard Canada All Cap will perform roughly the same as VCE, ZCN or XIU. The REIT component of the fund is thrown into the mix, but shouldn't play much of a role.

As far as I understand the passive investing strategy, the aim is for the cheapest *boardest* vanilla indexes. So VTI should be the choice over VOO as it is broader. I've been following that... so far (except for tax related moves). But the broadness of VXUS is an argument for it. Is a few basis points worth it for 6000+ stocks versus 2000 stocks with VEA+VWO. Not my call, but an argument to think about. Diversification doesn't matter for the number of stocks, but it does give you more exposure to what I can only assume are small caps. Again, probably not going to yield much difference, but it's a play you can take advantage of.


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## andrewf (Mar 1, 2010)

favelle75 said:


> HXS looks interestin...awfully close to its 52-week high though. But I guess in the long run, that matters not...


HXS is just the S&P 500. It being close to a 52 week high is a property of the S&P500 and has exactly nothing to do with HXS.


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## andrewf (Mar 1, 2010)

Belguy, I think what CCP does is worthwhile. He gives guidelines/templates. But whether you pick the BMO, Vanguard, or iShares fund that does the exact same thing for almost exactly the same cost makes little difference. There are much bigger things to worry about that fiddling on the margins of product selection. Get your asset allocation roughly right, and the product allocation (which funds) not horribly wrong (low cost) and you're just about there. Anything beyond that is just fiddling over exceedingly minute detail.


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## Belguy (May 24, 2010)

Thanks to one and all. Just a couple of points of interest, sometime back, I decided to diversify my portfolio a bit by including a 5 per cent allocation in precious metals. That move hasn't served me very well over the past several months but could work again in my favour in the future. It just taught me that I should have just stuck with the broad indexes. Lesson learned. Also, while meaningless in the long term, it is noteable that my index portfolio is down 4.5 per cent since May 18 which I hope is not the start of any longer term trend. I guess that the other lesson here is to not keep looking at your portfolio but just go in and rebalance it periodically if required.


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## leeder (Jan 28, 2012)

Took a quick visit to the Sedar website and found the final prospectus for the new Vanguard ETFs. For those who are interested about the management fees (not the MERs, but you can add about 0.03% to get a reasonable estimate of the MER):

Vanguard FTSE Canada All Cap Index ETF: 0.12%
Vanguard US Total Market Index (unhedged): 0.15%
Vanguard US Dividend Appreciation Index (hedged and unhedged): 0.28%
Vanguard FTSE Developed ex North America (unhedged): 0.28% (Note: prior to July 24, 2013, the hedged version "VEF" had a management fee of 0.37%. Vanguard has dropped it down to 0.28%)
Vanguard US Aggregate Bond Index (CAD hedged): 0.25%
Vanguard Global ex-US Aggregate Bond Index (CAD hedged): 0.35%

No word when they'll be trading in the market, but it wouldn't surprise me if they come out by September or maybe even before.


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## longinvest (Sep 12, 2012)

Finally, unhedged versions of VUS and VEF. Good!


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## leeder (Jan 28, 2012)

For those interested, it looks like the new Vanguard equity ETFs are trading starting today. The tickers are:

Vanguard FTSE Canada All Cap Index ETF: VCN
Vanguard US Total Market Index (unhedged): VUN
Vanguard US Dividend Appreciation Index (hedged and unhedged): VGH and VGG
Vanguard FTSE Developed ex North America (unhedged): VDU

No information on the new fixed income ETFs yet. Probably next couple days...


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## mrPPincer (Nov 21, 2011)

Good to know, thanks leeder, I have been waiting for VCN to be up and running; Vanguard mers in a Canadian equity fund with full small cap exposure, nice to see the competition here finally for sure!


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## ChrisR (Jul 13, 2009)

I'm a little disappointed to see that VCN holds only 256 stocks (compared to 234 and 235 for ZCN and XIC). I guess that "all-cap" does not mean the same thing as "investable market".

Nonetheless, I will likely switch to VCN next time I'm adding Can equities. XIC's looking awfully expensive these days.


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## leeder (Jan 28, 2012)

Like in earlier posts, it begs the question as to whether it is worthwhile for investors to incur tax gain/loss in their non-registered accounts just to switch to VCN. I suppose it depends on what Canadian index product an investor has to begin with...


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## Belguy (May 24, 2010)

Is anyone planning to invest in any of the other new Vanguard ETF's aside from VCN? I already hold XIU and XSC for my core Canadian holdings in my RRSP account according to my target asset allocations and have the ability to rebalance them as required. Does it make much sense to sell them and invest in the single Vanguard VCN instead?


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## andrewf (Mar 1, 2010)

Belguy: it really makes very little difference. It's like arguing about which brand of vanilla ice cream is better, and is it worth it to throw out the one you have to buy the other one.


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## Belguy (May 24, 2010)

andrewf said:


> Belguy: it really makes very little difference. It's like arguing about which brand of vanilla ice cream is better, and is it worth it to throw out the one you have to buy the other one.


Thanks! I think that I will just stick with my current flavour. I like having the ability to rebalance between the large and small caps and to thus be able to capture the recent gains where they have occurred. I'll go back to sleep now.


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## eulogy (Oct 29, 2011)

VCN isn't too bad. I'm disappointed as I was expected something a little more broad. Like a VTI equivalent for Canada, though it would never be close to holding as much. It's still a good product though. I won't be touching it for a while though as I hold too much Canadian as is... but one day.

VUN is also interesting too. I won't be buying it as long as I can do Nobert's gambit and buy VTI, but something I would buy if TD ever put a stop to the gambit.


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## AltaRed (Jun 8, 2009)

If one is in a substantial cap gain situation, switch horses during a decline/dip/bear market when there will be less (cap gains)/more (cap losses). I switched from SPY to VTI during the 08/09 meltdown. There are always opportunities because it is never a question of if, but one of when.


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## leeder (Jan 28, 2012)

The MSCI Canada IMI holds 327 stocks. The remaining 70 odd stocks that this ETF doesn't hold probably are micro of all micro caps anyway. No one should expect 3000+ stocks in Canada. In any case, I think people need to take a wait and see approach with this ETF product, since it's the first of its kind. 

VUN interests me as well. Probably will watch it for now.


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## maxandrelax (Jul 11, 2012)

How has VCN been received 6 months later?


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## larry81 (Nov 22, 2010)

maxandrelax said:


> How has VCN been received 6 months later?


Net assets: $30.6 million

Not bad for 6 months, i expect this to raise steadily since VCN is now the low-cost leader in Canadian ETF (minus HXT which only make sense in Taxable account)


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## mike06 (Aug 4, 2011)

I wonder if/when we will see a canadian listed VXUS equivalent.


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## leeder (Jan 28, 2012)

The volume on VCN is still pretty low, but it will increase over time. That said, it seems to me that people are more interested in the foreign ETFs from Vanguard, such as VUN and VFV, simply because there aren't too many good foreign low cost alternatives that trade on the TSX. Many Canadians also already own a good portion of Canadian equity either through individual stocks or Canadian ETFs, such as XIC, XIU, and ZCN.

In any case, VCN is an excellent low cost product and is the closest to tracking the Canadian investable market index that I am aware.


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