Skip to content

Helping Canadians with Personal Finance Since 2006

All-in-One ETFs Battle: Vanguard vs iShares vs BMO

 

(Updated in December, 2019 by Kyle Prevost)

Vanguard was the first company to jump into Canadian all-in-one ETFs back in 2018.  It should come as no surprise that that the historical leader in low-cost investments was the first to roll out this superstar product.  With their Vanguard Conservative Income ETF Portfolio (VCIP), Vanguard Conservative ETF Portfolio (VCNS), Vanguard Balanced ETF Portfolio (VBAL), Vanguard Growth ETF Portfolio (VGRO), and Vanguard All-Equity ETF Portfolio (VEQT), Vanguard basically created a one-stop shop for people looking to create a diversified ETF portfolio in the 2nd-easiest way possible (more on that later).  The products have proven to be a hit with Canadian investors, as the Vanguard all-in-one ETF portfolios now have over $2 Billion worth of investment money in them!

Of course, following Vanguard’s success, the other major ETF providers in Canada quickly jumped into the fray. Canadian consumers were the big winners in 2019, as we saw the competition heat up and overall costs go down. It’s hard to overstate what a game changer these products have become, as but I’ll do my best to summarize in one sentence:

For only $20 per $10,000 invested, every Canadian can now instantly invest in over 10,000 companies (94%+ of the world’s stock and bonds markets), and 900 bonds, in under 90 seconds.

 

What is an “All-in-One ETF” or “All-in-One Portfolio”?

If you’re wondering what the heck an all-in-one ETF portfolio is, then you’re not alone.  Over the past six months, it’s been one of the most common questions that I get asked.

The basic idea is that some of Canada’s largest ETF providers decided that they didn’t want the robo advisors having all the fun when it comes to super simple investing solutions for the average Canadian. One of the big value propositions of a robo advisor is the idea that a couch potato investor (aka index investor, passive investor, etc.) no longer had to worry about rebalancing their various types of ETFs. Gone were the days of doing a little math to figure out if you were still hitting your asset allocation targets when it came to bonds, Canadian equities, and international equities. It was the new era where you just put your money in one place, and let the automated solution do the work for you.  So Vanguard, BMO, iShares, and most recently Horizons ETFs put together products that are basically a few different ETFs, inside of a big umbrella ETF.

In order to understand what is actually inside these ETFs let’s take an in-depth look at the Vanguard Growth ETF Portfolio (VGRO), one of the most popular of these new “asset allocation all-in-one ETFs”

Picture from Vangaurd website. For more information visit here

VGRO seeks to give Canadians a quick and easy way to invest for the long-term.  Consequently, the asset mix skews towards the riskier side of the risk/return spectrum, with 80% of your money being invested in equities/stocks/shares and 20% being invested in bonds/fixed income.

If you were to invest $1,000 in this all-in-one ETF, your thousand bucks would then roughly be automatically split up into the following investments (*all data as of December 2019*):

  • $320 into the Vanguard US Total Market Index ETF 
  • $238 into the Vanguard FTSE Canada All Cap Index ETF 
  • $182 into the Vanguard FTSE Developed All-Cap-ex-North America Index ETF 
  • $55 into the Vanguard FTSE Emerging Markets All-Cap Index ETF 
  • $117 into the Vanguard Canadian Aggregate Bond Index ETF  
  • $46 into the Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged
  • $37 into the Vanguard US Aggregate Bond Index ETF CAD

Now, within those ETFs, there are obviously many different companies represented.  Let’s take a look at the ETF that makes up 32% of the portfolio, the Vanguard US Total Market Index ETF (VUN).

Out of your initial $1,000, you now have $320 going into the massive world of the USA stock market.  Here’s a partial look at what your investment dollars will eventually end up purchasing:

  • Microsoft Corp: $11.52
  • Apple Inc: $10.88
  • Alphabet Inc (Google): $8.00
  • Amazon Inc: $8.00
  • Facebook Inc: $4.80
  • Berkshire Hathaway Inc: $4.48
  • JP Morgan Chase & Co: $4.16
  • Johnson & Johnson: $3.84
  • Procter & Gamble Co. $3.20
  • Visa: $3.20

A pretty diverse group of companies, that ultimately only make up less than 20% of this specific ETF, which is only 32% of your overall all-in-one portfolio!  You really do get almost everything in one package.

