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ZBAL Review 2023: BMO Balanced ETF Portfolio Explained

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 underlying BMO ETFs.

Its target allocation is 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 September 2022:

  • Inception date: Feb 15, 2019
  • Management fee: 0.18%
  • Management Expensive Ratio (MER): 0.20%
  • Annualized Distribution Yield: 2.66% (as of September 2, 2022)
  • Total assets: $116.24 million
  • Eligible accounts: RRSP, TFSA, RRIF, RESP, personal and corporate non-registered
  • Listing currency: CAD

ZBAL Holdings

ZBAL consists of 60.13% stocks and 35.33% bonds, with the remainder allocated to cash and cash equivalents.

Its ETF holdings were made up of:

ZBAL ETF HoldingsAllocation
BMO Aggregate Bond Index ETF (ZAG)28.86%
BMO S&P 500 Index ETF (ZSP)24.57%
BMO S&P/TSX Capped Composite Index ETF (ZCN)15.91%
BMO MSCI EAFE Index ETF (ZEA)13.15%
BMO Government Bond Index ETF (ZGB)7.67%
BMO MSCI Emerging Markets Index ETF (ZEM)5.74%
BMO MID-TERM US IG Corporate Bond Hedged to CAD Index ETF (ZMU)3.86%
BMO S&P US MID CAP INDEX ETF (ZMID)1.56%
BMO S&P US SMALL CAP INDEX ETF (ZSML)0.69%

Source: Bmogam.com/ca/

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 -6.58% return in the last year and an annualized average return of 4.56% since inception.

ZBAL Fees

You pay a 0.18% annual management fee, and the overall management expense ratio (MER) is 0.20%. 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 not comfortable 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 Wealthsimple costs 0.60% to 0.70% 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 September 2022 are:

VBAL ETF HoldingsAllocation
Vanguard US Total Market Index ETF25.28%
Vanguard Canadian Aggregate Bond Index ETF23.25%
Vanguard FTSE Canada All Cap Index ETF18.28%
Vanguard FTSE Developed All Cap ex North American Index ETF12.15%
Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged9.06%
Vanguard US Aggregate Bond Index ETF CAD-hedged7.17%
Vanguard FTSE Emerging Markets All Cap Index ETF4.82%

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 these two:

1. 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 (you can also use our promo code SAVVY50).

Get more details about Questrade.

2. Wealthsimple Trade:

Wealthsimple Trade is one of a few brokers offering free buy and sell trades of stocks and ETFs in Canada. For assets listed in CAD (e.g. ZBAL), this means you don’t pay a trading fee when you make a transaction.

The platform is available on smartphones and desktop devices.

When you open a new account using our exclusive link, you get a $25 cash bonus after depositing at least $200 in your account. You can learn about how the platform works in this detailed review.

ZBAL FAQ

Is ZBAL a good investment?

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.

When is ZBAL rebalanced?

Fund managers at BMO Asset Management Inc. rebalance ZBAL every quarter.

Related:

ZBAL Review
4.8

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

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Author

Gravatar for Enoch Omololu, MSc (Econ)
Enoch Omololu, MSc (Econ)

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 is passionate about helping others win with their 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, CBC News, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, and many other personal finance publications. You can learn more about him on the About Page.

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.

1 thought on “ZBAL Review 2023: BMO Balanced ETF Portfolio Explained”

  1. Gravatar for Jeremy

    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.

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