VGRO and XGRO are both self-balancing ETFs that offer a blend of 80% equity and 20% bonds, offering long-term portfolio growth with medium risk level. Which one is best?
In this article, we’ll explain what VGRO and XGRO are and discuss their differences to help you choose between the two.
What are one-fund ETFs?
Also called self-rebalancing or asset allocation ETFs, one-fund ETFs are comprehensive portfolios that are rebalanced automatically to maintain their allocation and risk/return goals. They come in various blends of allocations, ranging from long-term options with 100% equity to conservative portfolios of mostly bonds.
What is VGRO?
VGRO is Vanguard’s Growth ETF Portfolio. It's Vanguard's most popular one-fund ETF with $3.7B of assets under management (AUM).
It consists of 80.82% equities and 19.14% bonds. VGRO is an ETF comprised of other Vanguard ETFs with the following allocation:
VGRO Holdings
As of February 21, 2023
| Ticker | Security Name | Percentage |
|---|---|---|
| VUN | Vanguard US Total Market Index ETF | 34.69% |
| VCN | Vanguard FTSE Canada All Cap Index ETF | 24.11% |
| VIU | Vanguard FTSE Developed All Cap ex North America Index ETF | 16.22% |
| VAB | Vanguard Canadian Aggregate Bond Index ETF | 11.34% |
| VEE | Vanguard FTSE Emerging Markets All Cap Index ETF | 5.83% |
| VBG | Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged | 3.96% |
| VCB | Vanguard US Aggregate Bond Index ETF CAD-hedged | 3.85% |
VGRO allows a good geographic diversification since its top 10 holdings (90.8% of net assets) with the following allocation:
VGRO Geographical Allocation
As of February 21, 2023
| Country | Percentage |
|---|---|
| United States | 42.6% |
| Canada | 30.1% |
| Japan | 4.5% |
| United Kingdom | 3.0% |
| China | 2.5% |
| France | 2.0% |
| Australia | 1.7% |
| Switzerland | 1.7% |
| Germany | 1.5% |
| Taiwan | 1.2% |
VGRO also offers industry diversification.
VGRO Industry Allocation
As of February 21, 2023
| Industry | Percentage |
|---|---|
| Financials | 20.2% |
| Technology | 15.7% |
| Industrials | 13.0% |
| Consumer Discretionary | 11.7% |
| Energy | 8.7% |
| Health Care | 8.7% |
| Basic Materials | 6.6% |
| Consumer Staples | 5.2% |
| Utilities | 3.9% |
| Real Estate | 3.2% |
| Telecommunications | 3.2% |
VGRO is relatively recent since it started in January 2018. It showed a return of 17.66% in 2019; 10.89% in 2020; 14.97% in 2021; and a dip of -11.21 in 2022 with an average annual return of 5.81% since inception (impacted greatly by 2022).
VGRO's distribution yield is currently 2.06%. Since VGRO is a mix of stocks and bonds, this includes both stock dividends and bond interest payments.
VGRO's Management Expense Ratio (MER) is 0.22%.
What is XGRO?
XGRO is BlackRock’s Growth ETF Portfolio. It consists of about 80.78% equities and 19.15% bonds. It's one of BlackRock's most popular one-fund ETF with $1.5B of assets under management (AUM).
In practice, XGRO is a portfolio ETF comprised of other BlackRock ETFs with the following allocation:
XGRO Holdings
As of February 21, 2023
| Ticker | Security Name | Asset Class | Percentage |
|---|---|---|---|
| ITOT | ISHARES CORE S&P TOTAL U.S. STOCK | US Stock | 36.95% |
| XEF | ISHARES MSCI EAFE IMI INDEX | Developed Markets Stocks | 20.08% |
| XIC | ISHARES S&P/TSX CAPPED COMPOSITE | Canadian Stocks | 19.92% |
| XBB | XBB ISHS CORE CAD UNIV BND IDX ETF (CA) | Canadian Bonds | 12.22% |
| IEMG | ISHARES CORE MSCI EMERGING MARKETS | Emerging Market Stocks | 3.84% |
| XSH | iShares Core CAD ST Cor Bd Index | Short-Term Canadian Corporate Bonds | 3.08% |
| USIG | ISHARES BROAD USD INVESTMENT G | US Corporate Bonds | 1.92% |
| GOVT | ISHARES US TREASURY BOND ETF | US Government Bonds | 1.91% |
| USD | USD CASH | Cash or Cash Derivatives | 0.02% |
| CAD | CAD CASH | Cash or Cash Derivatives | 0.08% |
XGRO is geographically diverse with its top 10 holdings (91.4% of net assets) with the following allocation:
XGRO Geographical Allocation
As of February 21, 2023
| Country | Percentage |
|---|---|
| United States | 45.78% |
| Canada | 24.42% |
| Japan | 5.59% |
| United Kingdom | 3.88% |
| France | 2.6% |
| Switzerland | 2.51% |
| Australia | 2.0% |
| Germany | 1.96% |
| China | 1.43% |
| Netherlands | 1.23% |
BlackRock reports performance since 2007 for XGRO but the fund was actually restructured in December 2018, so performance before that date doesn’t mean much to current investors.
XGRO's performance was 17.96% in 2019; 11.42% in 2020; 15.17 in 2021; and a dip of -11.0 in 2022.
XGRO's distribution yield is currently at 1.43%. Since XGRO is a mix of stocks and bonds, this includes both stock dividends and bond interest payments.
XGRO has a 0.2% Management Expense Ratio (MER).
VGRO or XGRO?
VGRO and XGRO look pretty similar right? So how can you choose the best one? There are a few subtle differences that can help guide you.
MER
From a MER perspective, XGRO is a slight winner with 0.02% less than VGRO. It doesn't mean much to a small portfolio but, as it's a percentage, the more your portfolio grows, the more it would make a difference.
Performance
XGRO is a slight winner in terms of performance over the past 2 years, and the distribution yield is also slightly higher.
Geographical allocation
In terms of geographical allocation again, the differences are quite subtle. VGRO has slightly more exposure to emerging markets, while XGRO is slightly more exposed to North American markets.
This is a matter of personal preference, but ultimately, the percentage difference between the two funds is not enough to have a big impact on your portfolio.
In summary
XGRO takes the win with a lower MER and slightly better performance.
However, VGRO and XGRO are very similar and ultimately, the subtle differences between the two would not matter to most portfolios. Without a high enough portfolio value, the decimal percentage points difference would not make much of a difference on your allocation.
If your portfolio gets to that level, it may be worth it to consider investing in the underlying assets instead as it is cheaper to manage, and very easy with Passiv.
If you want to learn more about buying the underlying assets of self-balancing ETFs, you can read these articles on VGRO and XGRO.
Source: VanguardCanada.ca, BlackRock.com
