Weekend Reading: Best All-In-One ETFs Edition
I’m a big fan of all-in-one ETFs and indeed invest my own money in Vanguard’s VEQT – the 100% equity version of its all-in-one balanced ETFs. These ETFs are a game changer for self-directed investors who want to invest in a low cost, broadly diversified, and automatically rebalanced portfolio.
Vanguard was first to launch its suite of asset allocation ETFs in January 2018, and they were quickly followed by Horizons and iShares later that year. BMO got in on the action in early 2019, and this year has seen the launch of TD’s “one-click” ETFs, and finally Tangerine’s global ETF portfolios.
Vanguard’s VGRO continues to be the most popular of the all-in-one ETFs, attracting $457 million of new in-flows year-to-date. The entire asset allocation ETF category has attracted $2.13 billion of new in-flows so far this year.
Before investing in an asset allocation ETF you’ll want to first identify a risk-appropriate asset mix. These ETFs come in several flavours, but most often you’ll find a conservative (40% equities and 60% bonds), balanced (60% equities and 40% bonds), or growth (80% equities and 20% bonds) option.
The point of an all-in-one ETF is for it to truly be your one fund portfolio solution. Don’t be fooled into thinking you’re putting all of your eggs in one basket. These ETFs are wrappers that contain several other ETFs, which themselves hold thousands of individual stocks and bonds.
“An asset allocation ETF is a simple and efficient way to invest in a portfolio of ETFs that is broadly diversified by asset class and across regions, in one convenient package.”
While each asset allocation ETF provider offers a slight difference in terms of how their ETFs are constructed, which indexes they follow, and the fees they charge, the general concept is the same across the board: low cost, broad diversification, and automatic rebalancing.
With that in mind, here’s an overview of the best all-in-one ETFs you’ll find on the market today:
| ETF Provider | ETF Name | ETF Symbol | Asset Mix | MER |
|---|---|---|---|---|
| Vanguard | Vanguard Conservative Income ETF Portfolio | VCIP | 20 / 80 | 0.25% |
| Vanguard | Vanguard Conservative ETF Portfolio | VCNS | 40 / 60 | 0.25% |
| Vanguard | Vanguard Retirement Income ETF Portfolio | VRIF | 50 / 50 | 0.29% |
| Vanguard | Vanguard Balanced ETF Portfolio | VBAL | 60 / 40 | 0.25% |
| Vanguard | Vanguard Growth ETF Portfolio | VGRO | 80 / 20 | 0.25% |
| Vanguard | Vanguard All-Equity ETF Portfolio | VEQT | 100 / 0 | 0.25% |
| iShares | iShares Core Income Balanced ETF Portfolio | XINC | 20 / 80 | 0.20% |
| iShares | iShares Core Conservative Balanced ETF Portfolio | XCNS | 40 / 60 | 0.20% |
| iShares | iShares Core Balanced ETF Portfolio | XBAL | 60 / 40 | 0.20% |
| iShares | iShares Core Growth ETF Portfolio | XGRO | 80 / 20 | 0.20% |
| iShares | iShares Core Equity ETF Portfolio | XEQT | 100 / 0 | 0.20% |
| Horizons | Horizons Conservative TRI ETF Portfolio | XCON | 50 / 50 | 0.15% |
| Horizons | Horizons Balanced TRI ETF Portfolio | HBAL | 70 / 30 | 0.15% |
| Horizons | Horizons Growth TRI ETF Portfolio | HGRO | 100 / 0 | 0.17% |
| BMO | BMO Conservative Index Portfolio ETF | ZCON | 40 / 60 | 0.20% |
| BMO | BMO Balanced Index Portfolio ETF | ZBAL | 60 / 40 | 0.20% |
| BMO | BMO Growth Index Portfolio ETF | ZGRO | 80 / 20 | 0.20% |
| TD | TD One-Click Conservative ETF Portfolio | TOCC | 30 / 70 | 0.25% |
| TD | TD One-Click Moderate ETF Portfolio | TOCM | 60 / 40 | 0.25% |
| TD | TD One-Click Aggressive ETF Portfolio | TOCA | 90 / 10 | 0.25% |
| Tangerine | Tangerine Balanced ETF Portfolio | INI420 | 60 / 40 | 0.65% |
| Tangerine | Tangerine Balanced Growth ETF Portfolio | INI430 | 75 / 25 | 0.65% |
| Tangerine | Tangerine Equity Growth ETF Portfolio | INI440 | 100 / 0 | 0.65% |
You can sort the table by ETF provider, asset mix, and fees.
