Why You Should Consider an All-in-One ETF

All-in-One ETFs are changing the investment landscape for the better.

These asset allocation funds amplify the benefits of individual ETFs (i.e. diversification and lower fees), while also being convenient to buy and maintain or rebalance.

If you were looking to invest a few years ago, your top choices were limited to using mutual funds or a self-directed brokerage account to buy individual stocks and ETFs.

Alternatively, you could opt to build your portfolio by picking individual stocks/bonds.

While this option removes the need to pay some fees, you become responsible for deciding and maintaining an appropriate asset allocation.

And, depending on your trading platform and trading activity, trading commissions could pile up.

Lastly, you could DIY invest using individual ETFs. This is a great option; however, it does not spare you the need to manually rebalance your portfolio a few times per year.

Benefits of All-in-One ETFs

All-in-One ETFs provide many of the benefits offered by the investment strategies mentioned above and some others.

1. Convenience

ETFs are easy to buy online using a brokerage account.

Like stocks, ETFs trade on an exchange with prices fluctuating throughout the trading day. You can place different types of orders to determine how much you pay per unit of ETF.

With the advent of commission-free trading platforms, you can even invest small amounts on a regular basis and not worry about racking up trading fees.

2. Diversified Portfolios

An important benefit of All-in-One ETFs is that they provide built-in diversification.

For instance, the Fidelity All-in-One Balanced ETF (FBAL) comprises 14 ETFs that are made up of over a thousand stocks and ETFs.

This type of diversification is challenging (if not practically impossible) to achieve on your own if you are picking stocks.

Diversification is a risk management strategy that aims to limit the downside risks posed by over-concentration in any one investment asset, industry, or category.

By investing in a mix of stocks and bonds across sectors and countries, an asset allocation ETF like FBAL could lower your investment risk.

3. Lower Fees

In the long-run, high fees can become a drag on your overall returns when there isn’t a commensurate return to offset your increased costs.

Using Fidelity’s All-in-One Growth ETF (FGRO) as an example, the indirect management fee was 0.37% as of November 10, 2021.

Compared to 2% or more on some mutual funds, All-in-One ETFs are a low-cost investment solution.

4. Automatic Rebalancing

Couch-potato investors who have built investment portfolios using several ETFs may want to rebalance their portfolios at some point.

Rebalancing is required because investments perform differently based on market conditions, and over time, your asset allocation will stray from your preferred targets.

For example, let us assume that your desired portfolio allocation is 60/40 (equities/fixed income). After a while, your equity holdings may do better than bonds, resulting in a heavier tilt towards stocks.

In order to keep your portfolio “balanced”, you will need to either sell some stocks to buy bonds or simply buy more bonds by adding new funds.

This process is referred to as rebalancing and some investors may find it tedious.

All-in-One ETFs automatically rebalance annually and at other designated times, so you don’t have to worry about manual rebalancing at all.

5. Professional Management

The average investor may benefit from having professionals manage their investment portfolio.

While some All-in-One ETFs are passively managed, others, like Fidelity’s All-in-One ETFs, use active investment strategies to potentially improve performance over time.

Types of All-in-One ETFs

Another benefit of All-in-One ETFs is that they are designed with specific investor profiles in mind.

When choosing or designing an investment portfolio, you must consider how it matches your investment goals, risk tolerance, and the time you have to invest.

Completing an investor risk profile questionnaire can help you determine the type of portfolio that is best suited for your needs.

All-in-One ETFs are available for the following risk profiles:

Conservative portfolios: This is designed for investors who have a low appetite for risk and want to preserve their capital while enjoying modest income and growth. A conservative ETF portfolio comprises mainly fixed income assets (~80%) and some stocks (~20%).

Balanced portfolios: This portfolio takes on a higher level of risk than a conservative portfolio by investing in more stocks (~60%) than fixed-income assets (~40%). In return, investors can expect long-term capital growth while enduring some volatility.

An example of a balanced ETF portfolio is FBAL.

Growth portfolios: Designed for investors with a higher risk appetite and long-term investment horizon, a growth ETF portfolio consists of mainly stocks (80% to 100%).

This portfolio can experience more fluctuations in value compared to conservative or balanced ETF portfolios.

An example of a growth ETF portfolio is FGRO.

Here is a step-by-step guide on how to buy Fidelity ETFs in Canada.

Conclusion

All-in-One ETFs are now my favourite investment funds.

