With the vast array of exchange-traded funds (ETFs) and index funds on the market, identifying the ones that best match your investing style can feel overwhelming. No one can accurately forecast which sectors or companies will thrive in the long run.
So, how can you simplify your investment process while minimizing costs and avoiding the hassle of frequent portfolio rebalancing? Consider all-in-one ETFs, also known as asset allocation ETFs, as a potential solution. In this article, we will clarify what an all-in-one ETF is, highlight which firms offer them, and discuss the advantages of integrating them into your investment strategy.
What is an all-in-one ETF?
An all-in-one ETF serves as a comprehensive solution for constructing your investment portfolio in the stock market. Fundamentally, it is a diversified fund with a well-suited asset allocation, characterized by low management fees and the ability to self-rebalance.
Vanguard was the pioneer in introducing all-in-one ETFs to the Canadian market back in 2018, although some might assert that iShares had already launched similar offerings in 2007.
These ETFs generally contain a mix of six to ten different funds, allocated between equities (stocks) and fixed income (bonds). Additionally, they offer broad exposure to various asset classes and geographical regions. Some may even include a small allocation of cash or cryptocurrency.
For instance, the iShares Core ETF portfolios encompass various underlying funds, with allocations depending on the specific portfolio selected:
Equities:
- Canadian equities (XIC)
- U.S. equities (ITOT)
- International developed market equities (XEF)
- Emerging market equities (XEC)
Fixed Income:
- Canadian fixed income (XBB & XSH)
- Global fixed income (GOVT & USIG)
With options catering to conservative, moderate, and aggressive investors alike, these ETFs have gained popularity among everyday investors due to their performance, competitive fees, and ease of use.
What benefits do all-in-one ETFs offer?
Asset allocation ETFs come with numerous advantages, such as:
- Low fees – This means you keep more of your investment returns.
- Instant diversification – These ETFs combine multiple funds, saving you from the costs associated with purchasing individual funds.
- Automatic rebalancing – They maintain a consistent allocation of stocks and bonds.
- Dividend income – Some ETFs pay dividends, which you can reinvest into your portfolio.
In summary, all-in-one ETFs present a well-rounded solution for your investing needs, often unnoticed by many investors.
What are the top all-in-one ETFs in Canada?
Based on extensive research, we have created a list of prominent Canadian firms offering asset allocation ETFs tailored to different investor profiles. The following table includes fund names, ticker symbols, and management fees:
| Investor Type/ Stock/Bond Ratio | Management Fee / MER | Conservative (40/60) |
Balanced (60/40) |
Growth (80/20) |
All Equity (100) |
|---|---|---|---|---|---|
| BMO | 0.18% / 0.20% |
ZCON | ZBAL | ZGRO | ZEQT |
| Fidelity | 0.00%* / 0.34%*/ 0.38% to 0.43% |
FCNS | FBAL | FGRO | FEQT |
| Horizons ETFs | 0.00%/ 0.15% to 0.17% |
HCON | HBAL | N/A | HGRP |
| iShares | 0.18% / 0.20% |
XCNS | XBAL | XGRO | XEQT |
| Vanguard | 0.22% / 0.24% |
VCNS | VBAL | VGRO | VEQT |
BMO
BMO’s Growth ETF (ZGRO) was recognized by MoneySense as one of the top all-in-one ETFs in 2023, boasting competitive management fees of 0.18% and an MER of 0.20%.
Fidelity
Introduced in 2021, Fidelity’s portfolios are notable for including a small allocation to cryptocurrency. If you wish to gain exposure to this asset class without separate purchases, this could be an appealing choice. However, it has higher combined fees compared to others.
*The fees listed consist of both an indirect and a direct management fee.
Horizons ETFs
Horizons differentiates itself with unique split ratios such as 50/50 and 70/30, unlike the more common ratios. They currently have the lowest fees but offer fewer portfolio choices.
iShares
The iShares Core Growth ETF Portfolio (XGRO) and Core Equity ETF Portfolio (XEQT) have also been highlighted as top all-in-one ETFs by MoneySense this year, featuring similar fees to BMO. These portfolios are ideal for aggressive investors.
Vanguard
Despite slightly higher fees, Vanguard’s attractive asset allocation draws investors. The Vanguard Growth ETF Portfolio (VGRO) has a solid performance history over the past five years, making it an attractive option for young, risk-tolerant investors.
How to choose the right all-in-one ETF?
If you are uncertain about your investing style, I recommend reviewing my previous article that discusses financial goals, risk tolerance, and asset allocation to identify your investor profile. This can help you determine which all-in-one ETF aligns with your financial needs. Some investors opt to combine an all-in-one ETF with a few selected individual stocks.
Regardless of your choice, rest assured that all listed options are strong candidates that can facilitate long-term success. Remember, you are not bound to your initial decision permanently; you have the flexibility to switch ETFs if your selected option does not suit your needs.
Dan Bortolotti’s book, “Reboot Your Portfolio,” is an insightful read for any investor. He discusses a strategy that involves utilizing all-in-one ETFs across various investment accounts, such as TFSA, RRSP, and non-registered accounts.
While this method may not be the most tax-efficient, it reduces the time and effort of periodically rebalancing your portfolio. Although this strategy might not fit everyone’s preferences, it could appeal to those who wish to avoid manual calculations and spreadsheets.
How can you purchase all-in-one ETFs?
Acquiring all-in-one ETFs is straightforward and can be done through a discount brokerage account, such as Qtrade Direct Investing. After opening an account, you can buy the ETF similar to purchasing stock. For example, if you want to invest $5,000 in an ETF priced at $50, you would acquire 100 units. Remember to account for any associated trading fees.
Aligning all-in-one ETFs with your financial goals
All-in-one ETFs have emerged as one of the premier innovative products available in the Canadian market over the past five years. Despite being relatively new, they should be utilized more frequently by everyday investors. This investment option provides a straightforward solution that autonomously rebalances, offers low management fees, and diversifies through underlying funds.
Ultimately, the decision to allocate all your funds into an all-in-one ETF or to incorporate it as part of a broader portfolio is entirely yours. When executed wisely, it can significantly enhance your overall investment strategy.
In the next section, I will guide you through the various types of investment accounts you can open and the best practices for assembling your stock market portfolio.