Summary: VBAL vs ZBAL
For investors exploring balanced portfolio ETFs, Vanguard’s VBAL and BMO’s ZBAL are two top contenders. Both ETFs offer a simple, cost-effective way to achieve a balanced portfolio that has diversified exposure to equities and fixed income. However, there are important differences in their strategies and geographic focuses that could influence your decision and the biggest differentiator between the two is their geographic exposure, as VBAL is globally diversified and ZBAL on the other hand is more Canadian focused.
What Are VBAL and ZBAL?
Both VBAL (Vanguard Balanced ETF Portfolio) and ZBAL (BMO Balanced ETF Portfolio) follow the classic 60/40 asset allocation model—60% equities and 40% fixed income—a strategy designed for investors seeking a balance between growth and stability. This is often referred to as a “balanced portfolio”.
What is a Balanced Portfolio?
A balanced portfolio is a diversified investment strategy that combines equities (stocks) and fixed income (bonds) to balance growth and stability. Typically, it follows a 60/40 allocation, offering moderate risk and returns. Balanced portfolios suit investors seeking steady growth while protecting against market volatility through asset diversification. This type of portfolio structure is something you will see as you move more to protecting your capital versus focusing solely on growth.
VBAL: Vanguard Balanced ETF Portfolio
VBAL provides global diversification across equities and bonds. Its equity exposure spans U.S., Canadian, and international markets, while its fixed income component includes bonds from various regions worldwide. Managed by Vanguard, VBAL emphasizes cost-efficiency and high-quality investments.
- MER: 0.24%
- Equity Focus: Heavy U.S. and international market exposure, complemented by Canadian equities.
- Fixed Income: Globally diversified, including corporate and government bonds.
ZBAL: BMO Balanced ETF Portfolio
ZBAL also follows a balanced strategy but places more emphasis on Canadian markets. Its equity and bond components skew toward domestic assets, making it an attractive option for investors who prioritize the Canadian market while still gaining some global exposure.
- MER: 0.20%
- Equity Focus: Greater allocation to Canadian equities compared to VBAL.
- Fixed Income: Primarily Canadian bonds, with limited global diversification.
Key Differences Between VBAL and ZBAL
While both ETFs share a similar goal, their differences in cost, geographic exposure and portfolio composition can impact performance and suitability for different investors.
Here is a full comparison:
| Category | VBAL | ZBAL |
| Management Expense Ratio (MER) | 0.24% | 0.20% |
| Geographic Allocation | Heavier U.S. and international exposure | Strong focus on Canadian equities and bonds |
| Fixed Income Strategy | Globally diversified bonds | Primarily Canadian bonds |
| 5-Year Annualized Return* | 7.30% | 7.39% |
Let’s expand on two of these points as they can impact your decision when deciding which ETF is best suited for your portfolio:
Geographic Allocation
VBAL’s global diversification sets it apart, with significant exposure to U.S. and international markets. This provides broader market coverage and reduces reliance on the Canadian economy (as we’ve seen lately, our economy has been underperforming). In contrast, ZBAL’s heavier weighting in Canadian equities and bonds makes it more domestically focused, which may appeal to those confident in Canada’s economic outlook.
Fixed Income Strategy
VBAL’s bond allocation is globally diversified, offering a hedge against Canadian-specific risks. ZBAL, on the other hand, concentrates its bond exposure in Canada, which could be advantageous if domestic bonds outperform but also increases vulnerability to local economic fluctuations.
Should I Buy VBAL or ZBAL?
Well, it depends! Both VBAL and ZBAL are excellent options for building a balanced, diversified portfolio. If you want broad global diversification and you are comfortable with a slightly higher MER, VBAL might be for you. On the other hand, if you prefer a Canadian-focused portfolio with a slightly lower MER, ZBAL might be the right pick.
Ultimately, both ETFs provide simplicity, automatic rebalancing and diversification, so it comes down to global diversification versus Canadian-focused, as the MER differences are super nominal.
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