iShares Core Allocation ETFs vs. Vanguard’s LifeStrategy Funds

A reader writes in, asking:

“I recently learned about the ‘core allocation’ ETFs from iShares. I haven’t seen these discussed before on Bogleheads or elsewhere, but upon researching they seem like a good option to recommend to anybody who isn’t interested in really managing a portfolio on their own. Any thoughts on the core allocation ishares ETFs?”

The short answer is that I think they’re excellent.

For anybody who hasn’t encountered the iShares Core Allocation ETFs before, they’re funds that (like the LifeStrategy funds from Vanguard) offer a static, diversified allocation. In other words, they seek to offer a diversified portfolio in a single fund.

As far as differences, first and most obviously, they’re ETFs rather than traditional mutual funds. That means you can get commission-free access to the iShares Core Allocation funds at most brokerage firms, whereas generally you must have an account with Vanguard in order to buy the LifeStrategy funds without paying a commission.

In addition, when held in a taxable account, the iShares Core Allocation ETFs are somewhat more tax-efficient than the Vanguard LifeStrategy funds, due to being ETFs. For instance, if you look at the historical distributions of the iShares Core Allocation ETFs, you’ll see no capital gain distributions other than a single one in January 2018 or December 2017 depending on the fund, whereas the LifeStrategy funds make capital gain distributions every year.

As far as costs, the iShares Core Allocation ETFs have expense ratios of 0.15%. That’s ever so slightly higher than the 0.11-0.14% expense ratios for Vanguard’s LifeStrategy funds. In either case, you’re paying somewhat more than what you’d pay with a DIY portfolio of individual ETFs or index funds. But I would not hesitate to describe both the LifeStrategy funds and iShares Core Allocation ETFs as “low-cost funds.” And for anybody who doesn’t want to bother with rebalancing a portfolio, the cost is likely to be worth it.

As far as asset allocation, the overall stocks/bond allocations are as follows:

• iShares Core 80/20 Aggressive Allocation ETF (AOA): 80% stocks, 20% bonds;
• iShares Core 60/40 Balanced Allocation ETF (AOR): 60% stocks, 40% bonds;
• iShares Core 40/60 Moderate Allocation ETF (AOM): 40% stocks, 60% bonds; and
• iShares Core 30/70 Conservative Allocation ETF (AOK): 30% stocks, 70% bonds.

If you’re familiar with the LifeStrategy allocations, you’ll notice that this is very similar, with the one difference being that the iShares Core Allocation ETFs only go as low as 30% stocks, whereas the LifeStrategy Income Fund has a 20% stock allocation.

With regard to the actual underlying holdings, it’s pretty run-of-the-mill stuff. Nothing esoteric in any way. (That’s a good thing!) For instance, here’s the underlying allocation of the iShares Core Aggressive Allocation ETF (AOA), according to Morningstar as of 2/21/2025:

• iShares Core S&P 500 ETF 46.62%
• iShares Core S&P Mid-Cap ETF 2.7%
• iShares Core S&P Small-Cap ETF 1.25%
• iShares Core MSCI International Developed Markets ETF 21.8%
• iShares Core MSCI Emerging Markets ETF 8.29%
• iShares Core Total USD Bond Market ETF 16.34%
• iShares Core International Aggregate Bond ETF 2.83%
• Cash 0.17%

You may notice from the above that the iShares funds have slightly higher international stock allocations and slightly lower international bond allocations than the LifeStrategy funds. Frankly, I like the iShares funds ever so slightly better in that regard.

As I’ve written several times in the past, while I don’t think performance charts are especially useful for deciding which of two funds is better than the other, I do think such charts are helpful for showing how similar (or dissimilar) two funds are. The chart below shows the Vanguard LifeStrategy Moderate Growth Fund (in blue) as compared to the iShares Core 60/40 Balanced Allocation ETF (in red) since December 2011 (i.e., the point at which Vanguard switched the LifeStrategy funds so that they no longer include actively managed mutual funds).

As you can see, they’re very similar.

In short, the iShares Core Allocation ETFs are perfectly fine, boring funds. They’re slightly more expensive than the LifeStrategy funds, with slightly different allocations. And they’re ETFs rather than traditional mutual funds, which makes them more accessible to people with accounts anywhere other than Vanguard and which makes them somewhat more tax-efficient in a taxable account. If you’re looking for a one-fund solution that provides a static allocation, they’re a perfectly reasonable choice.