VGRO:CC - Not Sure What to Invest in? Try These 2 ETFs
The combination of surging inflation and fears of recession affects not only stocks and real estate investment trusts (REITs) but also exchange-traded funds (ETFs). Selling was intense on June 13, 2022, and the TSX entered correction territory. All of the 11 primary sectors pulled back to widen the Index’s year-to-date loss to nearly 7%.
If you’re unsure where to invest in given the complex environment, consider Vanguard Growth ETF Portfolio (TSX:VGRO) or iShares Core Growth ETF Portfolio (TSX:XGRO) . The fund managers of these ETFs invest in equity and fixed-income securities. Because of their exposures, the risk rating of both is low to medium.
80/20 asset mix
VGRO is one of Vanguard’s high-quality investment products. Besides investing in equity and fixed-income securities, Vanguard can also invest, direct or indirectly, in one or more ETFs it manages. The strategy should provide long-term capital growth to investors.
According to Vanguard, VGRO strives to maintain a long-term strategic asset allocation. Under normal market conditions, the usual exposure is 80% equity and 20% fixed-income securities. The sub-advisor can reconstitute and rebalance the portfolio asset mix from time to time or if necessary.
For equity investments, VGRO skews toward the U.S. (43.2%) than Canada (30.6%). However, the percentage representation of Canadian fixed-income securities (57.9%) is more compared to America (18.1%). Regarding sector exposure, the top four are financial (19.4%), technology (16.4%), industrial (12.2%), and consumer discretionary (11.6%).
For the fixed-income portion of VGRO, the maturity dates are longest in the one-to-five-year (40.3%) and five-to-10-year (28.7%) categories. At $27.62 per share, current investors are down 15.61% year to date. Somehow, the dividend payments compensate for the price drop. The ETF pays a 1.48% annual dividend, while the distribution frequency is quarterly.
Multi-asset
XGRO is broadly diversified and has the same exposure breakdown as VGRO (80% equity, 20% fixed-income). According to BlackRock Canada, the fund manager, investing in one or more of its ETFs should provide long-term capital growth to investors.
BlackRock monitors XGRO continuously and rebalances it automatically (quarterly), if necessary, to maintain the desired asset class target weights. Because of a lower cost fee structure (0.18%), the cut from investors’ earnings wouldn’t be much.
Currently, the top two holdings are iShares Core S&P Total U.S. Stock Index and iShares S&P/TSX Capped Composite Index. Like VGRO, this ETF underperforms with its 15.59% year to date. In the last 10 years, the total return is 117.61% (8.06% CAGR). If you invest today, XGRO pays a 1.53% dividend. As of this writing, the value of the nest assets is $1.26 billion.
Instant diversification
ETFs offer instant diversification and is far superior to mutual funds in terms of fees. Would-be investors in VGRO and XGRO can build a low-cost, broadly diversified portfolio and do away with picking individual stocks . However, not all ETFs are suitable investments today.
Look into the sector allocation, exposure breakdowns, and asset mix first before investing. For now, steer clear of tech stocks or tech-related ETFs. The sector reels from high inflation and rising interest rates. Meanwhile, energy ETFs mirror the performance of the red-hot sector in 2022.
The post Not Sure What to Invest in? Try These 2 ETFs appeared first on The Motley Fool Canada .
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
2022