Investing

Vanguard vs iShares ETFs. Which are better?

  • Last Updated:
  • Mar 16th, 2016 2:36 am
Tags:
None
Member
User avatar
Feb 12, 2016
447 posts
370 upvotes

Vanguard vs iShares ETFs. Which are better?

Vanguard vs iShares ETFs. Which are better if I want 60% in world/Canada Equities and 40% bonds. Which specific ETFs and why?
18 replies
Deal Fanatic
User avatar
Jun 19, 2009
6135 posts
1981 upvotes
Scarborough
I recommend Vanguard, their corporate structure is designed in a way so that the owners of the fund are the owners of the company itself. But in all honesty, either one is fine.

From a speech in 2004, found in this topic: https://www.bogleheads.org/forum/viewtopic.php?t=16305
https://about.vanguard.com/what-sets-va ... p-matters/

"Vanguard is the only investor-owned mutual fund complex in America. We are known for many things—including our low fees, our commitment to high-quality client service, and our indexing expertise—but I would say the single most defining characteristic about Vanguard is our ownership structure. The Vanguard® funds own The Vanguard Group, which in effect means that the investors in our funds own Vanguard. Unlike other fund firms, we don't have stockholders or a parent company to please. Our mutual ownership structure enables us to focus clearly on the interests of our investors, without the potential conflicts of interest that can occur at other firms."
Newbie
Jan 9, 2016
33 posts
53 upvotes
Canada
SkimGuy wrote: I recommend Vanguard, their corporate structure is designed in a way so that the owners of the fund are the owners of the company itself. But in all honesty, either one is fine.

From a speech in 2004, found in this topic: https://www.bogleheads.org/forum/viewtopic.php?t=16305
https://about.vanguard.com/what-sets-va ... p-matters/

"Vanguard is the only investor-owned mutual fund complex in America. We are known for many things—including our low fees, our commitment to high-quality client service, and our indexing expertise—but I would say the single most defining characteristic about Vanguard is our ownership structure. The Vanguard® funds own The Vanguard Group, which in effect means that the investors in our funds own Vanguard. Unlike other fund firms, we don't have stockholders or a parent company to please. Our mutual ownership structure enables us to focus clearly on the interests of our investors, without the potential conflicts of interest that can occur at other firms."
I believe this only applies to the US based ETFs. The Canadian side of business is structured differently.
Deal Fanatic
User avatar
Jun 19, 2009
6135 posts
1981 upvotes
Scarborough
I'm checking the Canadian Vanguard site and they claim it is a similar ownership structure, however it's more of the idea behind the ownership structure that I like.
Newbie
Jan 9, 2016
33 posts
53 upvotes
Canada
From their brochure:

"Vanguard Investments Canada Inc. is a subsidiary of Vanguard. As such, Canadian investors benefit from Vanguard being one of the world’s largest investment management companies and a very different kind of investment firm. The distinction stems from Vanguard’s unique ownership structure. Rather than being publicly traded or owned by a small group of individuals, The Vanguard Group, Inc. is owned by its U.S.-domiciled funds and ETFs. Those funds, in turn, are owned by their investors. This unique mutual structure aligns our interests with those of our investors and drives the culture, philosophy and policies throughout the Vanguard organization worldwide. As a result, Canadian investors benefit from Vanguard’s low costs, client focus, and stability and experience"

This was the difference between Vanguard Canada and Vanguard US I was mentioning. What actual difference it makes to an individual investor? I don't know.

FYI I buy Vanguard Canada ETFs. To the OP, I think the short and easy answer is that both iShares and Vanguard ETFs are solid options, and you won't go wrong with either. More important than specific product, is the asset allocation you choose and commitment to your plan.
Deal Expert
Feb 29, 2008
30106 posts
5547 upvotes
Montreal
Don't know? Buy each. I hold ishares in my RRSP and Vanguard in my TFSA.
Member
User avatar
Feb 12, 2016
447 posts
370 upvotes
great advice guys! i have bought some vanguard etfs and will stick to them as i also like the fact that im a part owner of the company lol.
Member
User avatar
Feb 12, 2016
447 posts
370 upvotes
i have bought vab,vcn,vxc. would i get higher returns if i get seperate etfs for international and US equities or is vxc the best solution?
Deal Expert
Feb 29, 2008
30106 posts
5547 upvotes
Montreal
Yes. MAybe? Noot so sure?

http://canadiancouchpotato.com/2015/01/ ... -for-2015/

First, simple is usually better than complex. You can now build a portfolio that includes hundreds of bonds and thousands of stocks in some 40 countries using just three ETFs, all for a cost of less than 0.20%. No one needs to diversify more broadly than that. A skilled portfolio manager may be able to boost returns slightly by moving beyond traditional index funds in the core asset classes. But many DIYers make costly mistakes when they try to juggle too many funds. Meanwhile, there are exactly zero investors in the universe who failed to meet their financial goals because they did not hold global REITs or small-cap value stocks.


Using US-listed ETFs is a another example: the management fees and withholding taxes may be lower, but the steps involved in currency conversion can be complicated and it’s easy to make errors that wipe out any potential savings. If you don’t believe me, try explaining Norbert’s gambit to your mom.

These model portfolios are not intended to reduce MERs and taxes to an absolute minimum. The suggested asset allocations were not created using Markowitz’s efficient frontier or portfolio optimization software. They are simply designed to provide broad diversification and low cost while remaining easy to manage on your own.

