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Asset allocation ETFs: Where to start?

To the point Markets evolve, so do financial products. Exchange traded funds or ETFs were born and asset allocation ETFs with them.

Introduction to ETFs

The last 50 years have seen several major changes in stock market investing. This activity, which was once reserved for a wealthy clientele, is now accessible to everyone through online brokerage platforms. Stock market investment trends have also undergone a major transformation since the early 1970s. Indeed, there has been a shift from an “active” to a “passive” investment strategy. The “active” approach is based on the regular intervention of a financial professional, who will study and select funds according to his research and market studies. The passive strategy is defined by an automated tracking of major stock market indices (S&P 500 and TSX 60 among others) through mathematical logarithms. This technique also tends to limit human intervention as much as possible. This transition can be attributed in part to financial magnate and founder of Vanguard Financial Group, John C. Bogles. The latter wanted to “democratize” stock market investment by making it accessible to all small taxpayers through a substantial reduction in administration fees. He also created the first mutual fund in 1975. This innovative passively managed fund soon gained notoriety, contributing to the creation of thousands of similar funds in subsequent years. More recently, exchange-traded funds, more commonly known as ETFs, have entered the market. These funds are based on mutual funds, but offer even lower management fees and greater exposure to different industries. In this vein, asset allocation ETFs have emerged. They offer diversified portfolios containing stocks and bonds with exposure to Canadian, U.S., European and emerging markets. In order to better understand this new financial product, we will first define the general concept of asset allocation ETFs and examine their main characteristics. Second, we will present the online brokerage platforms where asset allocation ETFs can be purchased. We will then profile the top 4 asset allocation ETF providers in Canada. Finally, we will take a closer look at the asset allocation ETFs available to Canadians.

What is an asset allocation ETF?

Asset allocation ETFs are actually a collection of several separate ETFs that track global markets. These ETFs created in 2019, mimic the economic growth of these markets by tracking the major stock indices of several countries such as the S&P 500 (U.S.), TSX 60 (Canada), DAX 30 (Germany) and Nikkei 225 (Japan) among others. These stock indices track the best performing companies in the country. This process is made possible by the use of complex mathematical logarithms that are updated regularly. More importantly, these ETFs offer exposure to multiple economic sectors. We are talking about the banking, manufacturing, energy, environment and technology sectors, among others. This diversification of portfolios is synonymous with stability for many, while it also reduces the risks associated with the stock market. Indeed, it is rather rare that each sector falls at the same time, which reduces the risk of massive losses. These ETFs are also innovative in terms of asset balancing. In this regard, it should be mentioned that before the introduction of asset allocation ETFs, investors had to manually calibrate their assets each month to maintain a balance between domestic and international stocks. This laborious process for many is now a thing of the past with these ETFs. The balancing of assets is now automated and carried out directly by the financial institution. Finally, the management fees associated with these ETFs are very low, generally between 0. %.and 0. %.. These fees are very competitive with mutual funds, which offer management fees of between 2% and 2. %. %. It should also be noted that asset balancing is included in these management fees.

The main online brokerage platforms

Platforms Accounts offered Transaction fees Sale of ETFs Special offers
BMO Equity Line RRSP TFSA Non-registered account RESP 9.95 per transaction Yes Free trades when you buy multiple ETFs   Asset allocation ETFs are one of them
Desjardins online brokerage RRSP TFSA Non-registered account RESP 0 to 29 transactions permonth: $4.95 30+ transactions per month: $0.75 Yes   No
RBC Direct Investing RRSP TFSA Non-registered account RESP Regular: $9.95 per transaction 150+ transactions per quarter: $6.95 Yes No
TD Direct Investing RRSP TFSA Non-registered account RESP Regular: $9.99 per transaction 150+ transactions per quarter: $7.00 Yes No
National Bank Direct Brokerage RRSP TFSA Non-registered account RESP Regular: $6.95 per transaction Young Investors (18-30 years old): $4.95 per transaction Active investors (100+ trades per quarter): $0.95 per trade Yes Free purchase of Canadian and U.S. ETFs if more than 100 ETF units are traded
Questrade RRSP TFSA RESP Free Yes All ETFs are free to purchase
Wealthsimple Trade RRSP TFSA Non-registered account   Free Yes All ETFs are free to purchase
Qtrade RRSP TFSA Non-registered account Regular: $8.75 per transaction 150+ transactions per quarter: $6.95 per transaction Yes The first 100 ETFs are free to purchase
Interactive Brokers RRSP TFSA Non-registered account 0.01 per share Minimum of $1.00 per order Maximum of 0.5% of the total transaction Yes No
Virtual Brokers RRSP TFSA Non-registered account RESP Regular: $7.99 for each transaction Yes Buy ETFs for free
CIBC pro-investor RRSP TFSA Non-registered account RESP Regular: $6.95 per transaction Students: $5.95 per $150 transaction 150+ transactions per quarter: $4.95 per transaction Yes No
HSBC Invest-direct RRSP TFSA Non-registered account RESP Regular: $6.88 per transaction 150+ transactions per quarter: $4.88 per transaction Yes No
Laurentian Bank Brokerage RRSP TFSA Non-registered account RESP Regular: $9.95 per transaction Yes No