Let’s take a look at the fixed income portion of our asset allocation ETF and dive into the Vanguard Canadian Aggregate Bond Index ETF (VAB).  Out of your initial $1,000, $117 will be used to automatically purchase a wide variety of Canadian bonds that break down as follows:

  • Provincial/Municipal Bonds in Canada: $45.75
  • Federal Government of Canada Bonds: $31.82
  • Bonds for Financial Institutions in Canada (such as TD Bank): $12.87
  • Bonds for Agencies (such as PSP Capital): $12.75
  • Bonds for Government-related Agencies (such as Hydro Quebec): $12.75
  • Bonds for private industrial companies (such as Apple Inc.):
  • Bonds for Utility Companies (such as Bell Canada): $2.70
  • Other Bonds/Cash Products: $1.17

To sum up your bond allocation: Your lending money mostly to Canada’s provincial and federal governments, with a smattering of other large Canadian entities tossed in, and a very small percentage of large foreign owned entities.  If you care about bond ratings, the average bond rating of this large collection (more than 900 separate bonds) is AA.

As you can see, your $1,000 monthly investment (taking all of 90 seconds to make through your discount brokerage account) will instantly diversify your money into investments of more than 12,500 companies, and 900+ bonds.  Not bad for 90 seconds of work…

How Do I Invest in the Best All-in-One ETFs in Canada?

Best for DIY Investing

Cheapest way to invest on your own.
Buy ETFs for FREE!
No annual fees (accounts over $15,000).
Very reliable and top-notch service.
Roughly 2 hours of paperwork on initial setup

Questrade Review

Best for Passive Investing:

Zero paperwork – sign up in 10 minutes online or via app
Easiest way to automatically invest a part of your paycheque each month
Excellent use of index investing principles
Perks for investors with more than $100,000
Although cheap, not as cheap as Questrade

Wealthsimple Review

 

Investors Do Better With All-in-One ETFs than Managing Their Own Portfolio

We’re going to get to our all-in-one ETF vs rebalancing individual ETFs vs robo advisors in just a second, but first I wanted to draw your attention to a potentially much more important aspect of automated investing.

There’s a key fact to understand when it comes to understanding human beings, basic math, and investment returns: We really suck at passively sticking to a simple index investing strategy.

As Millionaire Teacher author Andrew Hallam recently pointed out in his Globe and Mail article, human beings are generally pretty good at sabotaging their investment returns EVEN AFTER they commit themselves to being couch potato investors.  He sites US-based data from target-date funds in the USA, which are similar in many ways to our all-in-one ETF portfolios. 

If you want more evidence that we’re really bad at following the basic passive investing rules that we set out for ourselves, there was a report released in 2017 called “Abusing ETFs” that used German data to paint a picture of investors being tempted to overweight one index ETF over another.  The temptation to try and “bet a little more” on your home country’s stock market, or emerging market stock markets, or to “tweak” your bond risk profile for example, is just a little too great.

This is the logical extension of what we’ve seen for so many years with the mutual fund industry.  Every single study I’ve read on mutual fund investors shows that the average mutual fund investor routinely realizes returns that are roughly half of what their mutual funds returned over the past 10+ years.  

This seems impossible, right?  I mean, if a person is invested in mutual funds, shouldn’t they get the average return of those mutual funds?  The problem is that people are tempted to put more money into funds when news reports tell them everything is great, and everyone is making money in the stock market.  Then when those news reports turn negative, people either invest less, sell their mutual funds and “go to cash”, or decide to invest in a fund that is “doing better right now”.  They often do this on the advice of their financial advisor. Of course, the end result of this “strategy” is that you end up buying most when the market is approaching or at peak, and then buying the least (or even cashing out) when the market is approaching or at a low point.

While index ETFs offer a better overall product than mutual funds, they don’t offer to cure your behavioural biases for you.  Our brains are still wired the same way those mutual fund investors’ brains were. We’re still tempted to think that we can skew our market returns just a bit higher by “putting a little more here than there”.  Of course we’re wrong much more often than we’re right.  

The all-in-one ETF portfolios (and robo advisors for that matter) take this temptation out of our hands.  This might be their most valuable feature!

Note: If you’re a little unsure about what active investing vs passive investing means, the basic idea is that passive investors believe that simply owning small pieces of every company or bond in a given market – then cutting fees as low as possible – is a much better bet than trying to pick which stocks/bonds will do better than others (which is called active investing).  Pretty much every long-term mathematical study on investment returns agrees that the average investor is much better off with index investing than trying to pick their own stocks.

