[ETF] balanced fund

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eonny
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[ETF] balanced fund

Post by eonny »

Could two (or more) EFTs be combined to create a fund like a balanced fund, that is, 60% stocks, 40% bonds?
alex_686
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Re: EFT balanced fund

Post by alex_686 »

Yes.

And there are a few out there.

iShares S&P Aggressive Allocation Fund (AOA) is a example.

Why are you asking? They tend not to be popular. It defeats some of the tax benefits. It is more popular to hold the individual ETFs and manually rebalance across tax-advantaged and taxable accounts.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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eonny
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Re: EFT balanced fund

Post by eonny »

I like to keep things simple but a combined fund would, as you note, defeat one of the EFT advantages.
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Re: EFT balanced fund

Post by alex_686 »

eonny wrote: Tue Oct 12, 2021 9:39 am I like to keep things simple but a combined fund would, as you note, defeat one of the EFT advantages.
Just because they are not popular does not mean they are a bad choice. Keeping things simple is not a bad choice.

And I don't think it would defeat the tax advantage - just lessen the advantage. Somewhere in the middle.

I am pretty well versed on how taxes work for Fund, Fund of Funds (FoF), and ETFs. But I will admit that I don't know the nuances for ETF FoF - and I know there some.
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Re: EFT balanced fund

Post by ChinchillaWhiplash »

NTSX. :beer
dbr
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Re: EFT balanced fund

Post by dbr »

eonny wrote: Tue Oct 12, 2021 9:07 am Could two (or more) EFTs be combined to create a fund like a balanced fund, that is, 60% stocks, 40% bonds?
If by combine you mean own two different ETFs, then sure. That would just be an investor owning a portfolio of funds at a certain asset allocation, pretty much the typical thing for many investors. The investor has to attend to rebalancing themselves.

Many balanced mutual funds are just entities that own allocations to stock or bond mutual funds. Vanguard target retirement funds are like that. I am not sure there is any such thing as an ETF that is literally a combination of two different ETFs.
lovetalkingnumbers
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Re: EFT balanced fund

Post by lovetalkingnumbers »

To me, it's all about simplicity. Using an index mutual fund like VBIAX (Vanguard Balanced Index Fund Admiral Shares) seems to satisfy my goal of a 60/40 stock/bond split for the next 30 years. There's piece of mind knowing that if I grab my chest and fall face first into my pepperoni pizza, my wife won't have to worry about RMD withdrawls, rebalancing and such. Thoughts?
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jeffyscott
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Re: EFT balanced fund

Post by jeffyscott »

alex_686 wrote: Tue Oct 12, 2021 9:20 am Yes.

And there are a few out there.

iShares S&P Aggressive Allocation Fund (AOA) is a example.

Why are you asking? They tend not to be popular. It defeats some of the tax benefits. It is more popular to hold the individual ETFs and manually rebalance across tax-advantaged and taxable accounts.
And even if taxes are not an issue, those iShares asset allocation ETFs are higher cost than the comparable Vanguard Lifestrategy mutual funds, 0.25% vs. 0.14%.

There are also mutual funds made up of ETFs, as another variation, I think Schwab's target date funds do that as one example.
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Re: EFT balanced fund

Post by alex_686 »

jeffyscott wrote: Tue Oct 12, 2021 12:07 pm And even if taxes are not an issue, those iShares asset allocation ETFs are higher cost than the comparable Vanguard Lifestrategy mutual funds, 0.25% vs. 0.14%.
We should compare apples to apples. I picked AOA at random. It is running a more complex and expensive strategy, hence a higher expense ratio. That is what is driving the cost difference, not the ETF/Mutual Fund structure. Plus I suspect that Vanguard's funds are larger, gaining a cost advantage that way.
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cchrissyy
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Re: EFT balanced fund

Post by cchrissyy »

yes, if there is a balanced fund you like, you can find the ETFs that correspond to it and hold them in the same percentages.
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GoneOnTilt
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Re: EFT balanced fund