Online brokerage platforms at a glance

To purchase asset allocation ETFs, you will first need to open an online brokerage account through Canadian bank platforms or independent firms. The major Canadian banking platforms are as follows

  • BMO stock line,
  • Disnat (Desjardins),
  • RBC Direct Investing,
  • TD Direct Investing,
  • National Bank Direct Brokerage,
  • CIBC pro-investor and
  • HSBC investDirect.

They are directly attached to a physical institution and are members in good standing of the Canadian Savings Protection Fund and the Investment Industry Regulatory Organization of Canada. Each provider offers fairly similar benefits. However, we note that National Bank and BMO stand out from their competitors because of their special offers on ETF trades. The National Bank eliminates the ETF purchase fee if the transaction exceeds 100 units. BMO goes one better by subtracting transaction fees from the purchase of ETFs from a comprehensive list of 100 securities. Note that all asset allocation ETFs are included in this list, so your transactions will be free! The main independent companies are as follows:

  • Questrade,
  • Wealthsimple Trade,
  • Qtrade,
  • Interactive brokers and
  • Virtual Brokers.

They are not directly attached to a physical institution and operate mostly online without a head office. These platforms are all members in good standing of the Canadian Savings Protection Fund and the Investment Industry Regulatory Organization of Canada. Independent platforms differ from banking platforms in their low transaction costs. Also, many of them offer free trades on all ETFs with no strings attached. These include Questrade, Wealthsimple Trade and Virtual Brokers. It should be noted, however, that some independent firms do not offer all types of registered (RRSP, TFSA, RESP) and non-registered accounts. At the moment Questrade and Wealthsimple Trade appear to us as the most attractive independent platforms for a new investor.

Overview of the top asset allocation ETF providers in Canada

Once you have selected your brokerage platform, you will need to choose an asset allocation ETF from a designated provider. There are currently four registered providers of asset allocation ETFs in Canada: Vanguard, iShares, BMO and Horizons. We will briefly introduce these four suppliers here.

Vanguard

This American financial group, founded by John C. Bogles (creator of the first mutual fund), was created in 1975. It soon gained popularity, developing numerous international branches, particularly in Canada. Today Vanguard has an impressive $7 trillion in assets under management, mostly in mutual funds and exchange traded funds. In 2019, Vanguard Canada is launching the first asset allocation ETFs based on U.S. funds. These innovative portfolios offer exposure to international economic markets at different risk levels. Thus, a specific proportion of equities (higher risk) and bonds (lower risk) is offered to investors through five portfolios. We are talking about :

  • VEQT (100% shares),
  • VGRO (80% equities, 20% bonds),
  • VBAL (60% equities, 40% bonds),
  • VCNS (40% equities, 60% bonds) and
  • VCIP (20% equities, 80% bonds).

More recently, a sixth ETF was created, VRIF, composed of 50% stocks and 50% bonds.

iShares

IShares is a sub-division of the American financial group BlackRock specializing in ETF management. BlackRock has more than $7.3 trillion in assets under management, making it the world’s largest investment management firm. IShares entered the Canadian market in 2006. The asset allocation ETF offering is similar to that offered by Vanguard, with five options available to investors. Here are the main portfolios proposed:

  • XEQT (100% equity),
  • XGRO (80% equities, 20% bonds),
  • XBAL (60% equities, 40% bonds),
  • XCNS (40% equities, 60% bonds) and
  • XINC (20% equities, 80% bonds).

