The Best all-in-one Exchange Traded Funds

The Best all-in-one Exchange Traded Funds

What are some of the Best all-in-one Exchange Traded Funds (ETFs) to own?

How can some of these all-in-one ETFs make investing better for you?

Read on!

My investing approach

Passionate readers of this site will know I take a hybrid approach to investing.

I invest in a number of Canadian dividend paying stocks for long-term growth and income.

I also invest in some low-cost U.S. Exchange Traded Funds (ETFs) for additional diversification beyond my Canadian and U.S. stocks.

Yet for folks who might be new to investing or experienced investors striving to get out of high-priced funds (into lower cost but still diversified solutions) – navigating the ETF landscape can feel overwhelming.

Until now…these all-in-one Exchange Traded Funds are a game-changer!

First up, some reader comments and emails to me of late on this subject…

Hi Mark,

I know you like buying and holding Canadian banks, utility companies and more for income.  It seems to be a great way to invest but I have to be honest – doing so on my own seems overwhelming to a new investor like me.  What if I get it wrong and mess things up?  I’m thinking some of these new low-cost all-in-one ETFs might be right for me. Do you have any posts on these funds?

Hey Mark.

Love the site – what’s your take on Vanguard’s new all-in-one funds?  Do you think other companies are going to follow suit?

Hi Mark,
I’m a fan of the Vanguard all-in-one portfolios which I know you’ve covered before (VCNS, VBAL, VGRO). When they were launched, I was surprised they did not include an all-equity solution since it would help those who have taxable accounts but don’t want a fixed income drag there. Well, looks like they finally launched VEQT.

If you look at the total assets on Morningstar you will see VGRO’s $570.9bn exceeds VBAL ($392.0) and VCNS ($140.1) combined, so the market clearly favours a more aggressive tilt to these equity funds.

I wouldn’t encourage most investors to go 100% equity, for those looking for tax efficient allocations or who prefer not to have to rebalance a portfolio of individual ETFs (leading to market timing) I think the all in one funds are a great idea, and in my view, might even replace some advisor services.  Thoughts?  Maybe your take on these funds?

Great emails and great questions.  Keep them coming!

In previous posts on my site I’ve discussed how many ETFs are enough. 

Hint: only a handful are really required at best. 

Well, given the new wave all-in-one funds the answer might be:  just one.

There is beauty in simplicity – why all-in-one Exchange Traded Funds work!

Essentially, other than making regular investment contributions into these products within your accounts, these one-fund solutions do all the work for you.

• You no longer need to worry about getting fleeced on fees by your financial advisor.  You’ll see below that these funds have very low management costs.
• You no longer need to worry about portfolio re-balancing. These funds are designed to keep a particular asset allocation for you.
• You no longer need to worry about asset location – what funds to put where and why. These funds are designed to be held in registered accounts (RRSP, TFSA, RESP, RRIF, and more) and non-registered accounts alike, although some funds might be a bit more tax efficient than others.  Don’t sweat that stuff anyhow!
• You no longer need to fret about your risk tolerance or think about market timing. This is because the fund’s regular re-balancing act (for you) I mentioned above will keep your desired risk level in line with your investing goals.
• You no longer have to worry about your diversification. For some of these funds, you can obtain broad global and fixed income exposure to reduce investment risk while increasing your long-term return potential.

Let’s take a quick look at each all-in-one fund and see why each product can be a great, simple, solution for your investing needs.

Vanguard all-in-one ETF solutions

Vanguard has always been a low-cost investing leader – and they’ve done it again with their one-fund solutions. 

(All images from Vanguard Canada’s site current at time of this post.)

VCIP

• Lots of bonds (80%) and very little stocks (20%) – great for very conservative investors who don’t care to expose themselves to most stock market risks. 
• A good fund to own if you have the need for cash sooner than later (e.g., your child is pursuing post-secondary education in another year or so – think RESPs – the fund has mostly fixed income).

VCNS

• VCNS holds 60% bonds, 40% stocks – a solid product for conservative investors.

VBAL

• A “traditional” balanced fund – 60% stocks, 40% fixed income – long-term investing to weather any markets – up or down.

VGRO

• A great product for younger investors with a multi-decade investing horizon – holds 80% stocks, 20% bonds – so investors can take advantage of long-term equity growth from companies and countries from around the world.
• Could be a  great “set and forget” product for TFSA and RRSP for any 20- or 30-something. 

VEQT

• 100% equity, an aggressive fund, great for investors who might have a workplace pension and/or other fixed income assets who might wish to ride stock market returns from around the world while avoiding portfolio re-balancing on their own.

iShares all-in-one ETF solutions

These XBAL and XGRO iShares funds are designed to compete with VBAL and VGRO above.

(All images from iShares Canada’s site current at time of this post.)

XBAL

• A fund of 8 iShares funds.
• Management fee of 0.18%.
• Designed as “traditional” balanced fund of ~ 60% stocks, 40% fixed income.
• Distribution yield >3%.
• At the time of this post, returns ~7.38% over a 10-year investing horizon (including old fund history).

XGRO

• A many iShares funds; with a higher weighting to equities vs. XBAL.
• Management fee of 0.18%.
• Designed as a more aggressive mix of stocks and bonds (80% stocks, 20% bonds) – for long-term equity growth from markets around the world.
• Distribution yield ~ 2.5%
• At the time of this post, returns >8% over a 10-year investing horizon (including old fund history).