Robo advisors, all-in-one ETFs, and DIY ETF portfolios, are all different ways of index investing.  Index investing is often referred to as couch potato investing.

All-in-One ETF MER Fee Comparison

When we look at comparing the costs of all-in-one ETFs vs robo advisors vs DIY couch potato portfolios vs mutual funds we must first understand what the acronym MER means.

A quick refresher: MER stands for Management Expense Ratio.  It is usually shown as a percentage of between .05% and 3%. To understand how much an investment costs you to hold each year, you multiply this percentage by the amount of money that you have in that product.  It’s worth noting that while many of us math-challenged folks see the numbers .05% and 3% as both being small and relatively comparable to one another, 3% is actually sixty times more than .05%!!!  If you are paying 60 times more for your investments than the person next to you, it doesn’t take a genius to explain that you’re going to have much less investment money in your pocket.

Ok, so now that we have MER down, let’s take a look at what the different types of investments will cost us to hold on to each year. 

1) All-in-one ETF portfolios: .18%-.27% MER  

We’ll have a more precise all-in-one ETF comparison below, but generally you’re looking at roughly a .25% MER in order to invest in these funds.  That means that each year, you’re paying $25 per $10,000 invested.

2) DIY Couch Potato Portfolios: .13%-.2% MER

You might be asking yourself: Wait a second, if Vanguard or BMO just lets me see what is in their all-in-one portfolios, then why can’t I just construct these portfolios on my own?

Well, you can – it’s just a pain in the butt, and you won’t save a lot of money unless your portfolio is fairly large.  

To illustrate, let’s take a look at our Vanguard Growth ETF Portfolio (VGRO) example.

Here are the MERs of the respective underlying ETFs that make up the all-in-one product.

  • Vanguard US Total Market Index ETF: MER of .16% 
  • Vanguard FTSE Canada All Cap Index ETF: MER of .06% 
  • Vanguard FTSE Developed All-Cap-ex-North America Index ETF: MER of .23% 
  • Vanguard FTSE Emerging Markets All-Cap Index ETF: MER of .24% 
  • Vanguard Canadian Aggregate Bond Index ETF: MER of .09% 
  • Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged: MER of .38% 
  • Vanguard US Aggregate Bond Index ETF CAD: MER of .22% 

Not all of these ETFs are weighted evenly, so to create your own copy of VGRO, you’d be paying about .15% MER.  Of course this doesn’t take into account transaction costs (we’ll get there), behavioural considerations, and your time spent rebalancing the portfolio each year.

To put it another way, if we ignore time cost, and transaction cost completely, on a $1 Million portfolio, the difference between creating your own identical index portfolio and investing your million bucks in VGRO would be about $1,000 per year.  On a $100,000 portfolio, it’d be about $100 per year.

Note: For super detail-oriented investors, it might be worth looking into how foreign withholding taxes work in regards to ETFs.  If you are willing to do some homework and hold specific individual ETFs in your RRSP, you may be able to reduce the small amount of tax that you will be paying on your USA dividends (not on USA capital gains) if you go with an all-in-one ETF.  This is a relatively small consideration, and I’ve only met a handful of folks willing to do this much math on an individual ETF level.

3) Robo Advisors: .4%-.8% MER

Remember that when investing through a robo advisor you have to add their management fees, to the underlying MER of the funds themselves.  So to compare to our example above, you’re looking at the robo advisor charging you .3%-.6% for their services, PLUS the .15% that our underlying ETFs will charge you.

Now remember, this isn’t truly an apples-to-apples comparison.  Robo advisors do things that your all-in-one portfolios don’t, such as:

  • No Transaction Costs
  • Financial Advice
  • Tax Loss Harvesting
  • Loyalty Perks
  • Automated Contribution Options
  • Easier Account Opening

BUT – in exchange for those really nice features, you’re going to pay about $60 per $10,000 that you have invested.  On a $1 Million portfolio, that means you will pay $3,500 more per year with a robo advisor than you would with an all-in-one portfolio.  With a $100,000 portfolio, that narrows to $350 per year difference (again, excluding transaction costs)

4) Mutual Funds: 1.5%-3.5% MER

When comparing the mutual funds in Canada, it’s important to note that there is a large range, but overall, we have the highest mutual fund fees in the world!

