Investing

Index Fund Investing - VGRO vs VUN

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  • Feb 24th, 2021 11:58 am
[OP]
Newbie
Jul 16, 2020
11 posts
98 upvotes

Index Fund Investing - VGRO vs VUN

I have heard about and been interested in index fund investing for a number of years now and have basically been putting it off waiting for a "crash to get back in". Well even after the ~30% crash we saw earlier this year I STILL didnt get in. After realizing if I didnt jump in on that crash then there is no point of waiting any longer. I finally pulled the trigger, set up a questrade account, and starting buying $1000 to $2000 worth of index funds every week for the past 10 weeks, and plan to continue buying a set amount every week (so I can DCA). My main issue is I am still unsure of which index fund would be the best choice for me. I basically landed on VGRO and VUN and have been buying the same amount of each just to get started and prevent analysis paralysis. As of today VUN is performing better for me and I am leaning towards that one but would love to hear other peoples thoughts.

I am 30 years old so still have lots of time to be invested in the market and I am looking for a simple buy and hold index fund. Which one would RFD recommend? Should I stick to one index fund or continue to buy a little of both? Does todays uncertain times mean a safer fund should be purchased now and a more aggressive fund should be bought when things calm down?


VGRO (Growth ETF Portfolio)
MER: 0.25
https://www.vanguardcanada.ca/advisors/ ... s/12389/CA

VS

VUN (U.S. Total Market Index ETF)
MER: 0.16
https://www.vanguardcanada.ca/advisors/ ... ts/7418/CA

LTDR: Which index fund would you recommend between VGRO and VUN, and why?

P.S. Sorry if this topic has been beaten to death.
11 replies
Deal Addict
User avatar
Dec 19, 2007
1693 posts
323 upvotes
Toronto
I think you need to do some reading on index investing and see which model suits your risk tolerance. The two products you linked are completely different. VGRO is a globally diverse fund (though relatively heavily weighted to Canada) that many people use as a one stop shop for investing. VUN captures the US market only. You are likely pretty close to 75% invested in the US market (which is fine if that's what you want to do, but I sense you don't realize it). You also have a significant level of redundancy the current way you're investing.

Start here... https://canadiancouchpotato.com/

Invest in VGRO exclusively if you're looking for a "standard" index investment strategy that is relatively diversified.
Newbie
Aug 29, 2012
76 posts
88 upvotes
Ottawa
It's hard to provide advice without more information.

What is your risk? Timeline? What type of account (reg, TFSA, RRSP, etc.)?

As suggested above, strongly recommend reading up on Canadian Couch Potato.

Keep in mind if you want to keep a similar strategy (VGRO, VEQT, etc) you can do the iShares variant (XGRO, XEQT) that has slightly less Canadian exposure if that's something you're looking for.
Deal Addict
Nov 9, 2013
4708 posts
5208 upvotes
Edmonton, AB
I think you'll never go wrong with broader diversification in indexing. Thus, I'd pick VGRO.
Keep calm and go long
Deal Addict
Jul 23, 2007
4766 posts
3858 upvotes
If I was forty years younger like the OP's age, I would go for VGRO in a TFSA and/or RRSP. Forget the economy, Just keep throwing the money at it year after year.
Deal Addict
Dec 3, 2014
2348 posts
1839 upvotes
Ontario
I don’t think it’s been mentioned yet - in addition to the above VGRO holds 20% bonds, whereas VCN is all equity.

A closer comparison would be VEQT rather then VGRO. You would then only be determining whether you wanted a globally diversified ETF or a US only ETF.

I would stick to VGRO until you learn the ropes.
[OP]
Newbie
Jul 16, 2020
11 posts
98 upvotes
spintheblackcircle wrote: You are likely pretty close to 75% invested in the US market (which is fine if that's what you want to do, but I sense you don't realize it). You also have a significant level of redundancy the current way you're investing.
Thanks yes I didnt realize that VUN is actually apart of VGRO. I actually found the VGRO on couch potato website but I guess I should do a lot more reading over there. I guess my main concern is I worry VGRO is not aggressive enough as I am still young but ill have to read more to get a better idea, im still very new to this haha.
cbalain wrote: It's hard to provide advice without more information.

What is your risk? Timeline? What type of account (reg, TFSA, RRSP, etc.)?

As suggested above, strongly recommend reading up on Canadian Couch Potato.

Keep in mind if you want to keep a similar strategy (VGRO, VEQT, etc) you can do the iShares variant (XGRO, XEQT) that has slightly less Canadian exposure if that's something you're looking for.
I feel I can handle a good amount of risk if it just means being able to hold some bags for a while. Timeline would be 10-30 years, basically my current plan is to dump as much as possible into index funds for the next 10 years and really see where I end up. If I can leanFIRE in 10 years that would be amazing but im not holding my breath. I am very good at saving and I currently have roughly $100K I would like to have invested by the end of this year. My gut is telling me to dollar cost average over the year and if the market tanks I will buy more aggressively during that time.
Deal Expert
Aug 2, 2001
17911 posts
8799 upvotes
VUN is entirely in the US market, and as others have said that poses a higher level of risk that investing in VEQT, which is an all equity portfolio diversified across multiple countries (40% focus on the US via VTI (which is what VUN ultimately holds)).

