This XBAL vs VBAL comparison takes a detailed look at the 2 top balanced ETF portfolios in Canada.
Asset allocation ETFs, or all-in-one ETFs, are a quick and easy way to build a diversified portfolio with minimal risks and costs.
With these types of ETFs, you can diversify your portfolio across different asset types, sectors, and markets, without the need to buy and manage several ETFs or individual stocks.
Like individual ETFs, all-in-one ETFs also have varying risk levels to meet different investment objectives. XBAL and VBAL are all-in-one ETFs that seek to provide long-term capital growth and income with a low-to-medium level of risk.
Due to their similarities, it is easy to get confused about which of the ETFs is best for you.
This article compares the key similarities and differences of XBAL vs VBAL to help you choose the perfect one for your situation.
XBAL vs VBAL: Overview
Let’s start with an overview of the current key features of XBAL and VBAL.
|Date of inception||June 21, 2007||January 25, 2018|
|Portfolio manager||BlackRock||Vanguard Investments Canada Inc.|
|Target allocation||60% Equity; 40% Fixed Income||60% Equity; 40% Fixed Income|
|Asset allocation||Equity 60.27%, fixed income 39.54% and cash and/or derivatives 0.19%.||Stocks 60.08%, bonds 39.81%, short-term reserves 0.06%.|
|Risk level||Low to medium||Low to medium|
|1-year performance (July 2022)||-7.38%||-7.32%|
Overview of XBAL
XBAL is the ticker symbol of the iShares Core Balanced ETF Portfolio that was founded in 2007 to provide long-term capital growth and income through a diversified investment portfolio.
To achieve its investment objective, XBAL aims for approximately 60% equity allocation and 40% fixed income allocation through its underlying ETFs exposure.
XBAL is traded on the Toronto Stock Exchange and is managed by the world’s largest asset manager, BlackRock.
The ETF can be held in both registered and non-registered accounts so it is suitable for all investment account types. And as a balanced ETF portfolio, many investors, whether they’re young, old, beginner or experienced investors, may find XBAL ideal.
Like other ETFs, the XBAL portfolio is automatically rebalanced regularly to stay close to its target allocation. It also has one of the lowest management fees and MER among the asset allocation ETFs in Canada.
As you will learn shortly, XBAL has delivered on its investment objective on its last 1-year and 3-year returns better than some of its competitors.
The following is a highlight of the pros and cons of the portfolio you need to know before investing.
|XBAL Pros||XBAL Cons|
|One-ticket solution of diversified ETFs with automatic rebalancing.||Home bias to Canadian stocks and bonds|
|Low management fee and MER compared to mutual funds and similar all-in-one ETFs.|
|Slightly higher returns than peers.|
Overview of VBAL
Vanguard Balanced ETF Portfolio, VBAL, started trading on the Toronto Stock Exchange on January 25, 2018 and is managed by Vanguard Investments Canada Inc.
As a balanced all-in-one ETF, VBAL also seeks to offer long-term capital growth and income through a diversified portfolio.
Like XBAL, the portfolio aims for approximately 60% equity allocation and 40% fixed income allocation through exposure to underlying Vanguard ETFs.
As you continue reading, you will learn more about how VBAL compares with XBAL and other balanced all-in-one ETFs in Canada.
|VBAL Pros||VBAL Cons|
|Broader diversification.||Slightly higher fees compared to similar portfolios.|
|Strong returns since inception.||Slightly returns than similar ETFs, such as XBAL and ZBAL.|
|Low fees compared to expensive mutual funds.|
Learn more: VBAL Review
XBAL vs VBAL: Assets Allocation
As balanced all-in-one ETF portfolios that seek to provide long-term capital growth and income, both XBAL and VBAL target approximately 60% equity and 40% income allocation.
However, XBAL has the following asset allocation as of the time of writing this article.
- Equity = 60.27%
- Fixed income = 39.54%
- Cash and/or derivatives = 0.19%.
The following table shows the top underlying ETFs that the portfolio invests in as it seeks to achieve its investment objective.
|ISHARES CORE S&P TOTAL U.S. STOCK (ITOT)||27.95%|
|ISHS CORE CAD UNIV BND IDX ETF (CA) (XBB)||25.16%|
|ISHARES S&P/TSX CAPPED COMPOSITE (XIC)||15.52%|
|ISHARES MSCI EAFE IMI INDEX (XEF)||14.01%|
|iShares Core CAD ST Cor Bd Index (XSH)||6.41%|
|ISHARES US TREASURY BOND ETF (GOVT)||4.06%|
|ISHARES BROAD USD INVESTMENT G (USIG)||3.91%|
|ISHARES CORE MSCI EMERGING MARKETS (IEMG)||2.78%|
|CAD CASH (CAD)||0.22%|
|USD CASH (USD)||0.08%|
While VBAL also aims for approximately 60% equity allocation and 40% fixed income allocation, it has the following current allocation:
- 60.08% allocation on stocks
- 39.81% allocation on bonds
- 0.06% allocation on short-term reserves
As you can see, both XBAL and VBAL’s current allocations slightly exceeded their 60% equity as at July 2022. However, this is expected since equities and fixed income investments perform differently.