BMO

BMO is a Montreal-based financial services company, now relocated to Toronto. BMO has more than $970 billion in assets under management. These activities are not limited to Canada, with branches in the United States, China, England, India and Australia among others. The Canadian asset allocation ETF offering dates back to 2020 and has three options:

  • ZGRO (80% equities, 20% bonds),
  • ZBAL (60% equities, 40% bonds),
  • ZCON (40% stocks, 60% bonds).

Horizons

Horizons is a Canadian sub-division of the North Korean financial group Mirae, specializing in ETF management. Mirae has over $563 billion in assets under management. Horizons was founded in 2005 as BetaPro Management Inc. The organization currently has over $14 billion in assets under management The asset allocation ETF offering is similar to that of other providers, with three options available to investors. Here are the main portfolios proposed:

  • HGRO (100% shares),
  • HBAL (70% equities, 30% bonds) and
  • HCON (50% stocks, 50% bonds).

Advantages of these 4 ETF investment funds:

  • Portfolios with exposure to multiple international markets
  • Very low management fees
  • Automatic portfolio balancing
  • Diversification of assets across multiple sectors

Asset allocation ETFs under the microscope

We now have a comprehensive view of the asset allocation ETF offering. The next step is to carefully analyze the content of these ETFs and determine their advantages and disadvantages. The following is a comprehensive review of these funds.

Institution Products Assets under management
        Vanguard     VEQT 1.1 billion
VGRO 2.5 billion
VBAL 1.8 billion
VCNS 509.2 million
VCIP 208 million
VRIF 247.1 million
      iShares   XEQT 481.72 million
XGRO 926.58 million
XBAL 714.72 million
XCNS 68.56 million
XINC 40.82 million
    BMO ORGA 105.17 million
ZBAL 106.14 million
ZCON 41.33 million
    Horizons HGRO 84.68 million
HBAL 100.06 million
HCON 38.20 million

Vangard

Vanguard Asset Allocation ETFs Comparison

  VEQT VGRO VBAL VRIF VCNS VCIP
Distribution
100% equity
80 % shares 20% bonds 60 % shares 40% bonds 50% shares 50% bonds 40% shares 60% bonds 20 % shares 80% bonds
Formation of ETFs 4 ETFS : 1) Vanguard US Total Market Index ETF (41.2%) 2) Vanguard FTSE Canada All Cap Index ETF (30.4%) 3) Vanguard FTSE Developed All Cap ex North America Index ETF (20.6%) 4) Vanguard FTSE Emerging Markets All Cap Index ETF (7.8%) 7 ETFS : 1) Vanguard US Total Market Index ETF (33.2%) 2) Vanguard FTSE Canada All Cap Index ETF (24.4%) 3) Vanguard FTSE Developed All Cap ex North America Index ETF (16.6%) 4) Vanguard Canadian Aggregate Bond Index ETF (11.6%) 5) Vanguard FTSE Emerging Markets All Cap Index ETF (6.2%) 6) Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (4.5%) 7) Vanguard US Aggregate Bond Index ETF CAD-hedged (3.5%) 7 ETFS 1) Vanguard US Total Market Index ETF (24.5%) 2) Vanguard Canadian Aggregate Bond Index ETF (23.4%) 3) Vanguard FTSE Canada All Cap Index ETF (18.7%) 4) Vanguard FTSE Developed All Cap ex North America Index ETF (12.3%) 5) Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (9.1%) 6) Vanguard US Aggregate Bond Index ETF CAD-hedged (7.2%)7) Vanguard FTSE Emerging Markets All Cap Index ETF (4.8%) 8 ETFS : 1) Vanguard Canadian Corporate Bond Index ETF (27.8%) 2) Vanguard US Aggregate Bond Index ETF CAD-hedged (19.8%)) 3) Vanguard FTSE Developed All Cap ex North America Index ETF (18.7%) 4) Vanguard US Total Market Index ETF (15.6%) 5) Vanguard FTSE Canada All Cap Index ETF (7.1%) 6) Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (6.9%) 7) Vanguard FTSE Emerging Markets All Cap Index ETF (3.1%) 8) Vanguard Canadian Aggregate Bond Index ETF (1.0%) 7 ETFS : 1) Vanguard Canadian Aggregate Bond Index ETF (35.1%) 2) Vanguard US Total Market Index ETF (16.4%) 3) Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (13.7%) 4) Vanguard FTSE Canada All Cap Index ETF (12.5%) 5) Vanguard US Aggregate Bond Index ETF CAD-hedged (10.8%) 6) Vanguard FTSE Developed All Cap ex North America Index ETF (8.3%) 7) Vanguard FTSE Emerging Markets All Cap Index ETF (3.2%) 7 ETFS : 1) Vanguard Canadian Aggregate Bond Index ETF (46.9%) 2) Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (18.3%) 3) Vanguard US Aggregate Bond Index ETF CAD-hedged (14.3%) 4) Vanguard US Total Market Index ETF (8.4%) 5) Vanguard FTSE Canada All Cap Index ETF (6.3%)) 6) Vanguard FTSE Developed All Cap ex North America Index ETF (4.2%) 7) Vanguard FTSE Emerging Markets All Cap Index ETF (1.6%)
Management fees 0,25 % 0,25 % 0,25 % 0,29 % 0,25 % 0,25 %

