How to Choose Your Asset Allocation ETF 

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I just switched up my Roth IRA to 50% SCHD, 25% SCHX, and 20% SCHG. My Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement in 5 years.

Wow. This was the best video I've seen on asset allocation. Very clear and easy to understand. I love that you backed your suggestions with an analysis of real data from a long 50-year time frame. Well done!!

Wow PWL has Ben, Justin, and Shannon, that’s a lot of firepower!

You guys are the nicest Canadians I have ever met on RU-vid, respectively. I love the fact that your information is presently factually and clearly and concise, is a breath of fresh air. Donating to sick kids all your proceeds is Amazing! Thank you so much guys for being great people.

I truly appreciate the idea that taking more risk does not always lead to more return. Thanks Shannon.

Thank you so much! I've been always worried about how to or where to start. This was very informative and helps.

That was the best asset allocation video! Clearly explained.

I came here from a link on Canadian Couch Potato - great look at asset allocation from different angles and good use of data.

Solid, sensible and clear content. Merci once again!

Love how your and Justin's videos. Very clear - the presentation graphics and most importantly your explanations.

This video is excellent and I will be sharing with my 30-something kids. Sensible, non-judgmental, clear and concise and impressive that you backed it up with such a clearly presented data analysis. You’ve earned a subscriber!

Very interesting information, backed up by solid data. I really learned something and it changed my perception of asset allocation.

Shannon, I very much appreciate the data based information. REALLY nice to FINALLY have actual time examples for investing as opposed to the generic long or short term descriptors.

Justin and Shannon, your back tested data on asset allocation etfs are the best. Incredibly insightful. Thank you.

Very clear, concise, insightful advice backed up by factual data. What stood up the most for me was that taking higher risk even after ten years is only 50% likely to beat the less risky investment. Thank you!

Great job - very interesting, clear and concise 👏

The best straight forward advice. Love it. It is not like many experts who give no advice and leave you with incomplete information to make your own decisions. Thank you so much. I was thinking of 60-40 for money that I need in 5 years, RESP, now I am thinking this can be risky. I have the ability but not the willingness to lose any of it.

Wonderful video. Knowing your risk tolerance is definitely the most important part in determining asset allocation but remember there is no such thing as a free lunch. The relationship between risk and return is very real. Not meeting long term goals because you were too conservative in your asset allocation is a risk all it’s own. For the high income earner who doesn’t have a good pension, their investment return may be the only way to keep up the lifestyle they are used too.

Wow, this is the perfect video I needed right now. You perfectly described me as the young investor who is an aggressive saver, but overestimates their risk tolerance lol. Thanks.

This is awesome, thank you.

This was an amazing video!!

Great video, thanks

I'm getting close to retirement and this makes me reconsider the heavy weighting of equity funds in my portfolio.

Great video, Shannon. 👍 I always learn a lot from you and Bender. Do you think bonds are still an attractive asset class for long term investors given today's low interest rates? Or is it better to have a tilt towards equities, especially when we don't know if the current high inflationary environment is here to stay or not.

this is really helpful thank you! So right now my investments are all in tax sheltered accounts (TFSA, RESP, RRSP) and the time horizon is 15+ years for all of them so I am investing in VGRO but whats happens 5-8 years from now when my child's RESP now only has a less than 9 year time horizon, do I sell all the VGRO and buy something with less risk because now the time horizon is less or do I keep it in VGRO because it had a large time horizon to start? - this secondary part of investing has always confused me.

Great video! One question, does the backtest include dividend reinvestment? Or, can the ~2-4% yield be cashed with similar returns?

I go balanced and when the market is low I’d buy more equity. That has worked well for me. I think.

Super great and informative as always. Which on will better suit RESP needed in13 years? VRGO, VEQT or VBAL? Same question for RRSP with withdrawal time of 20ish years? I'm kind of a buy don't look at it person!!

Hi Shannon, would love to know which 20years those were with the worst/best gains/losses. Thank you✌️🌷🌷🌷!

Would you recommend Robo-Advising until one has a better understanding?

Thanks for the very helpful content! What are your thoughts with investing veqt and vfv at the same time say 50/50

Thank you 👍🤓

Great video...But just wondering why you recommend staying away from asset allocation ETFs if the cash need is less than 5 years. Is it because in the event of a downslide I can better control which asset class to divest or am I missing something?

