A balanced portfolio consists of stocks and bonds in a 50:50 or 60:40 ratio with the aim of balancing the risk you are taking with your expected returns.
Balanced portfolios such as the iShares Core Balanced ETF portfolio (XBAL) suit investors who have a moderate risk tolerance and offer capital preservation and lower volatility when stock market turbulence occurs.
This is not to say that you can’t lose money with a balanced strategy. However, compared to growth or aggressive all-stock portfolios (e.g. VGRO), you may experience milder ups and downs.
If you are a newbie investor, are close to retirement, or hate to see fluctuations in your investment account, a balanced portfolio may work for you.
Unlike traditional individual ETFs, all-in-one ETF portfolios offer one-stop diversification and do not require manual rebalancing.
This XBAL review covers what you need to know about its holdings, pros and cons, fees, how to buy it in Canada, and how it compares to VBAL.
What is XBAL?
XBAL is iShares’ balanced ETF portfolio designed to “provide long-term capital growth and income…”
It has a low-medium risk rating and aims for a 60% stock to 40% bonds asset allocation.
Comparable asset allocation ETFs offered by other ETF provides are the Vanguard Balanced ETF Portfolio (VBAL) and BMO’s Balanced ETF (ZBAL).
Key fund facts for XBAL as of November 20, 2020, are:
- Net assets: $427,544,218
- Management fee: 0.18%
- Management Expense Ratio: 0.20%
- Number of holdings (funds): 8
- Underlying holdings (stocks and bonds): 18,279
- Distribution yield: 1.64%
- 12-month trailing yield: 2.04%
- Eligible accounts: Registered and non-registered
- Frequency of rebalancing: Quarterly
XBAL is made up of 8 other iShares ETF funds. As of November 20, 2020, it is exposed to 62.02% equity; 37.62% fixed income, and 0.36% cash and cash equivalents.
The ETF holdings are:
|XBAL ETF Holdings||Allocation|
|iShares Core S&P Total U.S. Stock (ITOT)||28.92%|
|ISHS Core CAD UNIV BND IDX ETF (XBB)||24.00%|
|iShares MSCI EAFE IMI Index (XEF)||15.04%|
|iShares S&P/TSX Capped Composite (XIC)||14.84%|
|iShares Core CAD ST Cor Bd Index (XSH)||6.25%|
|iShares Broad USD Investment G||3.77%|
|iShares US Treasury Bond ETF (GOVT)||3.60%|
|iShares Core MSCI Emerging Markets||3.21%|
The top-10 equity holdings as of Dec 16, 2020, are dominated by companies in the IT, Financials, Industrials, Energy, and Discretionary Consumer sectors.
How has XBAL fared since it was launched in 2007?
It should be noted that the fund initially existed as the iShares Balanced Income Core Portfolio Index ETF (CBD) and only became XBAL in December 2018.
After the fund’s name was changed, its management fee was reduced, and its investment objectives were updated.
That is to say, the long term returns of CBD may not fully reflect what to expect with XBAL.
The numbers as of November 30, 2020, are:
XBAL has a low annual management fee of 0.18%, and total Management Expense Ratio of 0.20%. This is equivalent to $2 in fees per $1,000 in investment assets.
Self-directed investors can save money in fess, and thus improve their investment returns over time. That said, you should watch out for expensive trading fees, especially if you make frequent small trades.
One option for lowering your fees is by using a no-commission broker such as Wealthsimple Trade.
You can also make free purchases of ETFs on Questrade, however, trading commissions apply when you put in a “sell” order.
Other brokerage platforms you can consider include:
Pros and Cons of XBAL
A balanced portfolio is designed to cater to investors with average risk tolerance. XBAL holds both stocks and bonds and is diversified on a global basis.
Investors using XBAL don’t have to worry about rebalancing as it is done automatically every quarter.
Compared to VBAL, XBAL has a lower MER of 0.20%, compared to 0.25%.
