:quality(80)/cloudfront-us-east-1.images.arcpublishing.com/morningstar/ZHTKX3QAYCHPXKWRA6SEOUGCK4.png?w=1920&resize=1920,1024&ssl=1 "Vanguard's Allocation ETFs: Ideal for Beginning Investors 5")
Key Morningstar Metrics for Vanguard Balanced ETF
Morningstar Medalist Rating: Silver
Process Pillar: Above Average
People Pillar: Above Average
Parent Pillar: High
For balanced fund investors, Vanguard’s allocation exchange-traded funds offer a strong combination of low fees solid performance. The firm’s efficient management and effective global portfolio construction has earned its funds above-average people and process ratings from Morningstar.
The series’ five risk options – Conservative Income, Conservative, Balanced, Growth, and All-Equity – target a 20%, 40%, 60%, 80%, and 100% equity weight, respectively, with a 2% threshold for rebalancing. An underlying mix of cheap ETFs keeps costs low and includes strong options like Vanguard US Total Market ETF and Vanguard FTSE Canada All Cap ETF. The series’ low 24-basis-point fee for each of the five options is its most attractive feature and biggest advantage.
Vanguard’s Investment Strategy Group and Strategic Asset Allocation Committee oversee the series. The former, a 70-person global team, conducts investment research and proposes changes for a wide array of Vanguard funds. Various firm leaders sit on the Strategic Asset Allocation Committee, which reviews and votes on the proposals.
The ETFs’ allocations haven’t changed much since their inception, but they have slightly overweighted Canadian equity relative to peers. It targets 30% of equities in Canadian stocks, slightly higher than global balanced peers’ 24%. The series’ fixed income sleeve also devotes more assets to Canadian securities—60%, compared with 53% for the average global balanced peer.
Vanguard Allocation ETF Performance Highlights
Relative performance across the five risk options varies, with some bright spots. Vanguard Balanced ETF Portfolio and Vanguard Growth ETF Portfolio registered top-quartile returns against their peers over the past five years ending July 2024. Vanguard Growth ETF scored a top-decile annualized return over the last three years and a top-quartile performance in the past year ending July 2024. Balanced ETF Portfolio slightly edged the Morningstar Canada Neutral Global Target Allocation Index by 0.4 percentage points annualized for the last five years ending July 2024.
The equity sleeves’ home bias can affect performance. The series’ 30% Canadian equity is more than three times that of the average global equity fund’s 7.4% as of July 2024. This helped in 2021 and 2022, when Canadian equity outperformed global equity, but detracted in 2023, when non-Canadian exposure shined.