Let’s compare our new favourite all-in-one-ETF (VGRO) to a similar big mutual fund portfolio in Canada… say the Investors Growth Portfolio (Series A) from IG Wealth Management.  As of November 24th, 2019, this portfolio had a MER of 2.75%, and invested in several different equity funds in order to get diversification to 423 companies from all around the world.

That MER is more than TEN TIMES larger than the MER of our all-in-one portfolio!  

You would be paying $27,500 per year to hold this fund in your $1 Million portfolio versus the $2,500 you would be paying with VGRO.

To be fair to the mutual fund world, part of this MER fee goes to pay a financial advisor.  In theory, that financial advisor should be able to provide you with valued financial advice AND there is a chance that this mutual fund could have better returns than your index portfolio.

In practice, we know that unless you have an investment portfolio larger than $1 Million, most large wealth management companies won’t pay a ton of attention to you.  

We also know that only somewhere between .5% and 10% of mutual funds (depending on which study you read, and what asset class you’re referring to) beat their comparable market index over the long-term AND we have very little idea of how to predict which of those mutual funds will be able to do that.  

You might take away from this that I’m not big on mutual funds and think you can cut your MER costs down with index ETF investing.  You’d be correct.

Best All-in-One ETFs in Canada

 

Transaction Costs of All-in-One ETFs vs Robo Advisors vs Stock Picking vs Mutual Funds

There is one more key consideration when it comes to comparing the costs of Canadian investment vehicles: Transaction costs to buy or sell the investment.

Robo advisors and mutual funds do not have transaction costs.  You do NOT pay a small amount each time you buy or sell investments with them.

The same cannot be said for online discount brokerages such as Questrade, RBC Direct Investing, or TD Direct Investing.  See our full comparison of Canadian discount brokerages. Discount brokerages will usually charge a per-trade fee ranging from $4.95-$9.95.  They may also include Electronic Communications Network (ECN) fees – which are $0.01-$4.95.  See our Questrade Review for a detailed look at ECN fees.

What that means is that every time you buy or sell a share of a company, you have to pay that transaction fee.  When you are managing a portfolio of $1 Million+ those five dollar fees represent a negligible overall percentage of your nest egg.  When you are just getting your portfolio off the ground however, those trade costs can add up in a hurry, and end up costing you substantially more money than an extra percentage of your overall portfolio

Now, to make matters even more confusing.  When we look at the all-in-one ETFs specifically, our two leading discount brokerage platforms, Wealthsimple Trade and Questrade allow you to purchase these ETFs without paying those transaction fees at all!  This development over the last couple of years has really chipped away the advantage that mutual funds once held in Canada, as it is now essentially free to invest in broad-market index funds such as these all-in-one ETFs.


Note: As we write this article, Wealthsimple Trade continues to evolve as a platform, and may represent the best path for cost-conscious ETF investors.  We’re going to update this article once we finalize our Wealthsimple Trade Review in the next few weeks.

 

Canada’s All-in-One ETFs vs Robo Advisors

The best comparison when it comes to the Canadian market and of these new all-in-one ETFs are robo advisors.  You can see in our above fee comparison, the dollar difference between building your own portfolio of index ETFs and purchasing an all-in-one Portfolio ETF.  The only real difference there is your fees, and the amount of time you spend rebalancing your own portfolio. It’s close to an apples-to-apples comparison. The same can’t be said when we look at all-in-one ETFs vs robo advisors.

By far the biggest advantage that robo advisors have is that they are the easiest possible way to take your paycheque and turn it into a diversified investment portfolio.  You might not think that’s a big advantage, but I’ve helped enough people over the years to know that one of the biggest obstacles to getting people to actually invest their money, is the procrastination of setting up a discount brokerage account, and to actually purchase shares of stock or units of an ETF.  If we are being completely vulnerable and honest, it can be very intimidating the first time you open that trading screen and realize you are about to click “buy” after doing the math on how many units of an ETF to purchase. Once you have done it a couple of times, and get used to sending money from your chequing account to your brokerage account, it gets much less intimidating – but that initial obstacle is juuuuussssst enough to prevent 80-90% of the people I try to help from getting started with index investing.  While all-in-one ETFs make investing easier, they don’t get rid of this annoying obstacle.

Robo advisors are great at getting rid of this obstacle!

