Q: For my TFSA, I am hesitating between VBAL and XBAL. Which one do you prefer? Because of the U.S. and international component of these ETFs, will there be withholding taxes in a TFSA or other tax considerations we should know about? Thank you for your guidance
5i Research Answer:
Both strategies are essentially the same offering a well diversified, 60-40 split between stocks and bonds. XBAL offers a slightly lower fee at 0.20% while VBAL charges 0.24%. The yield is identical for both ETFs, while performance slightly favours XBAL over the long term. The loweer fee and slightly better performance makes us give XBAL the edge, but we are more than comfortable with either. Both VBAL and XBAL are fund-of-funds, meaning they hold underlying ETFs. This structure often results in withholding taxes being deducted at the level of the underlying ETFs, not directly from your TFSA. But taxes certainly apply in a TFSA.