XEQT

• One of my favourite funds because it has a lower Canadian exposure than VEQT.
• A fund of 4 iShares funds with some cash.
• A lower management fee than VEQT of 0.18%.
• 100% equities.
• Quarterly distributions with yield ~ 1.5%.
• At the time of this post, returns since inception approaching 7%.

Need an ex-Canada all-in-one equity solution? Look at XAW

XAW

• Invest beyond Canada’s boarders to own companies from around the world. 
• Easy, simple global portfolio diversification.
• Low-cost way to own U.S., international and emerging market stocks.
• A low management expense ratio of 0.22%
• 100% equities.
• Quarterly distributions with yield > 1.5%.
• Disclosure: I own this fund.

BMO all-in-one ETF solutions

Not to be outdone…Bank of Montreal (BMO) has three risk-based asset allocation ETFs to challenge the Vanguard and iShares funds above. 

(All images from BMO’s site current at time of this post.)

ZCON

• A fund of 7 BMO funds and cash.
• Management fee of 0.18%.
• A conservative fund that targets exposure of 60% fixed income and 40% equity.

ZBAL

• Another fund of 7 BMO funds and cash.
• Management fee of 0.18%.
• A more aggressive fund for growth that targets exposure of 60% equity and 40% fixed income.

ZGRO

• Another fund of 7 BMO funds and cash.
• Management fee of 0.18%
• A growth-oriented fund designed to take advantage of an investors’ long-term holding objectives; 80% equity and 20% fixed income.

Horizons all-in-one ETF solutions

And finally, let’s bring in Horizons funds. 

Marketed as their “family of TRI Portfolio ETFs” to “help take the guesswork out of building an index ETF portfolio” – these are absolutely ones to consider. Better than potentially the products above, these TRI ETFs are tax-efficient and can offer after-tax benefits if held in taxable or non-registered accounts.

Let’s have a look at their key funds.

(All images current at the time of this post.)

Horizons Conservative TRI ETF Portfolio (HCON)

• HCON invests primarily in Horizons Total Return Index ETFs* (“Horizons TRI ETFs”). The portfolio targets a long-term asset allocation of approximately 50% equity securities and 50% fixed income securities at the time of any rebalance. The portfolio will be rebalanced semi-annually.
• Because of this asset balance, this fund is for the conservative investor I believe.

Horizons Balanced TRI ETF Portfolio (HBAL)

• HBAL is designed to compete in the same ballpark as VBAL, XBAL and ZBAL.
• It provides a one-ticket-ETF solution that targets a long-term asset allocation of approximately 70% equity securities and 30% fixed income securities, and rebalances semi-annually as well.

Horizons Growth TRI ETF Portfolio (HGRO)

• Despite the “GRO” name, HGRO is a 100% equity product.
• This fund seeks long-term capital growth using a portfolio of primarily equity-focused total return index exchange traded funds. 
• This product could be a game-changer in that like other “TRI” ETF funds, this is a corporate class fund structure for HGRO. So, taxable distributions are not anticipated. Instead, distributions compound and lead to tax-deferral benefits until the asset is sold. Something to consider for non-registered investing for sure…

Best all-in-one ETFs summary

As a passionate buy-and-holder of many Canadian and U.S. dividend paying stocks, as well as a couple of low-cost U.S. ETFs – I’m not quite ready to switch to an all-in-one fund for my entire portfolio.

Yet.

These choices are however very compelling to me; I might eventually re-think how I’m investing especially beyond Canada’s borders including in a taxable account.

Amongst all of them, I’m a big fan of 100% equity funds above since I have a big bond in my portfolio already. That means I would have a bias to owning HGRO, XEQT, VEQT or XAW for most of my portfolio. If I ever decide to move away from my basket of Canadian dividend paying stocks or U.S. stocks for income, those are the asset allocation funds I would gravitate to.

To invest in equity-only ETFs or high-growth ETFs you’ll need to become an investor who has learned to live with stocks.

For others that might not have the same tolerance for investing risk, I would consider a “BAL” fund or a more balanced 60/40 fund. 

If you’re a new investor, tired of paying pricey mutual fund fees without any professional, unbiased advice for your financial plan, it might be time to switch into any one of these funds. You can own one of these funds by opening any self-directed RRSP, TFSA, or other registered account at one of the many discount brokerage that exist in Canada.  In doing so, you’ll undoubtedly keep more of your hard-earned money and you will likely earn better returns over time.

Here is my primer on self-directed investing 101.

In fact, if you decide to become a self-directed investor I can save you BIG bucks with my partnership with BMO here.

If you’re an experienced investor, it might also be time to switch into an all-in-one ETF anyhow.

While you can use a few individual ETFs to be more tax-efficient across your portfolio (e.g., by putting Canadian equity ETFs in your TFSA; by putting U.S. equity ETFs in your RRSP or LIRA) – see why here – using one ETF to rule them all can be an easy, diversified, low-cost way to invest without any re-balancing effort.

Invest regularly and stay the course.

With new all-in-one ETFs investing might not get much better or easier than this.

What’s your take on the wave of new all-in-one ETFs?  Fan?  Not so much?  Tell me (and others) in a comment!