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VGRO vs. VFV: Which Canadian ETF Is a Better Investment Today

vgro etf

Investing in ETFs will not only strengthen your portfolio and increase your returns, but it will also help your assets grow quicker. In Canada, a variety of ETFs (exchange-traded funds) are popular. Vanguard’s VFV and Vanguard’s VGRO are two of them. Both are top-of-the-line items but which is the best to buy right now?

What is VGRO?

VGRO is Vanguard’s growth portfolio, which invests in both equities and fixed income assets to provide long-term capital. It is made up of many other Vanguard Index ETFs and has a target allocation of about 80% equities (stocks) and 20% fixed income (bonds) (bonds).

VGRO has a low to medium risk rating and is traded on the Toronto Stock Exchange under the ticker code “VGRO.” VGRO manages roughly six ETFs that span the whole regional stock and bond markets (Canada, US, developed markets, developing countries) and rebalances them on a regular basis. As a result, it’s a one-stop-shop for everything.

Pros of VGRO

  • Globally diversified ETF portfolio
  • Suitable for all investors
  • TFSA and RRSP account tax efficiency
  • Low-cost on management fee and MER.
  • Rebalances itself

Cons VGRO

  • The management charge may be unappealing to DIY traders and professionals.
  • VGRO is overly focused on Canadian markets.
  • The portfolio has a couple of high-risk stocks.

What is VFV?

Vanguard Canada’s VFV, or Vanguard S&P 500 Index ETF, is a US-equity ETF. If you want to diversify your portfolio by holding more U.S. equities, VFV is a good place to start. This ETF invests only in equities, so it is best to use it as part of a diversified portfolio rather than as the sole asset. The risk rating for VFV is “medium,” and it trades under the ticker symbol “VFV” on the Toronto Stock Exchange.

Pros of VFV

  • Take advantage of rise in the CAD
  • Get the chance to invest in the largest companies in the U.S. at a low cost.
  • Great for both registered and non-registered accounts.
  • Low-cost on management fee and MER.
  • High returns due to the stock market being highly volatile.

Cons of VFV

  • High volatility means you could lose money.
  • Currency risk

Daily returns as of 6th June 2021:

 VFVVGRO
YTD Daily Total Return6.58%  5.73%  
1-Year Daily Total Return22.8021.66%  
3-Year Daily Total Return14.49%  9.17%  

Quick facts as of June 6th, 2021:

 VFVVGRO
Number of stocks:   50713,023
Price/Earnings Ratio:27.9 x    20.7x
Price/Book Ratio4.4 x  2.4x
Return on Equity20.2%  13.7%
Earnings Growth Rate19.1%  13%
Management fee0.08%    0.22%    
MER0.08%    0.25%    
12-month trailing yield1.24%  1.82%  
Distribution yield   1.18%       1.65%    
Distribution frequency:QuarterlyQuarterly
CurrencyCADCAD
Eligible accounts:RRSP, RRIF, RESP, TFSA, DPSP, RDSP  RRSP, RRIF, RESP, TFSA, DPSP, RDSP  

Conclusion:

Investing in VGRO and VFV are very different. In comparison to VGRO, which is a globally diversified ETF portfolio, VFV solely tracks the S&P 500.

If you’re searching for a short and long-term investment that takes advantage of the strengthening of the Canadian dollar, we propose the VFV ETF.

If you don’t want to worry about the S&P 500 underperforming the rest of the world and spreading the risk, we propose the VGRO ETF. You may either assume that the United States will continue to dominate the global economy, or you may diversify your portfolio by investing in nations other than the United States.


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