Bonds are horrible lol! Sold my bond index because it was bringing my entire portfolio down. I need to find alternatives. The best alternative so far is a 20% yield on Anchor staking UST.

For anyone looking for more resources on this topic, Chapter 3 of Larry Swedroe's book, "Your Complete Guide to a Successful & Secure Retirement" provides a very detailed discussion of your ability, willingness and need to take risk. I found this book, and especially this chapter extremely helpful in making my own asset allocation decisions (along with videos like this one). Some other great books on asset allocation: "All about Asset Allocation" by Rick Ferri "Asset Allocation: Balancing Financial Risk" by Roger Gibson Any of William Bernstein's books, my favorite of which being, "The Four Pillars of Investing"

Thanks Shannon! If we already own VEQT or XEQT, and want to add more bonds can we just buy a bond ETF like ZAG to up our bond allocation?

Thanks as always for the video! Justin, in the past you've said that you do not recommend any of these ETFs for taxable accounts, due to the premium bond issue of the underlying bond ETFs. You've instead recommended some kind of 3-ETF portfolio, using ZDB as the bond component... is that still the case?

Hi. Completely new to investing. I wanted to know if I am buying etf XGRO (20% bond, 80% equities) as my retirement vehicle (I probably have another 20 years to go), how can I change my allocation as I approach retirement age to something more conservative (40% bonds, 60% equities -XBAL)? Do I sell all my shares in the XGRO etf and buy the more conservative etf? Can I do this given it will be in RRSP account? Since these etfs are already allocated, I am just having trouble figuring out how one can make changes to allocation if I need be.

At 7:13, there's table that says VEQT had a loss of $12,794 for the worst 10 year period. VEQT was created in 2018 and it's not even 3 years old. Was this amount extrapolated/guessed? Don't get me wrong. Great video and very informative. Thanks a lot!

Great video. I don't really understand the concept when comparing VEQT vs VGRO. Could you explain: 61.4% of 373 monthly rolling 20 year periods."

For a retiree who is coming into a large lump sum this fall, and will withdraw 3 to 4% a year, would you dollar cost average or lump sum invest in VBAL or go with something like VRIF?

Super basic question here but im just getting into this stuff. Just to be absolutely clear when you say VCIP returned 4% after 9 years that means your money would essentially gain 4% interest right? So $1000 turns into $1040? If so would that rate of return even be worth it? Dont some of these funds have fees and whatnot? Thanks for the video and link to this page!

Hi! The Horizon’s etf’s are a corporate type of ETF’s and as per their website they do not hold the stocks underlying their ETF’s rather than a guaranteed agreement with third parties, normally banks. Do you think this structure is safer than iShares or vanguard? What if these third parties don’t honor the agreement?

For someone with a long time horizon (10+ years), it is unlikely the investor will invest a lump sum at year 1 and then wait until the end. He/she will likely make additional investments periodically over the years, which in effect will reduce his overall time horizon as well as the average cost. The actual return at the end of the time horizon will therefore not be the worst case scenario as illustrated. Also, it is now probably safe to assume that the government will not let the market crash 50%. They will interfere way before that point by running the money printing machine at full tilt.

Just curious why would you recommend VEQT here when over a 20 year span its returns were in the negatives up until year 13? Doesnt that mean VCIP would be a more profitable investment despite being lower risk?

What are the options for funds in an RRSP account if you want to use the money for a mortgage within 5 years?

Shannon, you state, "Don't invest in any asset allocation ETF if you require the cash in less than 5 years." I have a question about this (perhaps I am just a little confused!?) and it does not pertain to my own situation. It is directed at my mother who has long since retired and is in her early 80s and widowed. Given her age (and health), would the VRIF be a good option for her or not? I believe it is part of the AA ETFs that Vangard puts out. Would she draw a regular monthly income (I believe they VRIF targets 4%) from this and is it relatively secure? And, does she have access to this investment should she require to sell for health-related reasons (i.e. retirement home, private home care, etc)

Which method would be better for investing, lump sum or dollar cost averaging?