But the ETFs will be rebalanced by their various portfolio managers on the next rebalancing date.
As a fund of funds, the following are the current underlying ETFs that the VBAL ETF invests in:
|U.S. Total Market Index ETF||26.67%|
|Canadian Aggregate Bond Index ETF||23.56%|
|FTSE Canada All Cap Index ETF||17.76%|
|FTSE Developed All Cap ex North America Index ETF||11.38%|
|Global ex-U.S. Aggregate Bond Index ETF (CAD-hedged)||8.52%|
|U.S. Aggregate Bond Index ETF (CAD-hedged)||7.80%|
|FTSE Emerging Markets All Cap Index ETF||4.30%|
Looking at the above tables you can see that both ETFs are weighted towards the Canadian bonds for their fixed income allocation. However, XBAL has a higher allocation of 31.57% against VBAL’s 23.56% allocation.
Also, XBAL is weighted more towards the US equities with a 27.95% allocation compared to VBAL’s 26.67% allocation.
Overall, both XBAL and VBAL provide broad diversification across the world. But they both exhibit some home bias to the Canadian market with a higher allocation to Canada than our relative size would suggest.
XBAL vs VBAL: Returns
Both XBAL and VBAL have delivered on their investment objective of long-term capital growth and income with solid returns since their inception.
VBAL is newer with a shorter history, but we can compare their 1-year and 3-year performance. As of July 31, 2022, XBAL slightly outperformed VBAL for both a 1-year and 3-year period as you can see below.
Of course, there’s no way of knowing if the trend will continue or reverse in VBAL’s favour. But based on the past 3 years’ data, XBAL currently comes out on top.
XBAL vs VBAL: Fees
In terms of fees, XBAL also outshines VBAL with its 0.18% management fee and 0.20% MER against VBAL’s 0.22% management fee and 0.24% MER.
Depending on your broker, you may also pay a commission when buying and selling XBAL and VBAL. This may add up over time especially if you’re buying smaller amounts.
Both Wealthsimple Trade and Questrade allow you to buy XBAL and VBAL and other ETFs with no commission. But when selling the ETFs, Questrade charges a commission while Wealthsimple Trade doesn’t.
Which is Better XBAL or VBAL?
You may still find it difficult to choose between XBAL vs VBAL because they share more similarities than differences.
Both ETFs have the same investment objective and target asset allocation of approximately 60% equity and 40% fixed income.
Unlike other ETFs that make monthly and annual distributions, XBAL and VBAL distribute dividends to investors quarterly.
While both XBAL and VBAL targets 60% equity and 40% equity allocation, they have slightly different risks because of the difference in their allocation to different markets.
Even though VBAL has a shorter performance history to allow comparison over longer periods, its 1-year and 3-year returns are less than those delivered by XBAL.
You could also save a few dollars on fees with XBAL than VBAL, but the difference is not material. For example, you’ll pay $20 on a $10,000 investment in XBAL and $24 with VBAL – a negligible $4 difference even when compounded over some years.
Overall, XBAL is a slightly better growth ETF portfolio than VBAL using the past 3 years’ information. It’ll be interesting to see how VBAL will perform and compare to XBAL over time.
XBAL vs VBAL vs ZBAL
|Asset allocation||Equity 60.27%, fixed income 39.54% and cash and/or derivatives 0.19%.||Stocks 60.08%, bonds 39.81%, short-term reserves 0.06%.||Stocks 61.32%, fixed income 38.59%, cash and cash equivalents 0.09%|
ZBAL is the BMO asset allocation ETF equivalent of XBAL and VBAL. The ETF’s full name is the BMO Balanced ETF and also trades on the Toronto Stock Exchange with the ticker “ZBAL”.
Introduced on Feb 15, 2019, ZBAL is younger than XBAL and VBAL but has provided competitive returns since inception.
Like XBAL and VBAL, ZBAL has a low-to-medium risk level as it seeks to provide moderate long-term capital appreciation and income.
ZBAL also distributes dividends quarterly to investors with the last dividend yield being higher than XBAL’s but lower than that of VBAL.
Like XBAL, ZBAL has a relatively lower management fee of 0.18% and 0.20% MER.
ZBAL also exhibits some home bias with a higher allocation to the Canadian market than the size of our market relative to the world would dictate.
Overall, depending on your investment needs and risk level, you can’t make the wrong choice with XBAL, VBAL or ZBAL.
Verdict on XBAL vs VBAL
The bottom line is that both XBAL and VBAL are good balanced all-in-one ETFs based on their asset allocations, fees and returns.
As you can see, both XBAL and VBAL have delivered on their investment objective but XBAL had slightly higher returns.
If you’re looking to invest in a balanced ETF portfolio with low-medium risk and competitive fees, you can’t go wrong with either ETF.
But if XBAL or VBAL do not meet your investment needs and risk appetite, then consider some of the other asset allocation ETFs with higher or lower risk levels.
If you need more help in choosing the perfect ETF portfolio for you, please leave a comment below.