Top All-in-One ETF – Vanguard’s VBAL

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Top All-in-One ETF – Vanguard’s VBAL

These funds have been called one-stop ETFs, one-ticket solutions, asset-allocation ETFs, and balanced ETFs. For the purpose of this article we’ll call them “All-in-One ETFs”.

Investors have several choices when it comes to all-in-one ETFs. We’ll briefly highlight all of the different options before declaring a winner.

First up is Vanguard, who arguably changed the game for DIY investors (and put robo-advisors on notice) with the introduction of its line-up of all-in-one ETFs. They include:

• Vanguard Conservative Income ETF Portfolio (VCIP) – 20% equities / 80% bonds
• Vanguard Conservative ETF Portfolio (VCNS) – 40% equities / 60% bonds
• Vanguard Balanced ETF Portfolio (VBAL) – 60% equities / 40% bonds
• Vanguard Growth ETF Portfolio (VGRO) – 80% equities / 20% bonds
• Vanguard All-Equity ETF Portfolio (VEQT) – 100% equities

Each of the above ETFs comes with a low-cost MER of 0.25%

Next up is iShares’ asset allocation ETFs:

• iShares Core Balanced ETF Portfolio (XBAL) – 60% equities / 40% bonds
• iShares Core Growth ETF Portfolio (XGRO) – 80% equities / 20% bonds

The iShares funds are expected to have a MER of 0.21%.

BMO also launched three asset allocation ETFs:

• BMO Conservative ETF (ZCON): 40% equities / 60% bonds
• BMO Balanced ETF (ZBAL): 60% equities / 40% bonds
• BMO Growth ETF (ZGRO): 80% equities / 20% bonds

The three BMO all-in-one ETFs come with a MER of 0.20%.

We decided to crown Vanguard the winner of this category due to the breadth of its offerings for the ultra-conservative to ultra-aggressive investor, and everything in between.

I personally switched my previous two-ETF portfolio, consisting of VCN and VXC, to the new 100% equities all-in-one ETF VEQT.

Personal preferences aside, I stand by my statement that most investors should add bonds to their portfolio to smooth out the ride. For that reason, I’ll highlight the classic 60/40 balanced portfolio – VBAL – as the top all-in-one ETF in Canada.

As “set-it-and-forget-it” as investing gets, VBAL offers instant global diversification with more than 12,000 holdings. A fund of funds, VBAL is made up of the following underlying ETFs:

• Vanguard US Total Market Index ETF – 23.8%
• Vanguard Canadian Aggregate Bond Index ETF – 23.6%
• Vanguard FTSE Canada All Cap Index ETF – 17.9%
• Vanguard FTSE Developed All Cap ex North America Index ETF – 13.8%
• Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged – 9.2%
• Vanguard US Aggregate Bond Index ETF CAD-hedged – 7.2%
• Vanguard FTSE Emerging Markets All Cap Index ETF – 4.5%

One area to highlight is the exposure to both U.S. and global bonds, which most investors can’t get in a typical ETF or mutual fund portfolio.

How to Invest in ETFs

Now you have a list of the best Canadian ETFs, but how do you go about investing in them? That depends on whether you want to be a do-it-yourself investor or want to take a more hands-off approach to investing. Either way, here’s a brief explanation of how to invest.

For DIY investors, you’ll want to open a discount brokerage account. The lowest cost option is at Questrade, where you can purchase ETFs for free and there are no annual fees no matter what your account size. Their other trading fees range from $4.95 to $9.95, and their account minimum is $1,000. If you transfer your RRSPs or TFSAs from another institution, Questrade will cover your transfer fees. See our full Questrade review for all the nitty-gritty details.

Once your discount brokerage account is set-up, you’ll need to fund the account with a contribution from your bank. You can do this with a one-time lump sum or with regular automatic contributions.

From there you’ll want to select your ETF, or portfolio of ETFs, by entering the ticker symbol(s) and purchasing the appropriate number of units. Unless you hold an all-in-one balanced ETF, you’ll need to do your own portfolio rebalancing. Decide on some rules. Let’s say your target allocation is 33% Canadian, 33% U.S., 33% International. You can either rebalance whenever you add new money by contributing to the fund that is lagging behind. Or you can rebalance once or twice a year by selling some of the top performing fund and buying more of the fund with the poorest returns. Buy low, sell high. That’s the name of the game.

For investors looking for some hand-holding through the process but who still want to save on fees, a robo-advisoris worth a look. Robo-advisors, or digital advisors, allow investors to build a portfolio of low-cost ETFs and will automatically rebalance your portfolio as you add new money or whenever your portfolio drifts away from its target allocation. Most robo advisors charge a management fee of around 0.40 – 0.50% to monitor your portfolio.

I’d be remiss if I didn’t mention that if you’re interested in a basic ETF portfolio, you should likely consider one of Canada’s robo advisors, such as Wealthsimple (our top pick) and BMO SmartFolio. These relatively new Fintech darlings are changing the way the financial management game is being played in Canada.