Being in all equities in a higher risk. Being in all equities in the US is an even higher risk.


So in my humble opinion I would diversify into all equities from the world, not just the US.
[OP]
Newbie
Jul 16, 2020
11 posts
98 upvotes
Clearly I have a lot more reading to do so thanks for everyones input. I think ill start doing 100% VGRO for the next little while until I figure out if I should be getting anything else. Would most people recommend I stick to 100% VGRO forever or because I am young I could also purchase a higher risk index fund on top of VGRO?
Deal Addict
User avatar
Feb 1, 2012
1938 posts
3228 upvotes
Thunder Bay, ON
DataCrunch wrote: Clearly I have a lot more reading to do so thanks for everyones input. I think ill start doing 100% VGRO for the next little while until I figure out if I should be getting anything else. Would most people recommend I stick to 100% VGRO forever or because I am young I could also purchase a higher risk index fund on top of VGRO?
VGRO is an asset allocation fund. Vanguard has VCIP, VCNS, VBAL, VGRO and VEQT with equity allocation from 20% to 100%. Pick the one that best matches your volatility tolerance and investing timeline. They are designed to be one-fund solutions for investors that want very simple portfolios. Mixing them in different combinations or adding in other specific funds defeats the purpose.
https://www.vanguardcanada.ca/individua ... n-etfs.htm

If you want more control over your portfolio it would be better to purchase individual ETFs like XBB, XIC, XUU, XEF, XIC to form your portfolio with the asset allocation you want. (I used iShares as examples because I am more familiar with their products). Vanguard and BMO have comparable funds.
EDIT: you could also go for a 3 fund portfolio like XIC, XAW and XBB (iShares) or VCN, VXC and VAB (Vanguard).

Your idea of sticking with VGRO for now makes a lot of sense. Take a few months or a year to study and learn until you have an understanding of markets and asset classes before you decide. If you are holding in a RRSP or TFSA there would not be any tax implications from switching funds. This is a good site for understanding portfolio design:
https://www.finiki.org/wiki/Simple_index_portfolios
https://www.finiki.org/wiki/Portfolio_d ... nstruction

Regarding the $100k you want to invest by the end of the year, generally investing the lump sum now gives the best return and DCA is more of an emotional response. In 30 years any fluctuations in the next 6 months will be nothing but a blip over the long term. But if you do decide to DCA, pick a schedule to invest and stick with it. Here are a couple of good articles on DCA vs. lump sum.
https://awealthofcommonsense.com/2018/0 ... -decision/
https://personal.vanguard.com/pdf/ISGDCA.pdf

Here is the conclusion from the Vanguard paper:
Conclusion
Determining how best to time the investment of a large cash balance can be a daunting task. Our analysis indicates that investing immediately has historically provided better portfolio returns on average than temporarily holding cash. If we assume that stock and bond markets will continue to provide risk premia above cash, we would expect similar results in the future.

For those who choose the systematic approach, we suggest creating a disciplined program to invest the lump sum within a year. This structure ensures that cash is continually invested according to the target asset allocation while limiting the time the balance sits on the sidelines
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
Newbie
Nov 16, 2020
1 posts
Hello all,
Thank you for this very helpful and well thought out article. I am currently holding VGRO in my TFSA and in my RRSP I have VAB = 25%, VUN = 35%, VCN = 40%, XEF = 10%.
I just finished reading The Simple Path To Wealth by J.L. Collins and I’m just curious as to what the pros and cons to each might be? I’m 48 years old and own my home, have a pension over and above my TFSA and RRSP accounts so I won’t need this money for about 20 years. Your thoughts and suggestions would be greatly appreciated. Thanks in advance
Sr. Member
Nov 21, 2007
644 posts
85 upvotes
User728950 wrote: Hello all,
Thank you for this very helpful and well thought out article. I am currently holding VGRO in my TFSA and in my RRSP I have VAB = 25%, VUN = 35%, VCN = 40%, XEF = 10%.
I just finished reading The Simple Path To Wealth by J.L. Collins and I’m just curious as to what the pros and cons to each might be? I’m 48 years old and own my home, have a pension over and above my TFSA and RRSP accounts so I won’t need this money for about 20 years. Your thoughts and suggestions would be greatly appreciated. Thanks in advance
Hey, I’m in a similar situation as you and wonder if you got any PMs on this topic. I have been investing small amounts personally through tfsa and rsp in VGRO, VTI, etc but have a LIRA account with funds I’ve yet to invest.

Was thinking whether to follow the vanguard group of ETFs or something else...

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