Again, it’s tough to definitively say which all-in-one ETF is best. Each fund provider takes its own approach to ideally achieve a similar outcome (when comparing similar asset mixes). Here’s my takeaway:
- If you want the lowest cost portfolio, go with an iShares or BMO asset allocation ETF.
- If you’re a TD customer, and use the new TD GoalAssist investing app, go with the TD “one-click” portfolios (they’re free to trade)
- If you’re looking for tax efficient investing in a non-registered (taxable) account, go with the Horizons TRI ETF portfolios
I chose the Vanguard funds because I believe in the company’s mission to take a stand for all investors and to treat them fairly. I also know that Vanguard regularly reduces its product fees and so I expect their asset allocation fees to eventually match the fees charged by iShares and BMO.
This Week’s Recap:
The TFSA new contribution limit for 2021 was officially released this week. It’s staying at $6,000, where the annual limit has been since 2018. I’ve updated my TFSA contribution limit guide to reflect the new changes and highlight that the total lifetime TFSA contribution limit is now up to $75,500.
Last week I explained why health and dental insurance isn’t really insurance – it’s an employee benefit.
Watch this week for my long-awaited post on how I changed up my approach to credit card rewards this year to maximize my cash back.
Promo of the Week:
Black Friday deals are already here and many of you will be taking advantage of online shopping as we head into the holiday season. This is a reminder to always be sure to visit a cash back rebates site before visiting your favourite online retailer. It’s a great way to collect an extra 1-5% (or more) cash back on spending you are going to do anyway.
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Weekend Reading:
Our friends at Credit Card Genius are getting into the Christmas spirit and have opened their annual $1,000 cash Christmas giveaway. They’re giving away five cash prizes, so head on over and enter to win.
One of Canada’s oldest personal finance sites – Million Dollar Journey – just got a new face lift. In addition to Frugal Trader’s regular financial freedom updates, Kyle Prevost has been writing some unique stuff about moving to the desert and making a tax-free income as a teacher.
Jamie Golombek shares everything you need to know about converting your RRSP into a RRIF this year.
Larry Swedroe explains an investing truth: that for every buyer there must be a seller.
If one spouse makes most or all the financial decisions, the uninvolved spouse can be left vulnerable. Jason Heath explains why seniors, their family and their advisors should try to involve both spouses in money discussions.
Jonathan Chevreau tackles an interesting question: Should retirees speculate in the stock market?
The Economist wrote about a passive attack – how index investing is reshaping the investment industry.
Dr. Bonnie-Jeanne MacDonald says that outdated assumptions and conflicts may be guiding advice on CPP timing:
“In a way,” MacDonald said, “advisors are being compensated to tell Canadians to take their CPP as soon as possible.”
We took a look earlier at asset allocation ETFs. Here, PWL Capital’s Justin Bender takes a look at iShares’ new ESG ETF portfolios:
Morgan Housel continues to write some incredibly thought-provoking articles – this one on the big lessons from history.
Of Dollars and Data blogger Nick Maggiulli explains how to save for a big purchase.
Rob Carrick answers a question from a reader who is on the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness.
Gen Y Money asks, do you need mortgage insurance? Likely not from your bank.
Michael James previously wrote about why owning long term government bonds is crazy, and followed up with a four question bond quiz.
Andrew Forsythe shares why he changed his free spending ways to become “cheap and proud”.
Finally, Rob Carrick interviews retirement expert Fred Vettese on low rates, when to start CPP, and millennials in love with stock trading.
Have a great weekend, everyone!
Like the idea of a one ETF portfolio such as Vanguard VQET but annual distribution of .403 cents per year does not cut it
Hi Daniel, these funds take a total return approach so if you’re looking for income you just have to sell off some units. That said, if you’re in the withdrawal phase then an all-equity fund is likely not appropriate.
Thx Rob
Yes I’m in withdrawal mode, retired 4 years now
My all equity/ dividend portfolio is doing very well.