Vanguard Asset Allocation ETFs in detail

Here is a summary of the main funds offered by Vanguard: VEQT (100% equities), VGRO (80% equities, 20% bonds), VBAL (60% equities, 40% bonds), VRIF (50% equities, 50% bonds), VCNS (40% equities, 60% bonds) and VCIP (20% equities, 80% bonds)   VEQT: This ETF is 100% equity. This is the most aggressive ETF offered by Vanguard. The management fee is 0.25% and the return in 2020 was 11.43%. Components: Vanguard US Total Market Index ETF (41.2% ): US Equity Index Vanguard FTSE Canada All Cap Index ETF (30.4% ): Canadian equity index Vanguard FTSE Developed All Cap ex North America Index ETF (20.6%): Index of developed countries outside North America Vanguard FTSE Emerging Markets All Cap Index ETF (7.8%): Emerging Markets Equity Index   VGRO: This fund consists of 80% equities and 20% bonds. It is a portfolio focused on medium and long-term growth. The management fee is 0.25% and the return in 2020 was 10.88%. Components: Vanguard US Total Market Index ETF (33.2%): US Equity Index Vanguard FTSE Canada All Cap Index ETF (24.4%): Canadian Equity Index Vanguard FTSE Developed All Cap ex North America Index ETF (16.6%): Developed equity index Vanguard Canadian Aggregate Bond Index ETF (11.6%): Canadian Bond Index Vanguard FTSE Emerging Markets All Cap Index ETF (6.2%): Emerging Markets Equity Index Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (4.5%): International Bond Index Vanguard US Aggregate Bond Index ETF CAD-hedged (3.5%): US Bond Index   VBAL: This fund is composed of 60% equities and 40% bonds. This portfolio is focused on a balanced distribution that limits risk exposure. The management fee is 0.25% and the return in 2020 was 10.20 Components: Vanguard US Total Market Index ETF (24.5%): US Equity Index Vanguard Canadian Aggregate Bond Index ETF (23.4%): Canadian Bond Index Vanguard FTSE Canada All Cap Index ETF (18.7%): Canadian equity index Vanguard FTSE Developed All Cap ex North America Index ETF (12.3%): Index of developed countries outside North America Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (9.1%): Canadian Bond Index Vanguard US Aggregate Bond Index ETF CAD-hedged (7.2%): US Bond Index Vanguard FTSE Emerging Markets All Cap Index ETF (4.8%): Emerging Markets Equity Index   VRIF: This fund offers a distribution of 50% equities and 50% bonds. This portfolio aims to achieve a balance between regular returns and asset security. The management fee is 0.25% and returns in 2020 are unavailable as the fund was created in 2021. Components: Vanguard Canadian Corporate Bond Index ETF (27.8%): Canadian Bond Index Vanguard US Aggregate Bond Index ETF CAD-hedged (19.8%): US Bond Index Vanguard FTSE Developed All Cap ex North America Index ETF (18.7%): Index of developed countries outside North America Vanguard US Total Market Index ETF (15.6%): US Equity Index Vanguard FTSE Canada All Cap Index ETF (7.1%): Canadian equity index Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (6.9%): International Bond Index (non US) Vanguard FTSE Emerging Markets All Cap Index ETF (3.1%): Emerging Markets Equity Index Vanguard Canadian Aggregate Bond Index ETF (1.0%): Canadian Bond Index   VCNS: This fund is composed of 40% equities and 60% bonds. This portfolio takes a conservative approach with the aim of achieving moderate returns while limiting the risks involved. The management fee is 0.25% and the annual return in 2020 was 9. %.. Components: Vanguard Canadian Aggregate Bond Index ETF (35.1%): Canadian Bond Index Vanguard US Total Market Index ETF (16.4%): US Equity Index Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (13.7%): International Bond Index (non US) Vanguard FTSE Canada All Cap Index ETF (12.5%): Canadian Equity Index Vanguard US Aggregate Bond Index ETF CAD-hedged (10.8%): US Bond Index Vanguard FTSE Developed All Cap ex North America Index ETF (8.3%): Index of developed countries outside North America Vanguard FTSE Emerging Markets All Cap Index ETF (3.2%): Emerging Markets Equity Index   VCIP: This fund consists of 20% equities and 80% bonds. This portfolio advocates prudence and protection of the invested capital. The management fee is 0.25% %.and the annualized return in 2020 was 8. %.. Components: Vanguard Canadian Aggregate Bond Index ETF (46.9%): Canadian Bond Index Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged (18.3%): International Bond Index (non US) Vanguard US Aggregate Bond Index ETF CAD-hedged (14.3%): US Bond Index Vanguard US Total Market Index ETF (8.4%): US Equity Index Vanguard FTSE Canada All Cap Index ETF (6.3%): Canadian equity index Vanguard FTSE Developed All Cap ex North America Index ETF (4.2%): Index of developed countries outside North America Vanguard FTSE Emerging Markets All Cap Index ETF (1.6%): Emerging Markets Equity Index

