An asset allocation ETF such as the BMO Balanced ETF portfolio (ZBAL) simplifies the investment process for beginners and seasoned investors.
Also known as ‘one-solution’ or ‘one-ticket’ ETFs, you can now easily buy one fund that is optimized and diversified to meet your needs.
A ‘balanced’ ETF portfolio is designed to cater to investors looking to balance long-term growth, income, and volatility.
You get the upside that comes with equity investing while also enjoying the stability and income that comes from a solid base of fixed-income assets.
This ZBAL review covers what you need to know about its underlying funds, fees, pros and cons, how it compares to VBAL, and how to buy it in Canada.
What is ZBAL?
The BMO Balanced ETF (ZBAL) is a fund of funds comprised of 7 other underlying BMO ETFs.
Its target allocation is about 60% stocks and 40% fixed income, which is comparable to other balanced asset allocation portfolios offered by iShares (XBAL) and Vanguard (VBAL).
ZBAL’s risk rating is low-medium, and its key fund facts as of August 2023:
- Inception date: Feb 15, 2019
- Management fee: 0.18%
- Management Expensive Ratio (MER): 0.20%
- Annualized Distribution Yield: 2.57%
- Total assets: $150.35 million
- Eligible accounts: RRSP, TFSA, RRIF, RESP, personal and corporate non-registered
- Listing currency: CAD
ZBAL Holdings
ZBAL consists of 62.35% stocks and 37.20% bonds, with the remainder allocated to cash and cash equivalents.
Its ETF holdings were made up of:
| ZBAL ETF Holdings | Allocation |
| BMO S&P 500 Index ETF (ZSP.TO) | 27.32% |
| BMO Aggregate Bond Index ETF (ZAG.TO) | 26.21% |
| BMO S&P/TSX Capped Composite Index ETF (ZCN.TO) | 14.73% |
| BMO MSCI EAFE Index ETF (ZEA.TO) | 13.17% |
| BMO US Aggregate Bond Index ETF (ZUAG.F.TO) | 10.89% |
| BMO MSCI Emerging Markets Index ETF (ZEM.TO) | 4.68% |
| BMO S&P US MID CAP INDEX ETF (ZMID.TO) | 1.74% |
| BMO S&P US SMALL CAP INDEX ETF (ZSML.TO) | 0.70% |
| BMO Government Bond Index ETF (ZGB.TO) | 0.07% |
These ETFs consist of thousands of assets and offer exposure to the U.S., Canadian, and international equity and bond markets.
ZBAL Returns
ZBAL is a relatively new ETF.
It has had a +7.43% return in the last year and an annualized average return of +5.80% since inception.
ZBAL Fees
You pay a 0.18% annual management fee; the overall management expense ratio (MER) is 0.20%. This means that for every $10,000 you have invested in ZBAL.TO, you will pay $20 in annual fees.
For the socially responsible BMO Balanced ESG ETF (ZESG), ZGRO and ZCON, these fees are unchanged.
One attraction of investing using asset allocation ETF is the investment fee savings that accumulate over time.
Considering that traditional equity mutual funds cost up to 2% per year in fees, the savings from one-ticket ETFs are nothing to scoff at.
If you are uncomfortable with managing your own portfolio, you can use the services of a robo-advisor. These online wealth management companies use low-cost ETFs to design a portfolio aligned with your needs and risk tolerance.
They also offer free financial advice and automate the rebalancing process, so you won’t need to do it manually.
After accounting for ETF costs, a robo-advisor like Questwealth costs around 0.50% per year.
Pros and Cons of ZBAL
Below are some factors to consider if you are a DIY investor.
Pros
- Low management fees can translate into improved returns over time
- Offers automatic rebalancing
- The portfolio is optimized to work for an average investor who is comfortable with taking low to medium risk
Cons
- Trading fees add up over time and can significantly increase your costs if you have a small account
- You could potentially squeeze out a few extra basis points in fees by purchasing the underlying ETFs; however, keeping your portfolio rebalanced would be a hassle
ZBAL vs. VBAL
Vanguard’s Balanced ETF Portfolio (VBAL) has an investment objective similar to that of ZBAL.
It has a 60% equity (stocks) and 40% fixed income (bond) asset allocation, and its underlying funds as of August 2023 are:
| VBAL ETF Holdings | Allocation |
| Vanguard US Total Market Index ETF | 26.46% |
| Vanguard Canadian Aggregate Bond Index ETF | 23.26% |
| Vanguard FTSE Canada All Cap Index ETF | 18.19% |
| Vanguard FTSE Developed All Cap ex North American Index ETF | 11.58% |
| Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged | 8.32% |
| Vanguard US Aggregate Bond Index ETF CAD-hedged | 7.76% |
| Vanguard FTSE Emerging Markets All Cap Index ETF | 4.44% |
VBAL has a 0.24% MER compared to 0.20% for ZBAL.
Related: BMO Growth ETF Portfolio Review
How To Buy ZBAL in Canada
You can purchase ZBAL directly in your investment account by using a stock trading platform such as Wealthsimple Trade, Questrade, Qtrade, or one of the ones owned by the big banks.
Trading fees cost up to $9.99 per transaction. However, you can save money with the top brokerage in Canada:
Questrade
Questrade is a top independent online brokerage platform offering trades in stocks, ETFs, bonds, options, currencies, GICs, and more.
It offers free ETF purchases; however, there is a fee when you sell ($4.95 to $9.95 per trade).
Questrade works on all devices and new clients who deposit $1,000 or more get $50 in free trades.
Get more details about Questrade.
ZBAL FAQ
ZBAL is designed for investors who want “moderate long-term capital appreciation and income.” Given that it has a 60% stock allocation, you should only invest with a longer time frame in mind.
Fund managers at BMO Asset Management Inc. rebalance ZBAL every quarter.
Related:
- Best Investments in Canada
- Benzinga Pro Review
- Best Investing Books in Canada
- E*TRADE Alternatives in Canada
ZBAL Review
Overall
Summary
The BMO Balanced ETF Portfolio (ZBAL) is for investors who want to earn moderate income while growing their capital over time. This ZBAL review covers its pros and cons, fees, holdings, and more.
Pros
- Low management fees
- Automatic rebalancing
- Diversified portfolio
Cons
- Trading fees can add up if you are not using a no-commission broker
Can you explain the “20.92% cumulative performance” statement? It looks like you added the 10.27% 1-year return and the 10.65% “since inception” return.