Fidelity’s entrance into the one-ticket solution ETF space is great news for DIY investors looking to simplify their investment portfolios while saving on fees.
Popularly known as all-in-one ETFs, asset allocation ETF portfolios are designed to combine the benefits of traditional mutual funds and low-cost ETFs in one place.
Using the Fidelity All-in-One Balanced ETF (FBAL) as an example, investors enjoy:
- Potentially lower-cost portfolio management compared to mutual funds.
- Diversification across asset classes, sectors, and geographical locations
- Automatic and regular rebalancing by professional fund managers (hands-free investing)
- Choice of portfolio to match your risk tolerance and investment objectives
- Easy online ETF purchases and sales when the market is open and you have a brokerage account
This list of benefits is not exhaustive, but you probably get the idea.
Simply put, All-in-One ETFs offer a great balance between doing all the work yourself (i.e. rebalancing and asset allocation) to save cost and selecting individual securities.
This FBAL review covers its holdings, fees, returns, pros, cons, how to purchase Fidelity ETFs in Canada, and how it compares to FGRO.
Fidelity All-in-One ETF Portfolios
Fidelity Investments is a global investment company founded in 1946. Its Canadian operation as of September 30, 2021, has over $200 billion in assets under management and has served more than 1.5 million Canadians over the past 30 years.
Fidelity offers a variety of investment solutions, including two recently introduced All-in-One ETF portfolios:
- Fidelity All-in-One Balanced ETF (FBAL), and
- Fidelity All-in-One Growth ETF (FGRO)
What is FBAL?
The Fidelity All-in-One Balanced ETF is “designed for investors who are looking for long-term capital growth through a balanced approach”.
Using a neutral 60% equity to 40% fixed income securities target mix, investors get the benefit of both long-term growth and income stability over time.
The risk rating for FBAL is “low to medium”.
Some key facts about this fund as of September 24, 2021, are:
- Inception date: January 21, 2021
- Net assets: $16 million
- Management Expense Ratio (MER): 0.37%*, as of September 25, 2021
- Listing currency: CAD
- Eligible accounts: Registered and non-registered investment accounts
FBAL Asset Allocation
As its name suggests, FBAL is a fund of funds consisting of several underlying Fidelity ETFs.
It is rebalanced annually and whenever the ETF holdings deviate more than 5% from their target allocations.
As of June 30, 2021, the top-10 ETFs held by FBAL were:
|FBAL ETF Holdings||Allocation|
|Fidelity Systematic Canadian Bond Index ETF||29.24%|
|Fidelity U.S. High Quality Index ETF||7.76%|
|Fidelity U.S. Value Index ETF||7.75%|
|Fidelity U.S. Low Volatility Index ETF||7.61%|
|Fidelity U.S. Momentum Index ETF||7.43%|
|Fidelity Canadian Value Index ETF||3.89%|
|Fidelity Canadian Low Volatility Index ETF||3.86%|
|Fidelity Canadian High Quality Index ETF||3.85%|
|Fidelity Canadian Momentum Index ETF||3.75%|
|Fidelity International High Quality Index ETF||3.73%|
Overall, FBAL comprises 17 ETFs in various allocations.
Diversification involves exposing your portfolio to various companies, industry sectors, and geographical locations. This is to minimize the impact any one asset has on your overall portfolio performance when there is a market downturn.
Broad diversification can lower the overall risk profile of your investment portfolio.
FBAL is diversified across industry sectors as follows (as of June 30, 2021):
From a geographical diversification point of view, FBAL is globally diversified with market allocation as follows (as of June 30, 2021):
While historical returns do not guarantee future performance, it is always a good idea to see how a fund has performed over time.
FBAL is a brand-new fund and its returns information won’t be available until after one calendar year.
You could still get a sense of how a hypothetical FBAL portfolio would have fared by looking at the performance of its constituent ETFs, including FCUQ, FCCV, FCUL, FCMO, FCCL, etc.
Cash distributions for FBAL will be paid annually.
The MER for the fund was 0.37%* as of September 25, 2021.
There can be significant fee savings when you use a one-ticket solution ETF like FBAL.
Using Wealthsimple as an example for robo-advisors, you pay a 0.50% management fee when your asset balance is under $100,000. After adding an average of 0.20% ETF costs, you could pay a total fee of 0.70%.
As for mutual funds, their management fees can be as high as 1.98% per year (i.e. equity mutual funds).
When comparing fees between mutual funds and ETFs, it is also important to consider how much you are paying in brokerage commissions.
