ZGRO Review 2022: BMO’s All-in-One Growth ETF Portfolio Explained

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by Enoch Omololu

Updated

Advertiser Disclosure

Asset-allocation ETFs are a great way for DIY investors to access ready-made portfolios that suit their risk profile and return objectives at a low cost.

These one-ticket solution funds offer in-built diversification and frequent rebalancing and save you the time it would take to do these manually.

Regardless of where you fall on the risk spectrum (i.e. conservative, balanced, or growth), you can probably find an asset allocation ETF that works for you from providers such as Vanguard, BMO, BlackRock (iShares), and Horizons.

This ZGRO review covers its holding, fees, returns, pros and cons, how to purchase BMO ETFs in Canada, and how it compares to VGRO.

BMO All-in-One ETF Portfolios

BMO’s line of asset allocation ETFs include:

These funds are managed by BMO Asset Management Inc. and can be purchased using a discount brokerage account.

What is ZGRO?

ZGRO is BMO’s growth portfolio designed for investors who are looking for long-term capital appreciation offered by stocks and bonds.

As expected, it is heavily weighted in equities (80%) while the remainder is fixed income assets (20%).

ZGRO holds a low-medium risk rating and trades on the Toronto Stock Exchange under the ticker symbol “ZGRO”.

Key facts for this fund as of August 19, 2021, are:

  • Inception date: February 15, 2019
  • Management fee: 0.18%
  • MER: 0.20%
  • Rebalancing frequency: Quarterly
  • Accounts eligible: Personal non-registered, RRSP, TFSA, RRIF, DPSP, and RESP
  • Annualized distribution yield: 2.27% (as of August 13, 2021)
  • Listing currency: CAD

ZGRO Asset Allocation

ZGRO caters to investors with above-average risk tolerance. Given that its target allocation for stocks is 80%, you can expect the fund to react to economic and market vents with more volatility (up or down).

As of August 19, 2021, the fund was made up of 81.44% stocks; 18.55% bonds, and 0.01% cash and cash equivalents.

It is a fund of fund comprising of other BMO ETFs as follows:

ZGRO Fund HoldingsAllocation
BMO S&P 500 Index ETF (ZSP)33.48%
BMO S&P/TSX Capped Composite Index ETF (ZCN)20.51%
BMO MSCI EAFE Index ETF (ZEA)17.66%
BMO Aggregate Bond Index ETF (ZAG)13.06%
BMO MSCI Emerging Markets Index ETF (ZEM)6.88%
BMO Government Bond Index ETF (ZGB)3.74%
BMO Mid-term US IG Corporate Bond Hedged to CAD Index ETF (ZMU)1.75%
BMO S&P US MID CAP INDEX ETF (ZMID)2.03%
BMO S&P US SMALL CAP INDEX ETF (ZSML)0.87%
Cash0.01%

These component ETFs provide global diversification by exposing investors to Canadian, U.S., and international stocks and bonds.

Related: Robinhood Canada Review.

ZGRO Returns

ZGRO’s performance history is limited as the ETF is fairly new. It has had a return of 18.66% in the last 1 year and an annualized average of 12.81% since inception.

The historical performance of an investment asset may offer some clues as to its potential, however, it is only one of several factors you should be considering.

For further insight into ZGRO, you could take a look at its constituent ETFs and how they have performed over time.

More importantly, you should ensure that your investment objectives, time horizon, and risk tolerance is suited to a portfolio that’s growth-oriented.

Related: Best Investment Apps.

ZGRO Fees

ZGRO has an annual management fee of 0.18% and a Management Expense Ratio (MER) of 0.20%.

Compared to the average bank equity mutual fund with a 1.98% fee, you could save a lot of money over time.

When you consider the fact that active mutual funds rarely beat the market (i.e. their benchmark index), these fee savings coupled with close to market returns over time can easily translate into more money in your retirement pot.

Compared to a robo-advisor such as Wealthsimple, you are also saving some money. For example, Wealthsimple has a management fee ranging from 0.40% to 0.50%. After adding the in-built ETF fees, your total fees are in the 0.60% to 0.70%.

The higher fees for robo-advisors come with advantages, including hands-free investing, free financial advice, tax-loss harvesting, and other perks.

Depending on how often you buy and sell ETFs (ZGRO) in your portfolio and your account size, trading fees can significantly increase your costs.

As a self-directed investor, you can protect your fee savings by using a no-commission brokerage platform.

Wealthsimple Trade offers $0 commission trading in thousands of stocks and ETFs for both buy and sell trades.

Questrade offers free ETF Purchases and a low commission of $4.95 to $9.95 per trade when you sell.

Pros and Cons of ZGRO

Investing in ZGRO has its pros and cons

Pros

  • Easy to buy and hold without about manual rebalancing
  • Competitively low management fee compared to traditional mutual funds
  • Globally diversified fund
  • Designed to offer optimal asset allocation to a growth investor

Cons

  • Trading fees can add up if you frequently make small trades
  • Deciding when you place a trade can encourage market timing.

ZGRO vs. VGRO

VGRO is Vanguard’s Growth ETF Portfolio. Similar to ZGRO, it has an 80:20 allocation for equities and fixed income.

VGRO was launched about a year before ZGRO on January 25, 2018, and was made up of the following ETFs as of July 31, 2021:

VGRO Fund HoldingsAllocation
Vanguard US Total Market Index ETF34.25%
Vanguard FTSE Canada All Cap Index ETF24.11%
Vanguard FTSE Developed All Cap ex North America Index ETF16.13%
Vanguard Canadian Aggregate Bond Index ETF11.64%
Vanguard FTSE Emerging Markets All Cap Index ETF5.89%
Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged4.44%
Vanguard US Aggregate Bond Index ETF CAD-Hedged3.56%

VGRO has a slightly higher management fee than ZGRO (0.22% vs. 0.18%) and MER (0.24% vs. 0.20%).

How To Buy ZGRO In Canada

Retail investors can easily buy ZGRO using a discount brokerage platform.

Some of the popular ones we have reviewed include:

  • Wealthsimple Trade: Offers free trades in ZGRO and thousands of other stocks and ETFs. When you open a new account and deposit and trade at least $150 in stocks, you get a $50 welcome bonus.

Learn more about Wealthsimple Trade.

  • Questrade: Offers free ZGRO purchases and low fees when you sell. New clients who fund their accounts with $1000+ get $50 in fee trades here.

 You can also read this Questrade review.

ZGRO FAQ

Is ZGRO a good investment?

If you are investing for the long term (10+ years) and are okay with taking an above-average market risk in exchange for potential returns, ZGRO could be for you. If you are somewhat risk-averse or prefer a less volatile portfolio, you may prefer the conservative alternative (ZCON) or a balanced portfolio (ZBAL). All investments carry an element of risk.

How often does ZGRO rebalance?

Based on the information provided by BMO Global Asset Management, an investment fund manager rebalances the ETF back to its target assets allocation every quarter.

BMO Growth ETF Portfolio (ZGRO) Review
4.8

Summary

The BMO Growth ETF Portfolio (ZGRO) is designed for investors seeking long-term capital appreciation. This ZGRO review covers its fees, holdings, pros and cons, how to buy it in Canada, and how it compares to VGRO.

Pros

  • Access to a ‘one-ticket’ solution
  • Low fund management fee
  • Offers automatic rebalancing
  • Diversified portfolio

Cons

  • Self-directed trading exposes you to potential behavioural biases
  • Trading commissions can add up

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Author

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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.

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