Compared to a traditional mutual fund that can charge up to 2% in fees per year, XBAL is a lot cheaper.
Investors who seek a 50:50 equity to fixed income asset allocation won’t get that with XBAL, and may have to consider the 60:40 (bonds: stocks) XCNS instead.
Lastly, if you don’t mind rebalancing yourself, you could save a few basis points in fees by using individual ETFs to create your desired portfolio.
XBAL vs. VBAL vs. ZBAL
The Vanguard Balanced ETF (VBAL) and BMO Balanced ETF (ZBAL) portfolios are similar in their investment objectives and asset allocation.
As of October 31, 2020, VBAL was made up of 59.48% stocks; 40.46% bonds and 0.06% cash.
Its underlying funds were:
|VBAL ETF Holdings||Allocation|
|Vanguard US Total Market Index ETF||24.80%|
|Vanguard Canadian Aggregate Bond Index ETF||23.80%|
|Vanguard FTSE Canada All Cap Index ETF||17.40%|
|Vanguard FTSE Developed All Cap ex North America Index ETF||12.40%|
|Vanguard Global ex-US Aggregate Bond Index ETD CAD-hedged||9.40%|
|Vanguard US Aggregate Bond Index ETF CAD-hedge||7.30%|
|Vanguard FTSE Emerging Markets All Cap Index ETF||4.90%|
VBAL holds less U.S. equities than XBAL (24.80% vs. 28.92%) and has a higher allocation to Canadian equities (17.40% vs. 14.84%).
VBAL has a 0.25% MER compared to 0.20% MER for XBAL.
As of November 20, 2020, ZBAL was made up of 62.55% stocks, 37.38% fixed income, and 0.07% cash.
Its underlying funds were:
|ZBAL ETF Holdings||Allocation|
|BMO S&P 500 Index ETF||28.01%|
|BMO Aggregate Bond Index ETF||26.14%|
|BMO S&P/TSX Capped Composite Index ETF||15.48%|
|BMO MSCI EAFE Index ETF||12.88%|
|BMO Government Bond Index ETF||7.42%|
|BMO MSCI Emerging Markets Index ETF||6.18%|
|BMO Mid-Term US IG Corporate Bond Hedged to CAD Index ETF||3.81%|
ZBAL has a slightly lower stake in U.S. equities compared to XBAL (28.01% vs. 28.92%). It held more Canadian equities (15.48% vs. 14.84%), and international equities (19.06 vs. 18.25%).
Allocations are not set in stone and will fluctuate based on the market performance of an index and when the portfolio is rebalanced.
Similar to XBAL, the annual management fee for ZBAL is 0.18%, while its MER is 0.20%.
How To Buy XBAL in Canada
You can easily purchase XBAL in Canada using an online discount brokerage account and our top option for saving on fees is Wealthsimple Trade.
Wealthsimple Trade: This no-commission broker offers free trading in thousands of stocks and ETFs.
Sign up here to get a $10 cash bonus after funding your account and trading at least $100.
You can learn more about the platform in this review.
One-fund ETF solutions take the hassle out of investing on your own. Depending on your risk tolerance, investment objectives, and financial goals, a balanced, conservative, or growth portfolio may meet your needs.
Four other asset allocation ETF portfolios offered by iShares are:
- iShares Core Income Balanced ETF Portfolio (XINC)
- iShares Core Conservative Balanced ETF Portfolio (XCNS)
- iShares Core Growth Portfolio (XGRO)
- iShares Core Equity ETF Portfolio (XEQT)
The iShares Core Balanced ETF Portfolio (XBAL) offers Canadians access to a balanced ETF that is self-rebalancing at a low-cost. This XBAL review covers its holdings, fees, pros and cons, and how to purchase it in Canada.
- One fund solution with automatic rebalancing.
- Has a low MER.
- Easy to purchase using a brokerage account.
- Does not offer a 50:50 equity to bond allocation.