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:
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Become a member of Great Canadian Rebates and take advantage of online coupons and earn cash back rewards. GCR features over 400 merchants to satisfy all your shopping needs.
Ebates.ca pays you cash back every time you shop online, and it’s FREE to join. Sign up now and when you spend $25 you’ll earn a $5 cash back bonus.
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!
This article was originally published several years ago and written by insurance expert Glenn Cooke. I’ve received many questions from clients and soon-to-be retirees asking about losing their employer health insurance coverage, so I’ve decided to re-publish this excellent piece today.
Many years ago I was working as a student actuary pricing health insurance and dental plans for employers. As I was poring over claims that were not eligible to be paid because they were too large (wait, it gets even more exciting) I had an epiphany. I rushed into my supervisor and declared “this stuff, it isn’t really insurance”!
“No, Glenn”, my knowledgeable actuary supervisor explained, “they’re benefits, not insurance.”
“But everyone thinks they have insurance!” I said. “People think if they get really sick, they will have coverage.” My supervisor’s response was that employers use these benefits to attract and retain employees, and that they are expected by employees – but the employers need to cut costs. And they do so sometimes by reducing benefits that nobody every asks about. People are more worried about whether they have a card they can swipe to pay for their drugs than they are about a cap on their annual claim amount.
Now, before I get specific about health and dental insurance, I want to mention the basic precept of insurance. Insurance is intended to cover catastrophic financial loss. And it should be both – catastrophic and financial. If it’s not financial, it’s not really insurable. And if it’s not catastrophic then there’s no real need for insurance.
With that out of the way, let’s look at what we probably have with our work plans.
Health Insurance?
For the most part, when people talk about health insurance they really mean drug costs. There are other benefits with many health insurance plans like chiropractor coverage, but drug costs are the base coverage.
Can we suffer a catastrophic financial loss with drug coverage? Absolutely.
I can imagine a situation where I or a family member has thousands or tens of thousands in drug and related costs every year. And those costs could be ongoing. Such a problem is certainly financial and easily catastrophic. The perfect fit for insurance.
So you have a plan at work and you have $20,000 of drug claims one year. You’re covered right?
Not so fast. Many work plans have a cap or an upper limit. You may find your work plan has a drug cap of say $5,000. Any costs in excess of that $5,000, and you’ll quickly find out that you don’t actually have insurance (that’s what I was doing in my work above, finding claims in excess of I think it was $2,000, and capping it at that level – because that’s all the insurer was responsible for). How’s that for an unpleasant surprise.
Now the various provinces have some assistance for us in worst case scenarios like this, but I think many of us are making the mistaken assumption that our work plan provides coverage in these situations. If that’s your assumption, I suggest you call your HR department and find out what the actual caps on your drug costs really are.
Real Health Insurance
So you just realized you have a problem – if you actually need catastrophic drug coverage, your work plan may fail you in your hour of need.
The solution? Stop loss coverage. This type of insurance is intended to do just that – put a stop to an ongoing loss. It’s not intended for little claims, just those where you’re really starting to bleed financially. You can also view it as very high deductible coverage. Small claims, no payment. Large claims, it’ll cover everything past a certain point.
You can purchase this type of stop loss coverage privately, outside your employer. Probably the best known provider is Manulife. Their ‘CoverMe’ plan has a standalone option called catastrophic coverage that provides no coverage up to about $5,000 (there’s a couple of options available) and then covers 100% of eligible drug costs past that.
One or two other companies may have similar standalone products, I’ll leave it to you to Google them rather than promoting a list of products. Manulife’s CoverMe catastrophic coverage is available online.
If you are purchasing private health coverage, there’s one very big gotcha to look out for – how are your premiums determined next year? Some companies reserve the right to raise just your premiums. Others say they’ll only raise premiums as a class (or a group). You probably want the second choice. If you have $15,000 in claims one year, do you want to be with a company that has the option of saying here’s your renewal premium – it’s $18,000? Kind of defeats the purpose.
In summary, be careful that you are informed. You may think you have insurance for catastrophic drug coverage but really may not. Get educated on what your work plan provides, and consider purchasing stop loss insurance privately to fill the gaps in your work plan.
Dental Insurance
Do you buy insurance to cover oil changes for your car? It’s kind of a silly idea. You know you need to pay $50 or so every 5,000 to 7,000 km (not spring and fall like one person I know). It’s a routine event you can plan for, and the cost is not overwhelming for most of us.
So, why do you think you need ‘insurance’ for your twice yearly dental cleanings? Twice a year you know you have to pay $150 to get your teeth cleaned. It’s routine, it’s not unexpected (so you can plan for it) and the costs shouldn’t be catastrophic for most of us.