I did purchase VET (25k) in late December for the dividend, did well till April but that’s gone as well as down about 26k)
All my other stocks are still paying dividends – averaging 7%
Not planning on touching the principal any time soon
Still say TFSA should be the first dollars saved in all cases followed by RRSP.
Hi Frito, I disagree. Let’s say you make six figures but only have $6,000 to invest. Assuming that money is for retirement, I’d suggest the RRSP is more advantageous for tax planning and maximizing resources.
Ok, if all you ever do is invest $6,000 a year, you’ll be far better off when retired tax wise than you would be with the same in an RRSP wouldn’t you? If you invest in the same way as an RRSP (which you can and should) you’ll save tons more in taxes overall at the back end. You’d get a few hundred dollars back on your tax return this year, but after years of growth you can withdraw completely tax free. No planning required. AND, most high earners who contribute to RRSPs end up with a relatively large pile of money that they end up having to pay more than low tax rates, figure out when and how much to withdraw, are forced to draw down at 71 and risk clawbacks that could be avoided. If you’ve got a large portfolio, a TFSA is guaranteed fun money – easily withdrawn for big ticket items like a new vehicle or a bucket list trip with no tax consequences. I’ve said before, if I had access to TFSAs throughout my career I would be a happy camper right now. Unfortunately I was near 50 when it came to be. A person’s perspective changes once you cut loose the regular pay cheque and have to try to get through 30 years of managing your lifestyle spending.
Hi Rob,
I have TFSA, RRSP and Non registered account as well. I have been purchasing VGROs in my non registered account without knowing tax efficiency. You mentioned that Horizon TRI ETF portfolio for tax efficiency.
Do I need to switch to Horizon ETF instead of investing Vanguard in my non registered account?
I’m looking at what to do in my own non-registered account and did take a look at the Horizon HGRO TRI ETF portfolio. The other ETF I’m looking at is XEQT.
I have several concerns about HGRO:
– It is unclear whether there are tax consequences arising due to rebalancing, or something else, that are in addition the tax consequences of the underlying ETFs.
– HGRO appears to have a very small amount of assets under management ($12M), and seems relatively thinly traded. Assuming that’s correct, does this mean other investors know something that we don’t.
– The true cost-of-ownership MER of the fund appears to be significantly above 0.17%. See my other comment about this.
FWIW, I currently own shares of HXT and HXS, purchased prior to the change to corporate class ETFs.
I believe the actual MER of Horizon’s TRI ETF portfolios are significantly above 0.17%. The is because, AFAICT, in addition to the fund-of-fund’s MER charge, the underlying funds are still charging their trading expense ratios. This makes the true MER of the fund significantly higher. From the below info, I infer the true MER is at least 0.45% (0.17 + 0.28), or over 2.5 times the nominal MER of 0.17%.
I am hoping Horizons will clarify the true total cost of ownership of these ETFs.
From Horizon’s own website w.r.t. HGRO:
“HGRO is subject to the fees of its underlying ETFs. Horizons ETFs currently anticipates that the management expense ratio of HGRO will be approximately 0.17%, and will not exceed 0.19%, while the aggregate trading expense ratio of the portfolio of Horizons TRI ETFs held by HGRO will be approximately 0.28%. As trading expense ratios include expenses outside of the Manager’s control, the trading expense ratio of HGRO is subject to change at any time.”
We opened a TFSA with Tangerine years ago when they only offered the 1.07% fee portfolios. Now that they offer the ETF portfolios, is there any reason not to move the TFSA account over — one simple step so we’d lower fees without having to move to another provider altogether? Assuming we can open a TFSA with their ETF offering? Thanks for any insights you can provide.
Hi Robb,
Been re-reading your article and a question came to mind-
VEQT seems to be heavily weighted (29%) towards Canadian Equities vs. VXC which is everything ex-Canada.
MERs are very similar (0.25 v. 0.26) and given both ETFs are 100% equity, I dont know much re-balancing is required, except maybe within the underlying stocks held (12,500 v. 10,655) which I expect VXC does as well. Returns since inception for VEQT are slightly better (12.95% vs. 11.11%), VXC maybe being an older fund.
How would you see going exclusively with VXC instead of VEQT? Does that help de-risk local market preference?