Basic question here (sorry for my poor english as french is my first language) considering that does ETF are a package of ETF are we not paying fees on each an every of does ETF? If so, is that not a lots of fees? Thank in advance and keep up the good work 😃😃

I am new to this game and might be missing something, but I am having a hard time grasping how investing in bond ETF would represent a risk reduction, since unlikely "actual" bonds, etfs don't guarantee your initial investment back, and other than dropping a bit less than equities during a market fall, bond etfs seem to be always in the red, at least since the beginning of 2020. Long story short, other than liquidity, I fail to see the point of bond ETFs at all. Any thoughts?

Is NGRO a Vanguard fund like VTI ETF? I'm confused, in the US it's VTI.

Hi Shannon thank you for your help. For the past 6 months I’ve been stuck trying to find the right asset allocation. Ive taken many risk tolerance tests with different results from 100%, 80 and 60 stocks. I’m turning 38 in 2 months. Have no debt, steady pay, I am renting, and have about $24000 Saved up. I started investing in VEQT and now stopped scared that maybe I need to buy VGRO or VBAL. I know that stocks fluctuate up and down and am not afraid because I won’t be needing the money I invest for 20 years and want to build up a nice nest egg. Any suggestions on how I can choose one and stick with it ? Thank you

So in general your saying if you need the money sooner than 5 years you should never go into ETFs? Not sure if im misunderstanding that. So what would you recommend if someone wanted money sooner?

Would it be correct to say that during this 10-year scenario, if we compare similar funds, they all performed poorly? In other words, if I am aware of the levels of risk, would I be right to think that if the Asset Allocation ETFs of vanguards or Black rock have performed poorly, the same has been the case in the market with similar fund (ETF or mutual fund) and that, this should not prevent us to choose these funds rather than others?

👌

I'm curious how you back tested ETF's over a 10 year + period that haven't been released for longer than 3 - 5 years.

Dialing up my investment risk to 11...hahhahaha...gotta love Nigel Tufnel!

You don't create videos anymore?

For individuals with longer time horizons (20+ year) is it wiser to put the riskier Asset Allocation (VGRO, VEQT) ETFs in the RRSPs/TFSA (assuming both are maxed out) and then have VBAL in the non-registered account (which will be less susceptible to the forthcoming bear market) to maintain the adequate Asset allocation across the entire portfolio (assuming I was going for the 80/20 equity/F.I asset allocation)?

If I buy VEQT in a taxable account and my amount grows to $1M then Vanguard decides to close the ETF … I will get a massive tax bill, right? Are there any measures I can put in place to lessen the blow in a taxable account? I am worried that if I buy VEQT and it closes before my retirement I will be financially ruined. Thanks for your help. 🙏

Today bond stock is not doing any risk adjustments maybe stocks/gold or similar stock bond does not make any sense

Good video, but you didn't define "risk." It seems many investment pro's define it a bit differently. Volatility isn't part of it according to Buffet, he defines it as the "permanent loss of capital."

What are gics?

Interesting times.. VCIP is 17.5% down while VEQT is 9% down from its peak atm..

Informative video, still 80% XEQT 20% TEC to the moon!

Why no mention about vfv when its a far better option than any of your choices

This historical comparison of balanced etfs to all equity etfs has a serious thesis flaw. For 48 of the past 50 years bonds had a good return. I remember the days when bonds paid well over 5% and the stock market was only 1-2% better. Bonds pay basically zero now. Maybe 1% with significant downside risk to the par value. If interest rates go up 2%, bonds will fall 20%. The stock market might fall too and you might be waiting 5-10 years for a recovery too. Lets also keep in mind none of those etfs by Vanguard are more than a few years old. VEQT less than 2 years. So how they model 50 years of returns is assumed to be retrofitted accurately is unknown. The stretch is even larger by looking at etfs with bonds like VBAL. The last thing about this thesis is it’s based on comparing to worst case scenarios. I get the author’s purpose. Protecting capital is her highest priority. I somewhat agree. But balanced etfs with bonds is high risk too now. It might be better to hold GICs, high interest savings accounts at credit unions like Hubert Financial that pays me 1.25% or keep it in cash. 20% of my $2 million portfolio is in cash earning SFA. It hurts but its my safety net. My Hubert Account is a small part of my cash, about 5%. But its over $100 K. Its been with them 10 years now. A well run credit union that managed through the financial crisis in 2008 quite well.

the only problem is nowadays bonds give you nothing.

Buy gold.

And nobody mentioned she's extremely good looking...