Investing

What's wrong if I buy both VBAL and XBAL?

  • Last Updated:
  • Dec 21st, 2019 4:03 pm
5 replies
Deal Expert
Aug 2, 2001
16644 posts
6897 upvotes
Nothing is "wrong".

Generally if I recall XBAL/XGRO are higher towards US Equities compared to VBAL/VGRO. XBAL/XGRO also have a lower management fee I believe.

Buying both would mean you want to meet in the middle between the two in terms of things like US Equity exposure. You're not happy with the "low" amount in VBAL but not happy with the "high" amount in XBAL. One downside to buying both is that you'll have to manage both funds to keep your ratio of 50-50. And I think that's why it's frowned upon - it takes away from the simple nature of the funds. You could simply replicate your ideal ratio with a set of underlying funds if you're wanting to "manage" it because XBAL/VBAL are both just made up of other ETFs.
[OP]
Member
Mar 7, 2008
496 posts
128 upvotes
I like XBAL/XGRO since the management fee is slightly lower.
BUT I realized the market cap is too small (compare with VBAL/VGRO). Does it mean it's not easy to sell large amount shares (liquidity issues)?

TrevorK wrote: Nothing is "wrong".

Generally if I recall XBAL/XGRO are higher towards US Equities compared to VBAL/VGRO. XBAL/XGRO also have a lower management fee I believe.

Buying both would mean you want to meet in the middle between the two in terms of things like US Equity exposure. You're not happy with the "low" amount in VBAL but not happy with the "high" amount in XBAL. One downside to buying both is that you'll have to manage both funds to keep your ratio of 50-50. And I think that's why it's frowned upon - it takes away from the simple nature of the funds. You could simply replicate your ideal ratio with a set of underlying funds if you're wanting to "manage" it because XBAL/VBAL are both just made up of other ETFs.
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Sr. Member
Feb 13, 2008
568 posts
244 upvotes
Edmonton, AB
If you live in Alberta you would be paying PST in both. This applies to many mutual funds and ETFs.
Sr. Member
Jul 1, 2006
690 posts
473 upvotes
mouseswimming wrote: I like XBAL/XGRO since the management fee is slightly lower.
BUT I realized the market cap is too small (compare with VBAL/VGRO). Does it mean it's not easy to sell large amount shares (liquidity issues)?
There are no liquidity issues when it comes to ETFs. The market makers create shares as needed.
https://canadiancouchpotato.com/2012/09 ... ng-volume/
With ETFs, however, this isn’t the case. ETFs are open-end funds, which means new units can be created or redeemed as necessary, so supply and demand has little effect. Say a new ETF launches this week with 200,000 shares, each trading at $20, for a net asset value of $4 million. If an institutional investor wanted to put $1 million in the fund, their order would not drive the price sky high, as it would with a small-cap company with a finite number of shares. The ETF provider would likely just create 50,000 new units and deliver them to the institutional investor. The net asset value of the fund would now be $5 million and there would be 250,000 shares, each one still valued at $20.
The only possible wrinkle is getting hosed on the bid/ask spreads, but you can mitigate some of that by using a limit order.
Newbie
Apr 13, 2019
59 posts
81 upvotes
There is a tax-deferral strategy that involves buying two or more mirror all-in-one ETFs. It works best for people early in the accumulation phase using non-registered accounts.

Start by investing in one of the ETFs, say XBAL.
A decade or so later, start directing all new savings into VBAL.

When the time comes to start withdrawing -- i.e. selling part of your non-reg holdings in retirement and paying cap gains tax (hopefully!) -- you begin by selling down the VBAL. In all likelihood, this holding will have a higher cost base and therefore lower capital gains. IOW, less tax owing.

Only once the VBAL is liquidated do you start selling the XBAL.

Using only one of the ETFs is simpler, but it means you have only one adjusted cost base. Any sale will trigger tax on the full gain.
Using two or more similar ETFs gives you the potential option of deferring a hunk of that gain.

Again, this works best only in the specific set of circumstances described.
Mind you, the only downside is the "complexity" of two ETF holdings versus one.

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