In one hour you can open a Wealthsimple account, set up an automatic contribution from your chequing account for the day after payday – and boom – you are set.  Your money will be automatically invested month after month into a portfolio that looks very similar to the leading all-in-one ETFs. Here are a few more things that Wealthsimple (Canada’s largest robo advisor) offers that all-in-one ETFs do not.  Some of these features might be more valuable to you than others, but what each investor will ultimately have to decide is if these features are worth paying the extra .25%-ish MER on their portfolio as we illustrated above.

  • HELP: Wealthsimple advisors are available to help online or on the phone from 8AM-8PM Monday-Friday.  They will also respond promptly to email inquiries.
  • Tax-loss harvesting – depending on how large your portfolio is, this feature could save you a substantial amount of money come tax season.  The basic idea is that Wealthsimple will look at your portfolio and do some simple buying/selling that will save you tax dollars.
  • No need to do the math on how many units to buy or worry about stuff like market vs limit orders.
  • No “left over cash” in a robo advisor from partial unit purchases.
  • Automatic dividend reinvesting (not that hard to do in a discount brokerage account, but still a nice automated feature).
  • Cool perks such as VIP airline lounge access.
  • Easy access to the Wealthsimple High Interest Savings Account option.


Alright, so now that we’ve got a clear look at how Canada’s all-one-ETFs compare with robo advisors, mutual funds, and DIY options, let’s dive into the specific options that are available for your portfolio.

 

Vanguard All-in-One ETFs

The leader in low-cost index investing was the first company out of the gates, as the Vanguard all-in-one asset allocation ETFs were the first of their kind in Canada and charge a straight MER of .25% across all five of their all-in-one ETF options.  Vanguard builds their portfolio ETFs by including specific weightings of their line of ETFs including:

  1. Vanguard US Total Market Index ETF (VUN)
  2. Vanguard FTSE Canada All Cap Index ETF (VCN)
  3. Vanguard FTSE Developed All-Cap-ex-North America Index ETF (VIU)
  4. Vanguard FTSE Emerging Markets All-Cap Index ETF (VEE)
  5. Vanguard Canadian Aggregate Bond Index ETF (VAB)
  6. Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (VBG)
  7. Vanguard US Aggregate Bond Index ETF CAD (VBU)

The chart below illustrates the differences between the five Vanguard all-in-one portfolio options.

Fund name Ticker Management fee MER Trailing Yield 12 months Annual return 1 year
Vanguard All-Equity ETF Portfolio VEQT 0.22%
Vanguard Balanced ETF Portfolio VBAL 0.22% 0.25% 2.20% 11.09%
Vanguard Conservative ETF Portfolio VCNS 0.22% 0.25% 2.25% 10.67%
Vanguard Conservative Income ETF Portfolio VCIP 0.22%
Vanguard Growth ETF Portfolio VGRO 0.22% 0.25% 2.18% 11.52%

 

Blackrock iShares All-in-One ETFs

Shortly after Vanguard used their in-house ETFs to create a suite of all-in-one ETFs, Blackrock/iShares followed suit and released their two all-in-one portfolio ETFs: XGRO and XBAL.  Technically these two products were reboots of older portfolio ETFs that had been around since 2007, but were not popular due to their high MER.  They differ from Vanguard’s offerings in that they have a slightly lower MER, no international bond exposure, and slightly less exposure to Canadian equities vs their American counterparts.  The two portfolio options are made up of the following ETFs:

ISHARES CORE S&P TOTAL U.S. STOCK (ITOT)
ISHARES MSCI EAFE IMI INDEX (XEF)
ISHARES S&P/TSX CAPPED COMPOSITE (XIC)
ISHS CORE CAD UNIV BND IDX ETF (XBB)
ISHARES CORE MSCI EMERGING MARKETS (IEMG)
ISHARES CANADIAN SHORT TERM CORPOR (XSH)
ISHARES BROAD USD INVESTMENT G (USIG)
ISHARES US TREASURY BOND ETF (GOVT)

Fund name Ticker Management Fee MER Trailing Yield 12 months YTD Return 2019
iShares Core Balanced ETF Portfolio XBAL 0.18% 0.20% 1.78% 12.51%
iShares Core Growth ETF Portfolio AOM 0.18% 0.20% 1.66% 13.17%

 

BMO All-in-One ETFs

Not one to be left behind, the Bank of Montreal (BMO) wasted very little time in packaging their ETF offerings together to create three BMO all-in-one ETF portfolios.  If price is your main comparison tool, then you might want to note that BMO has the cheapest Canadian all-in-one ETFs at only .20% MER across all three asset allocation ETF options.  Here’s a look at the underlying ETFs that BMO uses to make up their all-in-one ETFs.

