The 50/25/25 Portfolio: Why Combine VFV, XDIV, and XDG

Once you understand what VFV, XDIV, and XDG each bring to the table individually, a natural next question shows up: why not just combine all three? A lot of Canadian FIRE portfolios do exactly that, often in some version of a 50/25/25 split. Here's the logic behind it.

The Idea

Instead of picking one fund and living with its trade-offs, a 50/25/25 blend uses each fund for what it's genuinely best at: 50% VFV for low-cost US growth, 25% XDIV for tax-efficient Canadian income, and 25% XDG for diversified global income. The result isn't the "best" fund in any single category — it's a portfolio that doesn't have a glaring weak spot.

What Each Piece Contributes

• VFV (50%): The growth engine. Highest expected long-term total return, lowest yield, lowest MER.
• XDIV (25%): Tax-efficient, monthly Canadian income, concentrated in banks and energy.
• XDG (25%): Diversified global income that reduces the "all your eggs in Canadian financials" risk XDIV alone carries.

Doing the Blended Math

Using approximate current figures — VFV around 0.85% yield, XDIV around 3.1%, XDG around 2.8% — a 50/25/25 blend works out to roughly:

(0.50 × 0.85%) + (0.25 × 3.1%) + (0.25 × 2.8%) ≈ 1.9% blended yield

The blended MER comes out to roughly (0.50 × 0.09%) + (0.25 × 0.11%) + (0.25 × 0.22%) ≈ 0.13% — still remarkably cheap for a three-fund, globally diversified, income-and-growth portfolio.

Why the Mix Matters More Than the Number

The specific 50/25/25 ratio isn't a magic formula — it's a starting point. Someone earlier in accumulation might run 70/15/15 to lean harder into growth; someone closer to drawing an income might flip toward 20/40/40 to push the blended yield higher. What matters is that you're deliberately combining a growth engine with two income engines that don't move in lockstep with each other, rather than betting everything on one fund's particular strengths and weaknesses.

Rebalancing

Because VFV tends to grow faster than it pays out, and XDIV/XDG pay out more than they grow, a 50/25/25 split will naturally drift toward being VFV-heavier over time if left alone. Many investors rebalance once or twice a year — either by selling a bit of the outperformer, or more simply, by directing new contributions toward whichever fund has drifted below target.

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