In fact, routine dental treatments such as cleanings simply don’t fit the basic insurance definition of ‘catastrophic’. If you can’t pay the costs of routine dental cleanings, you can start to budget for them so that next time the cash is there. No need to pay the insurance company’s 20% mark-up.
But what about braces? Crowns? Other items. I would say that some of these things can be planned and budgeted for. And they’re probably not catastrophic. They might be expensive and dent our savings or our credit cards, but they shouldn’t break us.
So why does everyone want dental insurance?
The answer is because many of us see this benefit as ‘free’. The employer pays for it so we don’t have to pay for that $150 cleaning – or even budget for it.
Of course it’s not free. The employer is paying your dental costs + 20% in order for you to have this benefit. (The same is true for things like glasses, chiropractors, and similar coverages). So, we’re conditioned to calling this insurance and thinking it’s for worst case scenarios. But again, since when is $150 every six months something we need to have insurance for?
To summarize my initial point – there’s nothing wrong with this type of coverage. But we as consumers should perceive this as a ‘benefit’ of working there, and not so much as insurance.
So what about worst case dental scenarios? Don’t we need insurance for those?
Sure. But what are those scenarios? I’m not a dentist, but unlike drugs, I don’t see a lot of risk in having $20,000 in dental claims, year after year. I personally don’t see the risk. I stand to be corrected, but if I run into a large dental claim, it’s likely to be seen as medical and treated under our provincial health care plan.
Like all insurance types, it pays to take a few minutes to inform yourself of what you’ve got in the way of benefits and what the limits are. The same is true for dental insurance.
If you’ve got it for free at work, hey, snatch it up like it’s the last cookie. If you’re paying for it then it might be worth doing some budgeting to find out what your actual dental costs are, what you figure your risk is for large dental claims, and see if budgeting for those costs is better than insurance.
The ability to do this points significantly to the catastrophic point I mentioned. You can’t ‘budget’ your way around replacing a $500,000 home if it should burn down tomorrow – that kind of thing we need insurance for.
It’s also perhaps worth noting that in other countries such as the US, it’s not just prescription drug coverage that’s important – true health insurance is a must. While we Canadians are fortunate to have government health care, Americans can run into $5,000 in costs just to have a baby, or $100,000 if they have a heart attack. There’s a huge need for insurance as a result.
I’ll close with a short story. When my wife became self-employed she lost her gold plated dental plan. She was bound and determined that we needed dental insurance. You know, EVERYONE has it. So we purchased dental insurance for two years. At the end of two years she added up our insurance costs versus our claims, and our costs were almost exactly 20% higher than our claims.
We no longer carry dental insurance – we budget for it. I’m prepared to pay for braces or other dental emergencies – your risk tolerance may be different but it is something I recommend you at least address.
Last week I previewed Fred Vettese’s completely updated and revised edition of Retirement Income For Life. I’m giving away an extra copy of the book and asked readers to enter to win by sharing when they took (or plan to take) CPP. The results were interesting.
The vast majority of responses were in favour of deferring CPP to age 70 (41%). One quarter of responses favoured taking CPP at age 60. And, nearly one-quarter of responses favoured taking CPP at age 65.
| CPP Start Age | # of Ppl | % of Ppl |
|---|---|---|
| 60 | 62 | 24.9% |
| 61 | 4 | 1.61% |
| 62 | 4 | 1.61% |
| 63 | 4 | 1.61% |
| 64 | 1 | 0.40% |
| 65 | 57 | 22.89% |
| 66 | 4 | 1.61% |
| 67 | 5 | 2.01% |
| 68 | 3 | 1.2% |
| 69 | 3 | 1.2% |
| 70 | 102 | 40.96% |
Deciding when to take CPP is a key consideration of your retirement income plan. What I found interesting about the responses was the rationale or the stories behind these decisions. For instance, there is a lot of misinformation about the Canada Pension Plan: that it is government run (it’s not), that it will become insolvent before you collect benefits (it won’t), and that you could do better investing the money on your own (not likely).
These misconceptions can lead to poor decisions. It’s estimated that just 1% of CPP recipients elect to take their CPP benefits at age 70. Clearly more education is required.
Several of the responses in favour of taking CPP early showed this lack of knowledge or a perceived bias around the CPP program.
Some retired early and took CPP early to “avoid too many zero contribution years.”
-
While it’s true that your calculated retirement pension may decrease with each year of zero contributions, the amount of the decrease is typically less than the amount of the increase you’d get by deferring CPP (0.6% per month to age 65 and 0.7% per month to age 70).