Disadvantages of this ETF:

  • The choice of stocks and bonds cannot be personalized; it is a choice made by Vanguard
  • Overrepresentation in Canadian stocks and bonds (home bias)

IShares

iShares Asset Allocation ETFs Comparison

  XEQT XGRO XBAL XCNS XINC
Distribution
100% equity
80 % shares 20% bonds 60 % shares 40% bonds 40% shares 60% bonds 20 % shares 80% bonds
Formation of ETFs 4 ETFS: 1) Ishares Core S&PTotal US stock (46.88%) 2) Ishares S&P – TSX capped composite (24.73%) 3) Ishares MSCI EAFE IMI index (23.18%) 4) Ishares Core MSCI Emergin markets (4.87%) 8 ETFS: 1) Ishares Core S&PTotal US stock (46.88%) 2) Ishares S&P – TSX capped composite (20.67%) 3) Ishares MSCI EAFE IMI index (19.91%) 4) Ishares Core CAD Univ Bond Index (11.60%) 5) Ishares Core MSCI Emergin markets (3.94%) 6) Ishares Core CAD ST Core Bond Index (2.97%) 7) Ishares Broad USD investment G (1.92%) 8) Ishares US treasury bond ETF (1.86%) 8 ETFS: 1) Ishares Core S&PTotal US stock (28.56%) 2) Ishares Core CAD Unive Bond index ETF (23.21%) 3) Ishares S&P – TSX capped composite (16.21%) 4) Ishares MSCI EAFE IMI index (15.34%) 5) Ishares Core CAD St Cor Bond index (5.89%) 6) Ishares US treasury bond ETF (3.94%) 7) Ishares Broad USD investment G (3.70%) 8) Ishares Core MSCI Emerging markets (2.99%) 8 ETFS: 1) Ishares Core CAD Unive Bond index ETF (37.46%) 2) Ishares Core S&P Total US stock (19.15%) 3) Ishares MSCI EAFE IMI index (10.74%) 4) Ishares S&P – TSX capped composite (10.66%) 5) Ishares Core CAD St Cor Bond index (8.76%) 6) Ishares US treasury bond ETF (5.63%) 7) Ishares Broad USD investment G (5.62%) 8) Ishares Core MSCI Emerging markets (1.97%) 8 ETFS: 1) Ishares Core CAD Unive Bond index ETF (50.54%) 2) Ishares Core CAD St Cor Bond index (12.62%) 3) Ishares Core S&P Total US stock (9.64%) 4) Ishares US treasury bond ETF (7.76%) 5) Ishares Broad USD investment G (7.74%) 6) Ishares S&P – TSX capped composite (5.46%) 7) Ishares MSCI EAFE IMI index (5.35%) 8) Ishares Core MSCI Emerging markets (0.99%)
Management fees 0,20 % 0,20 % 0,20 % 0,20 % 0,20 %

