Thursday, May 12, 2016

My ETF Experiment - Bought VCN and VXC

Last fall, I wrote about my plan to use a passive ETF index strategy in my son's Registered Education Savings Program ("RESP"). Although I was slow to implement the passive ETF index strategy, I decided on and bought two Vanguard ETFs recently so that my son's RESP funds for the first three years of life are now fully invested. The two ETFs I purchased were the Vanguard FTSE Canada All Cap Index ETF ("VCN") and the Vanguard FTSE All-World Ex Canada Index ETF ("VXC"). A brief overview of the ETF funds is included below.

Vanguard FTSE Canada All Cap Index ETF (TSE: VCN) 
From Vanguard Canada's website, VCN "seeks to track, to the extent reasonably possible and before fees and expenses, the performance of a broad Canadian equity index that measures the investment return of large, mid- and small-capitalization, publicly traded securities in the Canadian market." The ETF currently holds 233 companies' stocks, has a P/E of 26X, a 1.7X P/B ratio, and a 12% ROE. The ETF's top three holdings are Royal Bank, TD Bank and Scotia Bank. The fund's top 10 holdings account for 38.5% of its net assets. The fund's management expense ratio is 0.06%.

Vanguard FTSE All-World Ex Canada Index ETF (TSE: VXC) 
Also from Vanguard Canada's website, VXC "seeks to track, to the extent reasonably possible and before fees and expenses, the performance of a broad global equity index that focuses on developed and emerging markets, excluding Canada." The ETF currently holds 8048 companies' stocks, has a P/E of 19.5X, a 2.0X P/B ratio, and a 16.8% ROE. The ETF's top three holdings are Apple, Alaphabet, and Microsoft. The fund's top 10 holdings account for 9.8% of its net assets. The fund's management expense ratio is 0.27%.

I bought approximately the same dollar amount worth of each ETF.  The total transaction costs were $20. I plan to rebalance the portfolio when I make the 2017 RESP contribution. This passive strategy is meant to save me time. I feel an all equity portfolio diversified across the world meets the risk profile and investment objectives of my son who has a 16 year time horizon before he needs to start withdrawing the funds for college or university.

My Investment Holdings page is updated to reflect my son's RESP.

Do you own any index ETFs or index funds?





6 comments:

  1. We own both VCN and VXC. I like VXC because it allows us to diversify outside of Canada. :)

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  2. Thanks for stopping by Tawcan. Good luck recovering from your flu.

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  3. I own many ETFs (too many actually, it is now difficult to track). I do have the two mentionned here, but I have many others. One reason for me to buy different ETFs is that I'm trying to collect losses. Weird hey? That's because three years ago I had a rather large capital gain, against which I'd like to report losses. Anyway, I typically buy the big ones (Vanguard) with the smallest possible MER fees.

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    1. There's nothing weird about trying to collect capital losses. I completely understand why you would want to do that. Your plan to stick to the smallest possible MER fees also makes perfect sense to me :)

      Thanks for stopping by!

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  4. I'm thinking of investing in a global stock index. As a Singaporean, I'm contemplating whether to buy VXC or VWRD. Which one would you recommend?

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    1. Thanks for your comment Cheston. Without knowing the tax laws in Singapore or your personal situation, I'm in no position to make a recommendation on what you should buy.

      All the best!

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