With a myriad of exchange-traded funds (ETFs) and index funds on the market, selecting the right ones can feel overwhelming for any investor. The unpredictability of which sectors or companies will thrive over the long haul adds to this complexity.
So, how can you navigate the investment landscape easily while keeping expenses minimal and avoiding the hassle of constant portfolio rebalancing? All-in-one ETFs, also known as asset allocation ETFs, could be the perfect solution. This article will clarify what all-in-one ETFs are, highlight the companies that offer them, and discuss the advantages of including them in your investment mix.
Understanding All-in-One ETFs
If you prefer a simplified approach to constructing your investment portfolio, an all-in-one ETF might suit your needs. Essentially, these are diversified funds equipped with an optimal asset allocation, low management costs, and automatic rebalancing features.
Vanguard was the pioneer in introducing all-in-one ETFs to the Canadian landscape in 2018, although some argue that iShares released a comparable product as early as 2007.
Typically, these funds comprise a collection of around six to ten underlying funds, balancing equities (stocks) and fixed income (bonds). They offer comprehensive exposure to different asset classes and geographic markets, with a small allocation for cash or cryptocurrencies in some instances.
For illustration, the iShares Core ETF portfolios feature a mix of the following underlying investments with varying allocations depending on the selected fund:
Equities:
- Canadian equities (XIC)
- U.S. equities (ITOT)
- International developed market equities (XEF)
- Emerging market equities (XEC)
Fixed Income:
- Canadian fixed income (XBB & XSH)
- Non-Canadian fixed income (GOVT & USIG)
With options available for conservative, moderate, or aggressive investors, these funds have gained traction among regular investors due to their robust performance, appealing fees, and user-friendly features.
Advantages of All-in-One ETFs
Asset allocation ETFs present numerous benefits, including:
- Affordable fees – Ultimately, this means retaining more of your investment returns.
- Immediate diversification – By consolidating multiple funds, these ETFs reduce the need for individual fund purchases and associated trading costs.
- Automatic rebalancing – They maintain consistent stock-to-bond ratios without requiring your intervention.
- Dividend income – Holders of certain ETFs receive cash dividends, which can be reinvested into their portfolio.
In essence, all-in-one ETFs serve as a comprehensive investment option that deserves more consideration from investors.
Top All-in-One ETFs in Canada
We’ve researched the leading Canadian firms that provide asset allocation ETFs, categorizing them according to different investor profiles. Below is a table enumerating the 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 0.017% |
HCON | HBAL | N/A | HGRP |
| iShares | 0.18% / 0.20% |
XCNS | XBAL | XGRO | XEQT |
| Vanguard | 0.22% / 0.24% |
VCNS | VBAL | VGRO | VEQT |
BMO
In 2023, the BMO Growth ETF (ZGRO) was recognized as one of the top all-in-one ETFs by MoneySense. It features competitive fees of 0.18% for management and 0.20% for management expense ratios (MERs).
Fidelity
Since its inception in 2021, Fidelity’s portfolios have incorporated a small allocation to cryptocurrency. If you seek exposure to this asset class without direct purchases, this option may appeal to you. It does, however, have the highest total fees among its peers.
*The fees shown above include both an indirect and a direct management fee.
Horizons ETFs
Horizons provides a distinctive ratio with 50/50 and 70/30 splits instead of the usual 60/40 or 80/20 allocations. While they currently offer the lowest fees, there are only three portfolios available for selection.
iShares
The iShares Core Growth ETF Portfolio (XGRO) and iShares Core Equity ETF Portfolio (XEQT) were also highlighted by MoneySense as top contenders. Their fees align closely with those of BMO. These are ideal options for aggressive investors looking for growth.
Vanguard
While Vanguard portfolios have slightly higher fees, their asset allocation continues to draw investors. The Vanguard Growth ETF Portfolio (VGRO) has demonstrated strong performance over the past five years, making it an attractive pick for younger, aggressive investors.
Choosing the Right All-in-One ETF
If you are still unsure about your investor profile, which encompasses your financial objectives, risk tolerance, and intended asset distribution, consider reviewing related materials to help identify your investor type. This clarity will facilitate selecting an all-in-one ETF that aligns well with your individual circumstances. Some investors may opt to pair an all-in-one ETF with additional individual investments.
Regardless of your choice, rest assured that you are making a sound decision for your long-term investment strategy. Remember, you are not permanently bound to any one ETF; switching to another option is always viable if your initial selection doesn’t meet your needs.
For a deeper understanding, Dan Bortolotti’s book, Reboot Your Portfolio, is highly recommended for investors. He discusses a strategy that allows you to invest in all-in-one ETFs across all your investment accounts, such as TFSA, RRSP, and non-registered accounts.
Although this approach may sacrifice some tax efficiency, it significantly reduces the time and effort required for portfolio rebalancing. While this method may not suit everyone, it appeals to those who prefer not to engage in extensive calculations to maintain their portfolios.
How to Purchase All-in-One ETFs
Investing in all-in-one ETFs is straightforward; it can be done through a discount brokerage account like Qtrade Direct Investing. Once your account is set up, you can buy the ETF similarly to stocks. For example, if you wish to invest $5,000 in an ETF trading at $50, you would purchase 100 shares, keeping in mind any potential trading fees.
Aligning All-in-One ETFs with Your Financial Goals
For the past five years, all-in-one ETFs have emerged as a prominent innovation in the Canadian market. They remain an underutilized resource for everyday investors. Offering automatic rebalancing, competitive fees, and diversified investments, they present a straightforward solution to your investing needs.
Ultimately, whether you choose to invest wholly in an all-in-one ETF or incorporate it as part of a broader strategy is up to you. When executed wisely, it can serve as a valuable component of your overall investment plan.
In the forthcoming section, I’ll guide you through the various types of investment accounts you can establish and how to successfully construct your stock market portfolio.