DIY Investing: All-in-one ETFs
With thousands of exchange-traded funds (ETFs) and index funds available in the market, it can be dizzying trying to determine which are the most suitable for your investor type. No one can predict which industries or companies will perform well— especially in the long term.
So, how are you supposed to figure out an easy way to invest while keeping costs down and without rebalancing your portfolio? Look no further as the all-in-one ETFs (a.k.a. asset allocation ETFs) may be the answer for you. We’ll explain what is an all-in-one ETF, which companies offer them and the benefits of having it in your portfolio.
What is an all-in-one ETF?
If you’re looking for a one-stop-shop solution to building your stock market portfolio, an all-in-one ETF may be a good choice. Essentially, an all-in-one ETF is a diversified fund that has an appropriate asset allocation, with low management fees and can self-rebalance.
Vanguard was the first to launch all-in-one ETFs into the Canadian market in 2018. Although some may argue that iShares came out with this type of fund back in 2007.
Typically, it will hold a basket of about six to ten funds with a certain percentage of equities (stocks) and fixed income (bonds). Plus, they provide diversified exposure to various asset classes and regions. In some cases, they may hold a tiny percentage in cash or crypto.
To give you an idea, the iShares Core ETF portfolios hold the following underlying funds with varying percentages based on which specific fund you choose:
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)
There’s something for everyone— from conservative, moderate to aggressive investors. As such, they’ve become a popular choice amongst everyday investors based on their performance, attractive fees and convenience.
What are the benefits of an all-in-one ETF?
There are many advantages to asset allocation ETFs, including:
- Low fees – That means more money in your pocket
- Instant diversification – ETFs bundle a bunch of funds for you. Thus, it could save you from buying individual funds and racking up trading costs.
- Automatically rebalancing – They’re designed to keep the same ratio of stocks/bonds.
- Dividend payouts – Dividends are cash payouts you get for holding some ETFs. You can use the money to reinvest in your portfolio.
Overall, it’s a solid all-in-one solution for your investment needs that is often overlooked by investors.
What are the best all-in-one ETFs in Canada?
We’ve researched and compiled a list of the top Canadian companies that offer asset allocation ETFs categorized based on your investor type. The fund name, ticker symbol, and fees are listed in the table below.
| 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
Most notably, BMO Growth ETF (ZGRO) was voted as one of the all-in-one ETFs by MoneySense in 2023. The fees are cost-effective with 0.18% in management fees and 0.20% in management expense ratios (MERs).
Fidelity
Launched in 2021, these portfolios are unique as they hold a small percentage in cryptocurrency. So, if you want to have exposure to this asset class without having to purchase it separately, this could be a suitable option. Compared to its competitors, it has the highest combined fees.
*Based on the chart above, it has an indirect management fee and a direct management fee, respectively.
Horizons ETFs
The ratio is different than its competitors with a 50/50, 70/30 split compared to the common 60/40 and 80/20 split. They currently offer the lowest fees, but you have only three portfolios to choose from.
iShares
iShares Core Growth ETF Portfolio (XGRO) and iShares Core Equity ETF Portfolio (XEQT) were also voted as one of the best all-in-one ETFs by MoneySense this year. They offer the same fees as BMO. If you’re an aggressive investor, these could be worthy contenders.
Vanguard
Even with slightly higher fees, the asset allocation is what attracts investors to buy Vanguard portfolios. Vanguard Growth ETF Portfolio (VGRO)’s track record over the past five years is worth considering for young, aggressive investors.
Which all-in-one ETF should I choose?
If you haven’t figured out your investor type where I discussed your financial goals, risk tolerance and asset allocation, be sure to review the article and find out your investor profile. It will help you narrow down which all-in-one ETF is most suitable for your financial situation. Some investors may decide to have an all-in-one ETF and set aside a small amount to handpick a few individual companies to invest in.
No matter which one you choose, know that they are all excellent choices and you’ll be setting yourself up for success in the long run. Remember, don’t feel like you’re locked into the decision forever. You always have the option to switch to a different ETF if you find that the one you originally chose isn’t a right fit for you.
Dan Bortolotti’s book, Reboot Your Portfolio is highly recommend for every investor to read. He mentions a strategy where you can buy all-in-one ETFs in all of your investment accounts such as your TFSA, RRSP and non-registered accounts.
Although it may not be tax efficient, it saves you the time and effort of rebalancing your portfolio from time to time. Of course, this strategy may not be for everyone, but it may appeal to those who don’t want to use a spreadsheet and manually calculate how much they need to buy and/or sell to rebalance their portfolio.
How to buy all-in-one ETFs
Buying all-in-one ETFs is easy and can be done so in a discount brokerage account, such as Qtrade Direct Investing. Once you have opened an account, you would purchase the ETF like a stock. That’s where you select how many units you want to purchase at the current price (ask price). For example, let’s say you want to purchase $5,000 of a single ETF that’s trading for $50. You’d be able to buy 100 units. That said, you also need to factor in any trading fees.
How all-in-one ETFs can align with your financial goals
All-in-one ETFs are one of the leading innovative products being offered in the Canadian market for the past five years. It’s still a relatively new fund and should be used more often by everyday investors. It’s a simple solution that rebalances on its own, offers cost-effective management fees, and diversifies with underlying funds.
It’s entirely up to you whether you decide to put all your money into an all-in-one ETF or to have it as a piece of your entire portfolio. If done correctly, it can be a nice addition to your overall investment strategy.
In the next segment, I’ll walk you through the different types of investment accounts you can open and how to assemble your stock market portfolio.
