Investing

The Best ETFs: All-in-one ETF Investment Solutions

So when I think about the “BEST ETF” for investors, I honestly struggle to think there is such a thing.  So then I started thinking about what characteristics would be important to evaluate what could be the Best ETF and I came up with low fees, broad mandates and a solution that makes it really simple for investors. Investing may not be easy but there are solutions that help make investing simple.  One of the newer solutions being offered in the ETF industry are the All-in-one ETF investments.  Personally, I have grown to become a fan of these solutions and as a result, have shifted quite a bit of my portfolio to these cost-effective All-in-one ETF options.  Could they be considered the Best ETF investment?  You can be the judge of that.

Simple Investing Solutions for investors

In the mutual fund industry, there are funds called balanced funds or asset allocation funds or portfolio funds that try to make investing easy and simple.  They will mix and match different asset classes to try to create “optimal” investment portfolios to take the work or effort of building and managing a portfolio for you off your shoulders.  Typically, these mutual funds will automatically rebalance the portfolio from time to time so that investors can essentially invest, sit back and relax.  Typically you will see 3 to 5 asset allocation or portfolio options.  A 5-option series might look something like this:
    • Conservative Portfolio Fund – 80% fixed income and 20% exposure to stock
    • Moderate Portfolio Fund – 60% fixed income and 40% exposure to stocks 
    • Balanced Portfolio Fund – 40% fixed income and 60% exposure to stocks
    • Growth Portfolio Fund – 20% fixed income and 80% exposure to stocks
    • Aggressive Portfolio Fund – 100% exposure to stocks
Some financial institutions prefer a 3-option series which might look like this:
    • Conservative
    • Balanced
    • Growth
Different companies might come up with slightly different names but essentially, these are very common standards in the investment industry.
 
For Do-it-yourself investors (DIY), building, managing and rebalancing a portfolio with lower cost Exchange Traded Funds (ETFs) instead of mutual funds are great alternatives.  As ETFs gain popularity and market share, better trading platforms like Questrade allow investors to buy and sell ETFs easier.  I would put myself into this category as I moved from mutual funds into ETFs back in 2012.
 
Lots of investors like the idea of lower costs and fees but going on their own can be a little intimidating.  Robo-Advisors entered the picture.  These Robo-Advisors claim to do everything the mutual fund industry is doing but instead of building portfolios with expensive mutual funds, they use passive index ETFs which can lower fees by a lot.  Robo-advisors manage portfolios for about 0.5% fees compared to mutual funds running at 2.0% to 2.5% fees.  Robo-advisors leverage on technology to make it easy for investors to not only buy managed ETF portfolios but also to make it easy to sign up and create accounts to make investing simple and easy.
 
 
Robo-advisors will typically run with similar categories like Conservative, Balanced, and Growth portfolios but they also have more specialized portfolio options including options for Socially Responsible investors and Income oriented portfolios for retirees.
 

What is an All-in-one ETF?

It took a while, but the ETF industry did not want to miss out on not only the fun but more importantly the opportunity to help investors make investing easy and simple.  All-in-one ETFs do exactly that . . . they make investing easy and keep costs really low.  Basically, with an all-in-one ETF you buy one investment that mixes and matches different low-cost ETFs so you don’t have to worry about building, managing or tracking anything.  Essentially, it’s a portfolio that invests in a bunch of passive low-cost ETFs for you.  One investment, one ETF does it all for you. Does that sound appealing to you?
 

What are the All-in-one ETF choices?

So in the Canadian ETF industry, I would say there are 3 big players: 
Collectively, these 3 players have over 70% of the total market share of the ETF industry in Canada.  Horizons ETFs would probably get an honourable mention outside of the big top 3.
 
All three of these dominant players in the ETF industry offer All-in-one ETFs.  Here’s what each of these companies has to offer in the All-in-one ETF category:
 
Blackrock/ishares
Blackrock/ishares has 5 mainstream all-in-one ETF options in their CORE series:
    • iShares Core Conservative Balanced ETF (XCNS)
    • iShares Core Balanced ETF (XBAL)
    • iShares Core Growth ETF (XGRO)
    • iShares Core Equity ETF (XEQT)
    • iShares Core Income Balanced ETF (XINC)
In a partnership with RBC, they also have 4 Environmental, Social Governance (ESG) Portfolios for those looking for more socially responsible options in the All-in-one ETF category
 
BMO
BMO has only 4 mainstream all-in-one ETFs
    • BMO Conservative (ZCON)
    • BMO Balanced (ZBAL)
    • BMO Growth (ZGRO)
    • BMO Monthly Income (ZMI)
BMO does not have an all-equity option but they have one Environmental, Social, Governance ETF which is the BMO ESG Balanced (ZESG)
 