At up to $9.99 per trade, your trading fees can add up fast. That said, brokerages that offer commission-free ETF trades solve this problem.
Cons of FBAL
Earlier on, I touched on some of the many benefits offered by all-in-one ETFs like FBAL.
A few downsides to note are:
- It does not offer a 50:50 bond to stock split or higher. If you favour a conservative portfolio with a heavier weighting for fixed income assets, FBAL may not be for you.
- There are a few balanced asset allocation ETFs in Canada with slightly lower fees due to differences in underlying ETFs as they are passively managed. While past performance is not an indication of future results, active ETFs may outperform passively managed ETFs.
- It is not appropriate if you have a short-term investment horizon.
FBAL vs. FGRO
Fidelity’s All-in-One Growth ETF portfolio (FGRO) has a heavier equity component and is better suited for investors with low-to-medium risk tolerance.
A higher stock composition means the fund can experience more volatility depending on market conditions.
FGRO has a target allocation of 85% equity and 15% fixed income securities. As of June 30, 2021, the fund’s top-10 ETF investments were:
|FGRO ETF Holdings||Allocation|
|Fidelity U.S. High Quality Index ETF||10.90%|
|Fidelity U.S. Value Index ETF||10.88%|
|Fidelity Systematic Canadian Bond Index ETF||10.86%|
|Fidelity U.S. Low Volatility Index ETF||10.67%|
|Fidelity U.S. Momentum Index ETF||10.38%|
|Fidelity Canadian Value Index ETF||5.45%|
|Fidelity Canadian Low Volatility Index ETF||5.42%|
|Fidelity Canadian High Quality Index ETF||5.41%|
|Fidelity International High Quality Index ETF||5.27%|
|Fidelity International Momentum Index ETF||5.27%|
In total, FGRO consists of 16 Fidelity ETFs.
Compared to FBAL, FGRO has a slightly higher MER at 0.39%* as of September 25, 2021.
Both FBAL and FGRO have a low-to-medium risk rating.
How To Buy FBAL ETF in Canada
You can buy FBAL and other Fidelity ETFs through a financial advisor or by using an online brokerage account.
I have reviewed many of the top brokerage platforms in Canada including (in alphabetical order):
- BMO InvestorLine
- CIBC Investor’s Edge
- Desjardins Online Brokerage (Disnat)
- Interactive Brokers
- National Bank Direct Brokerage
- RBC Direct Investing
- Scotia iTrade
- TD Direct Investing
- Virtual Brokers
- Wealthsimple Trade
My review of FBAL is positive.
It is a one-ticket solution diversified across regions, market caps and investment styles/factors, with the benefits of professional management.
Also, FBAL is a low-cost solution, designed with built-in strategic asset allocation and consistent portfolio rebalancing.
If you are looking for a smart DIY alternative that cuts your fees and benefits from active management, an all-in-one ETF solution like FBAL can help.
You can further sweeten the deal by cutting your trading fees to the bone using a discount brokerage platform that offers free ETF trades.
This is a sponsored article by Fidelity.ca. All opinions are mine.
* The ETFs invest in underlying Fidelity ETFs that charge a direct management fee and as a result, the ETFs pay an indirect management fee based on the management fees of the underlying Fidelity ETFs. The actual effective, indirect management fee will vary based on the performance of each underlying Fidelity ETF and rebalancing events. Actual indirect management fees will be reflected in the management expense ratio (in addition to HST and expenses) of each ETF posted semi-annually.
Commissions, trailing commissions, management fees, brokerage fees and expenses may be associated with investments in ETFs. 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. The ETF/ETF Funds are sub-advised by Geode Capital Management, LLC. The ETFs are not sponsored, endorsed, sold or promoted by Fidelity Product Services LLC (“FPS”). FPS makes no representation regarding the advisability of investing in the ETFs.
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.
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, we 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.
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. A fund’s volatility is determined using a statistical measure called “standard deviation.” Standard deviation is a statistical measure of how much a return varies over an extended period of time. The more variable the returns, the larger the standard deviation. Investors may examine historical standard deviation in conjunction with historical returns to decide whether an investment’s volatility would have been acceptable given the returns it would have produced. A higher standard deviation indicates a wider dispersion of past returns and thus greater historical volatility. Standard deviation does not indicate how an investment actually performed, but it does indicate the volatility of its returns over time. Standard deviation is annualized. The returns used for this calculation are not load-adjusted. Standard deviation does not predict the future volatility of a fund.