While there may be some additional fee savings from holding several individual ETFs, rebalancing them 1-2 times a year involves work.

And, for me, having to manually rebalance also exposes me to all kinds of biases including inadvertently trying to time the market.

All-in-One ETFs simplify the investment process by providing automatic rebalancing and global diversification.

This article was sponsored by Fidelity. All opinions are mine.

Commissions, trailing commissions, management fees, brokerage fees and expenses may be associated with investments in ETFs. Fidelity’s All-in-One ETFs pay indirect management fees through their investments in underlying Fidelity ETFs that pay management fees and incur trading expenses. Please read the ETF’s prospectus, which contains detailed investment information, before investing. ETFs are not guaranteed. Their values change frequently, and investors may experience a gain or a loss. Past performance may not be repeated.

Regulatory restrictions prohibit the presentation of performance data for funds with a history of less than one year.

While the ETFs are typically managed to the neutral mix constraints indicated, the funds may deviate from it.

Please read the ETF’s prospectus, which contains detailed investment information.

The investment risk level indicated is required to be determined in accordance with the Canadian Securities Administrators standardized risk classification methodology, which is based on the historical volatility of a fund, as measured by the ten-year annualized standard deviation of the returns of a fund or those of a reference index, in the case of a new fund.

The statements contained herein are based on information believed to be reliable and are provided for information purposes only. Where such information is based in whole or in part on information provided by third parties, Fidelity cannot guarantee that it is accurate, complete or current at all times. It does not provide investment, tax or legal advice, and is not an offer or solicitation to buy. Particular investment strategies should be evaluated according to an investor’s investment objectives and tolerance for risk. Fidelity Investments Canada ULC and its affiliates and related entities are not liable for any errors or omissions in the information or for any loss or damage suffered.

Certain statements in this commentary may contain forward-looking statements (“FLS”) that are predictive in nature and may include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar forward-looking expressions or negative versions thereof. FLS are based on current expectations and projections about future general economic, political and relevant market factors, such as interest, and assuming no changes to applicable tax or other laws or government regulation. Expectations and projections about future events are inherently subject to, among other things, risks and uncertainties, some of which may be unforeseeable and, accordingly, may prove to be incorrect at a future date. FLS are not guarantees of future performance, and actual events could differ materially from those expressed or implied in any FLS. A number of important factors can contribute to these digressions, including, but not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition and catastrophic events. You should avoid placing any undue reliance on FLS. Further, there is no specific intention of updating any FLS, whether as a result of new information, future events or otherwise.

Best Investment Offers This month

Get a cash bonus and FREE stock and ETF trades ($25 bonus)

Best commission-free stock and ETF trading platform in Canada.

$0 trading commissions for thousands of investment products.

$25 cash bonus when you deposit $150 or more in your account.

Transfer fees waived up to $150 when you transfer eligible assets from other brokerages.

Get a FREE chequing account and a *$350 cash bonus*

Unlimited free debits and Interac e-Transfer transactions.

No monthly account or transaction fees.

$350 cash bonus when you set up eligible direct deposit for 3 months.

No monthly or minimum balance is required.

Overall best crypto exchange in Canada + $50 bonus

Crypto trading platform for beginners and advanced traders.

Low trading fees at 0.20% and multiple fiat currencies supported.

Trade 16 popular cryptocurrencies.

$50 instant bonus when you deposit $200.

Get $50 in FREE trades or invest $10,000 FREE for 1 year

Offers self-directed and professionally managed portfolios.

No trading commissions on ETF purchases.

Low fees to buy stocks starting at $4.95 per transaction.

Free transfers from other banks and $0 inactivity fees.

Retirement 101 eBook - 3D

Author

Photo of author
Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. He has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

2 thoughts on “Why You Should Consider an All-in-One ETF”

  1. Hello, I am trying to decide on how to invest $700,000.00 I am taking care of my Mother’s Estate. Initially I went to CIBC to inquire about investing, however I have found that it doesn’t look like the right direction to go given there fees….I am a Novice when it comes to investing. I live in Victoria, B.C…. I am interested in your thoughts. Thanks, Joseph

    • @Joseph: I think you will benefit more by working with a fee-only financial advisor so they can give look at your overall financial picture and give you a holistic strategy for investing the funds. It’s important to cut investment fees, however, other factors also come into play such as how long the money will be invested, your risk tolerance, and the type of returns you are expecting.

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

4 Shares
Share
Pin
Tweet
WhatsApp
Reddit