CPP expert Doug Runchey uses the example that by waiting you will receive a larger slice of a smaller pie, but you will almost always receive more pie.
One response called CPP a “legal pyramid scheme.”
- All pensions are claims on the earnings of future generations. Indeed, CPP is a contributory pension plan and so the retirement benefits paid today rely on contributions made by workers plus any investment growth in the plan. There is no doubt that pension plans face increasing pressure with longer life expectancy, a shrinking workforce, and lower expected stock and bond returns in the future. But the health of our CPP is reviewed every three years and the latest actuarial report shows the program is sustainable for the next 75 years.
Several responses from retired readers said they took CPP at 60 and “invested the money in their TFSA.”
- I’m a big fan of retirees continuing to use their TFSA to invest. But it’s unlikely your investments will outperform the guaranteed age-adjustment increase that you’d get by deferring CPP (7.2% per year to age 65 and 8.4% per year to age 70). A better reason to take CPP early is if you need the money to meet your spending needs. Voluntarily taking a pay cut and then trying to invest your way to outperformance is a losing proposition.
Finally, one of the most common reasons for taking CPP early is “when someone close to you happens to die early.”
- This experience has an ‘anchoring’ effect, where you don’t want to end up like your friend or relative (who got nothing after years of contributing) and so you decide to take your CPP benefit as soon as possible. Anchoring to an experience like this can be useful if it prompts us to buy life insurance or update our will. But should it be a factor in your decision to take CPP early? I think not. Your own personal health should play a role, yes. But, assuming you are in relatively good health, the chances are far greater that you live a long life. Indeed, a 60-year-old male has a 50% chance of living to age 89, while a 60-year-old female has a 50% chance of living to age 91.
Overall, I was happy to see the number of people who are at least considering delaying their CPP benefits to age 70. One of the best comments was from reader B. Pratt:
“I plan to take my CPP at age 70. That’s the “plan”. As with all plans, there is a need to monitor and adjust as required. So if I need to start earlier than age 70, I will. One cannot be asleep at the wheel during retirement and it is always good to reevaluate plans at least once a year!”
Retirement Income For Life book giveaway
As promised, I’m going to give away a copy of Mr. Vettese’s newly updated Retirement Income For Life. Many thanks to everyone who took the time to leave such thoughtful comments and share your strategy around when to take CPP.
There were a total of 220 entries into the contest. I used a random number generator to select the winner.
Congratulations to Gin, who commented on October 31 at 2:35 p.m. I will reach out to Gin by email and arrange to send out the book.
Promo of the Week
My friend Barry Choi and I have started a Facebook page called Personal Finance Canada – a private group but an open forum to discuss to discuss money topics and ask your burning questions about personal finance, investing, retirement planning, credit card hacks, travel tips, and more.
Barry and I will moderate the group and answer questions. But we plan to invite other experts to answer questions and post on topics of interest.
So, join the Personal Finance Canada page, invite your friends, say hello, and ask us your burning questions related to personal finance. We’d love to hear from you.
Weekend Reading:
Speaking of Barry Choi, he explained a new perk offered by Air Canada called a Buddy Pass. Think of it like WestJet’s companion voucher, where the second traveller can fly for free, plus fees & taxes.
Our friends at Credit Card Genius introduce the new BMO Eclipse Visa Cards – offering 5x points on everyday spending.
RateSpy.com reports that variable interest mortgage rates have smashed the prime minus 1 barrier. The variable rate to beat is now 1.29%.
Half of Canadian investors aren’t even aware they are paying fees. Larry Bates shares some simple steps that will help investors make more informed decisions.
Steadyhand’s Tom Bradley explains why investors should spend less time trying to avoid the dips and more time preparing for them:
“Being a successful investor is less about being good at reading the economy, timing the market, or picking individual stocks, and a whole lot about dealing with the inevitable dips that lie ahead.”
My Own Advisor blogger Mark Seed shares his financial independence plan. Mark enlisted the help of fee-for-service advisor and PlanEasy.ca founder Owen Winkelmolen to help him map out his early and semi-retirement options. Great stuff!
PWL Capital’s Justin Bender shares the best ETF pairs for tax-loss selling:
Justin’s video tutorial pairs nicely with this post by Dan Bortolotti on finding ETF pairs for tax-loss selling.
What does the stock market do around election day? Of Dollars and Data blogger Nick Maggiulli explains.
Gen Y Money explains the ins and outs of life insurance in Canada – and could it be a bad investment?
Finally, these seven business owners share lessons they’ve learned through success and hardship during the pandemic.
Have a great weekend, everyone!