Post by GoneOnTilt »

eonny wrote: Tue Oct 12, 2021 9:07 am Could two (or more) EFTs be combined to create a fund like a balanced fund, that is, 60% stocks, 40% bonds?
iShares AOR is 60/40.
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Re: EFT balanced fund

Post by tomsense76 »

alex_686 wrote: Tue Oct 12, 2021 1:05 pm
jeffyscott wrote: Tue Oct 12, 2021 12:07 pm And even if taxes are not an issue, those iShares asset allocation ETFs are higher cost than the comparable Vanguard Lifestrategy mutual funds, 0.25% vs. 0.14%.
We should compare apples to apples. I picked AOA at random. It is running a more complex and expensive strategy, hence a higher expense ratio. That is what is driving the cost difference, not the ETF/Mutual Fund structure. Plus I suspect that Vanguard's funds are larger, gaining a cost advantage that way.
Well there is also something to be said for the portability. One can buy the ETF at broker A move to broker B and buy more there. With the mutual fund, one might not be able to move it if they need to and even if they can there may be fees involved.
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Re: [ETF] balanced fund

Post by LadyGeek »

eonny wrote: Tue Oct 12, 2021 9:07 am Could two (or more) EFTs be combined to create a fund like a balanced fund, that is, 60% stocks, 40% bonds?
Hi,

I believe you mean "ETF", not "EFT". See the wiki: Exchange-traded fund

I also fixed the spelling in the thread title.

Do you intend to do something like this for your own portfolio? If so, may I suggest you start a new thread in the Personal Investments forum and post your portfolio information in that thread using the Asking Portfolio Questions format? It will make you think about the "big picture" while giving us the information we need to point you in the right direction.

If you have any questions, ask them in the new thread.
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jeffyscott
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Re: EFT balanced fund

Post by jeffyscott »

alex_686 wrote: Tue Oct 12, 2021 1:05 pm
jeffyscott wrote: Tue Oct 12, 2021 12:07 pm And even if taxes are not an issue, those iShares asset allocation ETFs are higher cost than the comparable Vanguard Lifestrategy mutual funds, 0.25% vs. 0.14%.
We should compare apples to apples. I picked AOA at random. It is running a more complex and expensive strategy, hence a higher expense ratio. That is what is driving the cost difference, not the ETF/Mutual Fund structure. Plus I suspect that Vanguard's funds are larger, gaining a cost advantage that way.
What's more complex and expensive about iShares strategy?

It appears to me to be more expensive simply because iShares adds a net management fee of 0.19% to the underlying ETF fees of 0.06%, while Vanguard effectively adds about 1/2 that by using investor shares of the underlying funds, rather than Admiral.

I think both are apples, there is a series of those ETFs with different allocations, just like Vanguard has their series of LifeStrategy mutual funds. The AOR fund from the same series, which has the allocation the OP asked about, has the same ER of 0.25% as AOA. The portfolio does not look significantly different from that of LifeStrategy Moderate. Both are about 60/40, both have similar US/International allocations, both have a similar distribution of stocks by market cap, both have similar M* stock style boxes, performance charts look similar (with LifeStrategy being slightly better most likely simply due to the lower ER.

Not suggesting the cost difference is due to the structure, just pointing out it's existence. Even cheaper are many target date options, those are different as allocations are not fixed, but that is not the reason that they are cheaper. They are likely cheaper due to there being more competition in the, more popular, target date space than there is in, the less popular, fixed allocation space.
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Re: [ETF] balanced fund

Post by 1789 »

eonny wrote: Tue Oct 12, 2021 9:07 am Could two (or more) EFTs be combined to create a fund like a balanced fund, that is, 60% stocks, 40% bonds?
Yea it is a great idea if you value simplicity. I don't know if there is an ETF twin for VBIAX. Certainly not AOR. It has too much international, imo.
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calwatch
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Re: [ETF] balanced fund

Post by calwatch »

The other option would be to use a broker like M1 Finance and have it automatically rebalance using dividends and/or a manually forced rebalance. https://www.m1finance.com/blog/everythi ... balancing/
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