  1. BMO Aggregate Bond Index ETF (ZAG)
  2. BMO S&P 500 Index ETF (ZSP)
  3. BMO Government Bond Index ETF (ZGB)
  4. BMO MSCI EAFE Index ETF (ZEA)
  5. BMO S&P/TSX Capped Composite Index ETF (ZCN)
  6. BMO Mid-Term US IG Corporate Bond Hedged to CAD Index ETF (ZMU)
  7. BMO MSCI Emerging Markets Index ETF (ZEM)
Fund name Ticker Management fee MER  
BMO Conservative ETF ZCON 0.18% 0.20%  
BMO Balanced ETF ZBAL 0.18% 0.20%  
BMO Growth ETF ZGRO 0.18% 0.20%  

 

Horizons All-in-One ETFs

The newest entry into the Canadian all-in-one ETF market is Horizons all-in-one-ETFs.  Due to the unique swap-based structure of their ETFs, Horizons is able to keep fees relatively low.  Here’s a look at their current lineup of all-in-one-ETFs and their respective MERs (you’ll notice that, unlike the other three ETF providers in Canada, Horizons all-in-one ETFs differ in their respective MERs).

  • Horizons Conservative TRI ETF Portfolio (HCON) – .18% MER
  • Horizons Balanced TRI ETF Portfolio (HBAL) – .20% MER
  • Horizons Growth TRI ETF Portfolio (HGRO) – .28% MER

The underlying ETFs that Horizons purchases in order to makeup their portfolio ETFs are:

  1. HORIZONS CDN SELECT UNIVERSE CL A UNIT
  2. HORIZONS S&P 500 INDEX ETF CL A UNIT
  3. HORIZONS US 7-10 YR TREAS BD CL A UNIT
  4. HORIZONS NASDAQ-100 INDEX ETF CL A UNIT
  5. HORIZONS INTL DEVELOPED MKT CL A UNIT
  6. HORIZONS S&P/TSX 60 INDEX ETF CL A UNIT
  7. HORIZONS EURO STOXX 50 INDEX CL A UNIT
  8. HORIZONS US 7-10 YR TREASR BD CL A UNIT
  9. HORIZONS S&P 500 CAD HEDGED CL A UNIT

These ETFs are slightly more complex to understand due to their swap-based nature than the first three groups of all-in-one-ETFs that we looked at.  Personally, due to their increased complexity, somewhat odd weighting of treasuries vs bonds, lack of exposure to developing markets, and just the relatively low volume traded daily, I don’t see these current Horizons all-in-one-ETF asset allocation ETFs as a serious contender versus the other excellent options out there.

 

Comparing iShares vs BMO vs Vanguard vs Horizons Canadian All In One ETFs 

When comparing the iShares vs Vanguard vs BMO vs Horizons all-in-one Portfolio ETFs, it’s important to understand this fact first and foremost:

They are all excellent choices for your portfolio – just choose one!

If comparing these products is going to in anyway delay you from opening a discount brokerage account and get started investing, then just go with Vanguard, and get started today!

Every single one of these all-in-one-ETFs offers the following:

  • Instant diversification to thousands of companies and hundreds of bonds/treasuries
  • Incredibly low costs
  • Super stable, safe companies that have been around for decades
  • Very high odds that your returns will beat those of actively managed mutual funds

All of that said, if you really want to dive into choosing the absolute perfect all-in-one-ETF for you, I’d look at the following areas to compare:

  • MER 
  • The asset allocation percentages relative to your investing goals
  • Home-country bias (might there be too much of a Canadian focus?)
  • Great diversification vs Incredible diversification (some of these products offer slightly more exposure to developing countries, etc)

 

The Best All-in-One ETFs for your TFSA and RRSP

The ultimate question that most Canadians have when it comes to their investment choices is which is the best one for their TFSA or RRSP. Again, the rule of thumb here is: all of these products are better than the typical Canadian mutual fund!

The real decision on which all-in-one ETF belongs in your portfolio has more to do with your specific risk profile, than the product itself.  If you are tolerant of risk (not an easy question to answer), have a long investment window, and will not panic when your portfolio’s value goes down by 30% in a given year, then I’d go with more of a growth portfolio.  If you’re approaching retirement or can’t sleep at night if you lose more than 15% of your portfolio in a given year, then I’d recommend more of a balanced or conservative portfolio.