Vanguard Canada
Vanguard is similar to Blackrock/iShares in that they have 5 All-in-one ETFs
    • Vanguard Conservative ETF Portfolio (VCNS)
    • Vanguard Balanced ETF Portfolio (VBAL)
    • Vanguard Growth ETF Portfolio (VGRO)
    • Vanguard All-Equity ETF Portfolio (VEQT)
    • Vanguard Conservative Income Portfolio (VCIP)
Vanguard Canada does not have ESG options for their All-in-one ETF options.  They do have an All-in-one ETF designed for RRIFs
    • Vanguard Retirement Income ETF Portfolio (VRIF)

Here’s a quick chart to summarize the different offerings by each company

 VanguardBlackrock/iSharesBMO
Conservative (40/60)VCNSXCNSZCON
Balanced (60/40)VBALXBALZBAL
Growth (80/20)VGROXGROZGRO
All Equity (100/0)VEQTXEQT
IncomeVRIF or VCIPXINCZMI

How to choose the right All-in-one ETF?

 
The first step is to choose the right category for your needs, risk tolerance and time horizon.  
    • Conservative
        • More conservative investors would likely deviate towards this option
        • It will invest 40% towards equities (stocks or markets) and 60% in fixed income (Bonds or cash)
    • Balanced
        • These portfolios will increase the equity exposure to 60% and accordingly reduce the fixed income exposure to 40%
        • This 60/40 split is very common and very popular in the investment industry.  Many large institutional pools have traditionally targeted this allocation
    • Growth
        • These portfolios will increase the equity exposure to 80% and therefore only 20% allocation to fixed income
        • These portfolios will appeal to investors have longer time frames that can accept more short term volatility
    • All Equity
        • These portfolios will have 100% exposure and no fixed income.
        • BMO Does not have an option in this category
    • Income
        • These portfolios are designed for investors who are looking for monthly distribution options
In choosing the category, remember that you don’t have to choose just one single option.  For example, if you put 50% into the Conservative category and then 50% into the Balanced category, your resulting mix or allocation would be 50% equities and 50% fixed income
 
The next step is to choose the specific investment within that category.
 
For example, if you are planning to invest in a Balanced Portfolio, the next decision is to choose between VBAL, ZBAL or XBAL?  How do you choose?
 
There will be lots of different opinions on this so I will simply share my opinion.  For the most part, personally feel like all these options are extremely similar and therefore will have a high correlation to each other.  Here are some key data points to consider for each category:
 1 year return (2020)MERDistributionDistribution yield
VCNS7.72%0.22%Quarterly2.11%
ZCON8.18%0.20%Quarterly2.60%
XCNS8.79%0.20%Quarterly1.96%
 1 year return (2020)MERDistributionDistribution yield
VBAL8.49%0.22%Quarterly2.01%
ZBAL8.72%0.20%Quarterly2.56%
XBAL8.88%0.20%Quarterly1.62%
 1 year return (2020)MERDistributionDistribution yield
VGRO9.04%0.22%Quarterly1.93%
ZGRO9.18%0.20%Quarterly2.52%
XGRO9.53%0.20%Quarterly1.40%
 
Here’s a few of my observations:
    • All these ETFs do not have a long track record.
    • performance is very similar
    • fees are very similar
    • distributions are very similar.
For me, when I look at these options, they are basically similar and choosing one over another is really not significant.  If I had to choose one, I would probably go with the iShares only because the fees are slightly lower and the returns have been slightly higher.  I also know that past returns are no indication of future returns and that down the road Vanguard or BMO could easily outperform iShares in different periods of time.  In the end, they are highly correlated so it should not matter.  I will revisit this analysis when there is a longer track record.
 

How to buy All-in-one-ETFs?

In order to buy these All-in-one ETFs, you need to have a trading account.  All the major banks have trading accounts like the RBC Direct trading, TD Direct Investing, CIBC Investors Edge, Scotia iTrade and BMO InvestorLine.   
 
Personally, I use Questrade and have done so from the start of investing in ETFs.  They offer super low fees and there are no transaction fees to buy ETFs.  Other trading platforms include Qtrade, Virtual Brokers and Wealthsimple has come out with their new Wealthsimple Trade platform
 
 

Who should invest in All-in-one ETFs?