Rick
Hi Rick, actually the opposite is true. A Vanguard study found that some home country bias was optimal for your portfolio, both for lowering volatility and maximizing returns. The reason is because of foreign currency risk. Your foreign equities get converted back into Canadian dollars and the study showed that too much foreign content made the portfolio more risky and volatile.
That makes sense, because we live in Canada and spend Canadian dollars. It’s sensible to have 25-30% of our investments in Canada and in Canadian dollars. That’s precisely what the study found was the sweet spot for home investing bias (25-30%).
That said, if you’re looking for a slightly lower allocation towards Canada then check out iShares’ XEQT, which holds just 23.84% in Canadian equities.
[I realize the conversation is about all-in-one ETFS, but …]
If the major reason is foreign currency risk, then going with a hedged ETF takes care of that, no? FWIW, in my RRSP I have both XUS and XSP in equal values. They’re both S&P500 ETFs, but XSP is hedged and XUS isn’t.
So, is it folly to just forget about Canada altogether and instead devote that share of a portfolio to hedged ETFs, e.g., XSP or XUH, XFH, etc? I’m not even sure you lose much in the way of diversification given that the US and certain other major countries have markets with significantly more diversity to them than the Canadian market.
Any thoughts?
Hi Jim, the problem is that hedged ETFs aren’t reliable (i.e. they don’t perform as you’d expect) due to tracking error and higher volatility. Yes, the same problem as just holding 100% foreign equities (VXC or XAW).
Here’s Dan Bortolotti and Justin Bender on why that’s the case: https://canadiancouchpotato.com/2016/03/07/ask-the-spud-is-it-time-to-hedge-currency/
Hi Rob,
Do you know if there is a charge to switch a TD mutual account into the Goal Asset app?
I have about 25k in a TD balanced growth mutual that I’m looking to do something else with. This could be an option. Alternatively I may set up a e-series portfolio as I believe you can set up pre authorized purchases for those with no fees. Still trying to figure that out. TD sales persons was not helpful the last time I was there and talked in circles.
Any info you can provide would be great.
Hi Robb, great article,
I currently follow a very basic ETF strategy in my RRSP account. I hold XIC, VTI and VXUS in about equal amounts. I very rarely rebalance my portfolio. I usually wait until I have new funds and deploy them where they best bring everything back to the ratios I am aiming for.
Do you think switching to one of the all-in-one equity etfs like VEQT or XEQT would serve me better? Would the slight increase in MER be outweighed by the automatic rebalancing of the all-in-ones? As far as foreign currency exposure goes, are there any pros and cons of holding one of the CAD dollar all-in-ones that has exposure to foreign currency vs holding VTI and VXUS in USD as my foreign currency exposure?
Thanks for your help!
Hi Robb,
Great article. I like XEQT a lot especially due to its rebalancing feature. However, don’t like the higher weight put on TSX equities. Hence, I am thinking of setting up a drip of following with Questrade in non-registered a/c.
80% XAW
10% VCN
10%VAB
Would like your thoughts please. Also how can we convince iShares to regularly rebalance XAW (like XEQT)?
Thanks,
Sam
Hi Sam, thanks. There’s good evidence to suggest Canadian investors should have 20-30% of their portfolio in Canadian equities to reduce volatility from currency risk.
You can certainly set up your own asset mix with multi-ETFs but the trade off is a more complicated portfolio that needs to be monitored and rebalanced every so often. Also, in a taxable account, holding multiple ETFs adds further complexity due to tracking the adjusted cost base of your funds.
Hi Robb,
Your blog has been a game changer in my investment journey! I am about to take the move from mutual funds to self-directed investing in all-in-one ETFs. I am a fairly young investor (31 yo) and have a fairly high risk tolerance but definitely want to include some bonds in my portfolio. I was thinking a 90/10 mix would work well for me. Would it make sense to hold VEQT in my RRSP and VGRO in my TFSA to achieve that?
Hi Sayla, thanks for the kind words!
I don’t typically recommend holding different asset mixes in different account types. That’s because your RRSP and TFSA have different contribution limits and over time your overall asset mix will start to vary widely.
Honestly, the easiest way to achieve the 90/10 asset mix would be to hold equal amounts of VEQT and VGRO in each account.