Here’s a look at my current favourite asset allocation ETFs in each broad category.

Best All-in-One Growth or Equity ETF – VEQT (Vanguard All Equity ETF)

I love what VEQT does for Canadians.  It’s a very simple all-equity ETF that instantly diversifies your investment dollars into thousands of small, medium, and large companies from around the world.  Some might argue that the 30% allocation to Canadian stocks is a bit high for a home country bias, but I’m fine with it. Here’s a look at what’s under the hood of the Vanguard All Equity ETF.

  • Vanguard US Total Market Index ETF 40%
  • Vanguard FTSE Canada All Cap Index ETF 30%
  • Vanguard FTSE Developed All Cap ex North America Index ETF 23%
  • Vanguard FTSE Emerging Markets All Cap Index ETF 7%

I personally love this all-in-one ETF because I am fortunate enough to still have a relatively long investment horizon, and my pension is sufficient to represent a fixed-income part of my portfolio.  If you’re appetite for risk is not the same as mine, one of the following ETFs might be a better option.

Best All-in-One Balanced ETF – VBAL (Vanguard Balanced ETF Portfolio)

Admittedly this balanced (60% equities, 40% fixed income) all-in-one ETF comparison is more difficult for me than the growth one was.

Truth be told, it is really hard to separate VBAL vs XBAL vs ZBAL.

I default to Vanguard’s offerings (despite their slightly higher MER, that will cost you $5 more for every $10,000 invested) because I love supporting the company that has been there innovating on behalf of index investors for decades.  I also prefer VBAL over XBAL and ZBAL because it has some global bond exposure that others don’t have. That said, all three are excellent products.

Best All-in-One Conservative ETF – VCNS (Vanguard Conservative ETF Portfolio)

There are even more “income based” conservative portfolios out there, such as the Vanguard Conservative Income ETF Portfolio, but if we’re comparing straight apples-to-apples “40/60” conservative portfolios (40% equities, 60% fixed income) then we have to look at VCNS vs ZCON vs HCON.  The Blackrock iShares all-in-one ETF suite does not currently include a similar conservative portfolio.

The argument here mirrors the one above.  I again default to Vanguard for the exact same reasons as above. You could certainly go with either the Horizons or BMO offerings if you prefer to save a cup of coffee worth of fees, and don’t see value in getting more bond diversification. 

 

All-in-One ETF Interviews with Dan Bortolotti and Andrew Hallam

If you’re hungry for even more all-one-ETF content then check out these two interviews that I did for the Canadian Financial Summit, where I go in-depth with two long-time passive investing experts!

 

If you would like to read more articles like this, you can sign up for my free weekly money tips newsletter below (we will never spam you).

22 Comments

  1. Adan on March 11, 2019 at 11:22 am

    Thanks for posting this. Is there a place where I could invest in these products using regular contributions without paying a trading fee every time I bought units?

    • Adam on March 11, 2019 at 10:15 pm

      Thanks!

    • Adam on March 11, 2019 at 10:19 pm

      And I just noted you included it in the post. So double thanks!

  2. Linda Rocco on March 12, 2019 at 12:21 am

    Are you sure about the more aggressive allocation of BMO’s AiO ETF ?

    ZGRO is listed as 20% FI, not 16% since you forgot to include the non-Canadian component of FI.

    • FT on March 13, 2019 at 4:49 pm

      Thanks for asking about this Linda. When I wrote the article, BMO’s website was reporting the more aggressive numbers, but have since corrected. I have modified the article with the new information.

  3. Dave on March 12, 2019 at 4:33 am

    I really love these all in one ETFs.

    The only thing I struggle with is deciding between VGRO and XGRO.

    I love the business model of Vanguard (funds own the company, so always trying to minimize costs and maximize fund performance).

    But I also really like the lower cost of XGRO and the higher allocation of US and International funds.

    First world problems :)

    • Anh on March 12, 2019 at 3:58 pm

      MER posted for XBAL at .75% and XGRO at 0.80% at my RBCDI. So, iShare is not as competitive as Vanguard for VBAL at .25% and VGRO also at .25%

      • Dave on March 13, 2019 at 3:05 am

        If you read the article, FT mentions that the MER isn’t posted for XGRO yet
        The reason is they can’t post the MER until a full year since the ETF is opened
        The current MER that exists is because XGRO is not a completely new ETF. Unlike VGRO which vanguard created new last year, iShares took a pre-existing ETF, CBN, and then changed it to become XGRO. I don’t understand what financial wizardry happens to do that but that’s the reason the MER posted is so high. In one year the true MER will come out and its anticipated to be about 0.22

        • FT on March 13, 2019 at 8:30 am

          Thanks Dave , I’ve also done some digging into the higher mer issue and I’ve come to the same conclusion.