The all-in-one ETF category is a real breath of fresh air for a lot of people as it has a broad appeal to investors of all kinds:
    • New investors looking to get into the ETF world seeking lower fees and keep the management of a portfolio really simple
    • I meet lots of people with mutual funds that hear about the high fee they are paying but really are not sure how to invest in low-cost ETFs
    • I also have met lots of DIY investors that employ the “Wing-it” strategy who buy a little of this and a little of that with no big picture perspective
    • Lastly, I see some DIY ETF investors that use the All-in-one ETFs as a core and explore strategy (read below)

Three examples of how to use All-in-one ETFs

 
  1. Jake’s inheritance.  Jake is 35 years old and received an inheritance.  He has his RRSPs in a Group plan with his employer and some TFSAs at Questrade invested in a few stocks.  Some are doing well and others are not.  Because the inheritance is significant, he does not really want to manage a stock portfolio so the idea of an All-in-one ETF is pretty appealing to him.  He decides to put half the money in XGRO and half in XBAL giving him an asset allocation of 70% stocks and 30% fixed income.
  2. Sarah is tired of paying high fees with her financial advisor.  Sarah is 49 years old and is starting to think about retirement.  She has all her money with a financial advisor invested in mutual funds but her sister has been educating her on the high fees she is paying.  Sarah has been doing a bit of research.  She likes the idea of lower fees but she is really not interested in managing the portfolio herself.  She really likes the simplicity of an All-in-one ETF and decides to put all her money into the VBAL ETF.  She really likes that the fees are one-tenth of what she is paying with mutual funds.
  3. Roger and Beth sell a property.  Roger and Beth came into a lump sum of money in mid-2020 in the heart of the COVID Pandemic after selling one of their rental properties.  Roger is retired and has been managing his own RRIF using the VRIF (All-in-one ETF with Vanguard designed for RRIF investors).  He wanted to put the new money to work but Beth was super nervous and was unsure about how COVID would affect the markets, the economy, finances of people, businesses and government.  Roger decided to invest in the conservative All-in-one ETF with iShares (XCNS) so that the money was at least working but 60% of it was still relatively safe.  If the markets go up, he will participate in the growth.  If the markets go down, he plans to use it as a buying opportunity and move into a higher equity exposure through XBAL or XGRO.
 
 

Final thoughts and how I use All-in-one ETFs (CORE and EXPLORE strategy)

 
Personally, I have started using All-in-one ETFs in my own portfolios.  I started making some changes in early 2020 by adding all-in-one ETFs to all three of my investment accounts (RRSP, TFSA and non-Reg).  I have a significant holding of VGRO in my TFSA (50%).  My wife is more conservative and has her entire TFSA invested in XBAL.  I have all three conservative portfolios (XCNS, VCNS and ZCON) in my non-RRSP.  I invested in all three just to be able to compare them with real money and real performance.
 
Related article:  My portfolio of ETFs
 
I plan to continue using All-in-one ETFs with a CORE and EXPLORE approach.  The most significant part of each portfolio will be the ‘core’ amount which will be 50% to 80% of the money in all-in-one ETFs.  With the rest of the money, I can take an EXPLORE approach.  For example, I own some GOLD (CGL), REITs (ZRE) and a couple of individual stocks as part of my ‘explore’ money.  
 
 
I share with you my strategy not because I want to convince you that it’s the best strategy but simply to show you the confidence that I have in these All-in-one ETFs.  Remember, every investor is different and you should invest your money how you see fit.

Comments

  1. Dave Marecek

    Jim

    Good article, I have used Purpose PIN for many years as an all in one ETF. As you talk about RRSP and TFSA in your other article, these all in one make sense as there is no tax liability.

    However in a non registered acct, these all in one can get you into lots of troubles, starting with taxable income, and non canadian dividends. then throw on foreign with holding taxes.

    I sense that a stronger statement that these work well in registered, but you really need to unpack them for non registered would be helpful to readers.

  2. Joey

    Hi Jim, great post, as always. Would the all-in-one investment ETFs (XBAL, XGRO, etc.) make sense for a sizeable taxable portfolio (1M+), where one would want to be hands-off yet still keep the management fees down? Many thanks

  3. Ian Babey

    Thanks for the article Jim. My kids are just starting investing and this is a great primer.
    As for myself, what would you recommend if I have no tax/rrsp/spousal rrsp room?

  4. Bob

    1) Is investing in all in one ETF really any better than just buying a canadian bank stock?
    We do have ETF’s (BMO ZWB ZWC ZWU) and only the bank ZWB we would say is a good dividend producer over just bank stock.
    2) With the government present agenda (not sure what they are doing) is fiat money going to be devalued by excess spending? This devaluing of currency will kill our retirement savings purchasing power. What real tangible asset can be considered to transfer too?
    Property seems to be risky with government looking for more tax money?

  5. Allison

    Hi There,
    I also use Questrade for my kids’ RESPs and have all the funds in VGRO. I have autodeposit set-up for bi-weekly contributions and the cash sits there until I go in and buy the ETF. Is there a way on Questrade to make auto purchases of an ETF with each deposit?
    Thanks!

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