So try not to agonize over the small details: just choose one of the model portfolios with an appropriate amount of risk and get started. It’s OK if convenience trumps cost, especially for young investors with small portfolios: remember, an additional cost of 0.10% works out to $0.83 a month for every $10,000 in your account. The cost of sitting in cash and scratching your head is much higher. And the peace of mind that comes with a simple investing strategy is priceless.
Deal Addict
User avatar
Feb 1, 2012
2214 posts
3798 upvotes
Thunder Bay, ON
[QUOTE]So try not to agonize over the small details: just choose one of the model portfolios with an appropriate amount of risk and get started. It’s OK if convenience trumps cost, especially for young investors with small portfolios: remember, an additional cost of 0.10% works out to $0.83 a month for every $10,000 in your account. The cost of sitting in cash and scratching your head is much higher. And the peace of mind that comes with a simple investing strategy is priceless. [/QUOTE]

:idea: Truly words of wisdom.

When I set up my current portfolio VXC had just been launched, and XAW was not yet available. If I was starting now with <100k I would probably go with just a CCP style 3 ETF portfolio. At that time I read about buying US domiciled ETFs (VTI etc) and using Norbit's Gambert to convert to US $ cheaply. But I decided to use ETFs from Canadian providers despite the slightly higher MER and FWT. My basic premise was get the $ invested, rather than dither around trying to get the utimate portfolio. The perfect portfolio that you never attain is the enemy of a good portfolio that you can build now. I am really glad now that I did not go the US ETF route, and an evaluation of the possible cost/tax savings is really not worth it to me given my portfolio size. Simplicity rules!
Member
User avatar
Feb 12, 2016
447 posts
370 upvotes
Does anyone know what Rob Carrick's freedom 0.15 portfolio consists of? Curious because I'm not a globe & mail subscriber.
Deal Addict
User avatar
Feb 1, 2012
2214 posts
3798 upvotes
Thunder Bay, ON
dealhawk1 wrote: Does anyone know what Rob Carrick's freedom 0.15 portfolio consists of? Curious because I'm not a globe & mail subscriber.
He now calls it the Freedom .12 Portfolio since fees have dropped since he first introduced it:
The newly renamed Freedom 0.12 Portfolio is an exception. To review, the portfolio includes:

- The Vanguard Canadian Short Term Bond Index ETF (VSB), with a management expense ratio of 0.11 per cent. That’s down from 0.15 per cent last spring.

- The BMO S&P/TSX Capped Composite Index ETF (ZCN), with an MER of 0.06 per cent. That’s down from 0.09 per cent last spring and 0.17 per cent in 2013.

- The iShares Core MSCI All Country World ex Canada Index ETF (XAW), with an MER of 0.21 per cent. That’s down from an estimate of 0.25 per cent last spring.

With a mix of 35 per cent VSB, 40 per cent ZCN and 25 per cent XAW, you get a weighted average MER of 0.115 per cent. I’ve rounded it up to 0.12 per cent.
Not sure why he recommends VSB, other than low cost. A basic tenet of fixed income investing is to match fund availability with need for the funds. VSB is short duration, so unless the money is needed in the next 3 years it is not a good match. I guess you could buy a short term bond fund on the expectation that it will protect against interest rate increases, but people have been forecasting rising rates for years now.
Sr. Member
Sep 22, 2005
957 posts
310 upvotes
BC
bond etf distribution is treated as dividend, not interest?
Deal Addict
User avatar
Oct 14, 2001
1754 posts
589 upvotes
GMA
iceage wrote: bond etf distribution is treated as dividend, not interest?
Nope, bond distributions are usually treated as Other Income ... so fully taxable. To minimize taxes, you either have to use discount bonds (ZDB) or swap-based (HBB).
Sr. Member
Sep 22, 2005
957 posts
310 upvotes
BC
so instead of buying bond etf, moving money to eqbank, tangerine, pc is also a good alternative?
Thanh wrote: Nope, bond distributions are usually treated as Other Income ... so fully taxable. To minimize taxes, you either have to use discount bonds (ZDB) or swap-based (HBB).
Member
User avatar
Feb 12, 2016
447 posts
370 upvotes
Thanks deepwater!!! It's basically like holding vab,vxc,vcn with a lower MER?
Member
User avatar
Feb 12, 2016
447 posts
370 upvotes
Deepwater wrote: :idea: Truly words of wisdom.

When I set up my current portfolio VXC had just been launched, and XAW was not yet available. If I was starting now with <100k I would probably go with just a CCP style 3 ETF portfolio. At that time I read about buying US domiciled ETFs (VTI etc) and using Norbit's Gambert to convert to US $ cheaply. But I decided to use ETFs from Canadian providers despite the slightly higher MER and FWT. My basic premise was get the $ invested, rather than dither around trying to get the utimate portfolio. The perfect portfolio that you never attain is the enemy of a good portfolio that you can build now. I am really glad now that I did not go the US ETF route, and an evaluation of the possible cost/tax savings is really not worth it to me given my portfolio size. Simplicity rules!
great advice as always deepwater!! your very helpful.
Member
User avatar
Feb 12, 2016
447 posts
370 upvotes
Deepwater wrote: He now calls it the Freedom .12 Portfolio since fees have dropped since he first introduced it:


Not sure why he recommends VSB, other than low cost. A basic tenet of fixed income investing is to match fund availability with need for the funds. VSB is short duration, so unless the money is needed in the next 3 years it is not a good match. I guess you could buy a short term bond fund on the expectation that it will protect against interest rate increases, but people have been forecasting rising rates for years now.

his asset allocation is wack! 40% in zcn and only 25% in xaw. whats that all about? lol

Top