          Since iShares switched their CBN ETF to xgro, xgro inherited the printed mer. Since mer is not calculated until one year after (like filing taxes), we do not know the true mer for xgro but it ‘should’ be around 0.21%. The part that I need to look into further is how CBN had a management fee of 0.18% but then had a mer of 0.80%.

          • Linda on October 4, 2019 at 7:37 pm

            Not sure if I’m too late to comment… I tried posting this before, but not sure it worked. Just wondering if you ever figured out why CBN had a management fee of 0.18% but then had a MER of 0.80%? Just asking in case there are some unexpected surprises about what XGRO’s MER finally ends up being.



          • FT on October 14, 2019 at 3:40 pm

            I have not seen the reason why, I will dig a little further. I suspect that XGRO will stay very competitive with their competition (ie. vanguard and bmo).



  4. Stephen van Egmond on March 12, 2019 at 11:36 am

    ugh!
    XGRO is negative since inception.
    VGRO is barely positive. VCNS marginally more so. Like $25.30 since launching at $25 a year ago.

    • Ian on April 3, 2019 at 6:59 pm

      When are you measuring inception for XGRO? The fund has been growing since mid-December – before that it was a completely different ETF. VGRO’s price has tracked the North American stock markets pretty well – if you aren’t happy with it, you won’t be happy with ANY broad-market ETF.

  5. Sarina on March 12, 2019 at 4:09 pm

    Hi I just opened my Questrade account last week, bought some XGRO shares but now I see that the MER is 0.80. I feel bad because I think I should have bought VGRO, their MER is lower at 0.25%. I thought they would have comparable fees but seems iShares costs a lot more.

    • Ian on March 13, 2019 at 10:16 am

      Hey Sarina,
      Read the article above – the MER will be around 0.22. You’re quoting the MER of the old funds that were re-branded as XGRO.

  6. Dividends on the Prairie on March 14, 2019 at 12:30 am

    Vanguard has also come out with two other ‘all in one’ ETF options (VCIP and VEQT). Any thoughts about having VEQT as the only equity position in a portfolio? It seems like such a simple and easy idea.

    • FT on March 14, 2019 at 10:03 am

      I like VEQT as an option, but only if you don’t have much Canadian holdings elsewhere. Otherwise, I would suggest XAW.

  7. Sagar Sridhar on March 16, 2019 at 12:29 am

    Thank you for the amazing content and information shared across.

    I own a few of the iShares ETF’s and it’s performing great so far.

    Thanks

  8. Peter on April 4, 2019 at 3:06 pm

    Are the quoted MERs the full MER including the underlying funds or are they on top of the underlying fund cost? In other words, what would I save by buying the underlying funds in the same percentages? What would I save by buying the stocks directly?

    • Ian on April 4, 2019 at 4:38 pm

      There are two paragraphs from the prospectus for XGRO that describe this:
      “In accordance with applicable securities legislation, including NI 81-102, an iShares Fund may invest in one or more iShares ETFs, provided that: (i) no management fees or incentive fees are payable by an iShares Fund that, to a reasonable person, would duplicate a fee payable by an iShares ETF for the same service…”

      “Under the new fee structure, BlackRock Canada will adjust the management fee payable to it by each iShares Fund to ensure that the total annual fees paid directly or indirectly to BlackRock Canada and its affiliates by each iShares Fund will not exceed the percentage of net asset value set out in the table below. These changes are expected to significantly reduce each iShares Fund’s management expense ratio.”

  9. retireby45 on November 14, 2019 at 5:37 pm

    All your articles has really helped me in deciding how i want to go about investing in index ETF’s.
    I was always a guy who believed that i can retire comfortable on my rental incomes. But i really love the concept and simplicity of index investing

    Opened my account with questrade last week and bought shares in ZGRO for RESP. I will open TFSA as well but just need to make sure i am doing right allocations

    Thanks again.

Leave a Comment





This site uses Akismet to reduce spam. Learn how your comment data is processed.

Scroll To Top
45 Shares
Tweet
Share
Pin
Email