iShares Asset Allocation ETFs in detail

Ishares’ main ETFs are: XEQT (100% equities), XGRO (80% equities, 20% bonds), XBAL (60% equities, 40% bonds), XCNS (40% equities, 60% bonds) and XINC (20% equities, 80% bonds).   XEQT: This fund is fully invested in equities. This is the most aggressive portfolio offered by IShares. The management fee is 0. %.and the annualized return was 11. %.. Components: Ishares Core S&PTotal US stock (46.88%): US equity index Ishares S&P – TSX capped composite (24.73%): Canadian Equity Index Ishares MSCI EAFE IMI index (23.18%): Developed equity index Ishares Core MSCI Emerging markets (4.87%): Emerging markets equity index   XGRO: This is a fund made up of 80% equities and 20% bonds. The portfolio is geared towards steady growth over the medium to long term. The management fee is 0. %.and the annual return in 2020 was 11. %.. Components: Ishares Core S&PTotal US stock (46.88% ): US equity index Ishares S&P – TSX capped composite (20.67%): Canadian equity index Ishares MSCI EAFE IMI index (19.91%): Index of developed countries outside North America Ishares Core CAD Univ Bond Index (11.60%): Canadian Bond Index Ishares Core MSCI Emerging markets (3.94%): Emerging markets equity and bond index Ishares Core CAD ST Core Bond Index (2.97%): Canadian Short Term Bond Index Ishares Broad USD investment G (1.92%): US bond index Ishares US treasury bond ETF (1.86%): US treasury bond index   XBAL: This fund is composed of 60% equities and 40% bonds. This portfolio is focused on a balanced distribution that limits risk exposure. The management fee is 0. %.and the return in 2020 was 10. %.. Components: Ishares Core S&PTotal US stock (28.56%): US equity index Ishares Core CAD Unive Bond index ETF (23.21%): Canadian bond index Ishares S&P – TSX capped composite (16.21%): Canadian Equity Index Ishares MSCI EAFE IMI index (15.34%): Index of equities and bonds from countries outside North America Ishares Core CAD St Cor Bond Index (5.89%): Canadian Bond Index Ishares US treasury bond ETF (3.94%): US treasury bond index Ishares Broad USD investment G (3.70%): US bond index Ishares Core MSCI Emerging markets (2.99%): Emerging markets equity and bond index   XCNS: This fund is composed of 40% equities and 60% bonds. This conservative portfolio tries more than anything else to have a stable return while limiting losses. The management fee is 0.20% and the annualized return in 2020 was 10.33 Components: Ishares Core CAD Unive Bond index ETF (37.46%): Canadian bond index Ishares Core S&P Total US stock (19.15%): US equity index Ishares MSCI EAFE IMI index (10.74%): International equity and bond index outside North America Ishares S&P – TSX capped composite (10.66%): Canadian Equity Index Ishares Core CAD St Cor Bond Index (8.76%): Canadian Bond Index Ishares US treasury bond ETF (5.63%): US treasury bond index Ishares Broad USD investment G (5.62%): US bond index Ishares Core MSCI Emerging markets (1.97%): Emerging markets equity and bond index   XINC: This fund is composed of 20% equities and 80% bonds. This portfolio advocates prudence and protection of the invested capital. The management fee is 0. %.and the annualized return in 2020 was 9. %.. Components: Ishares Core CAD Unive Bond index ETF (50.54%): Canadian bond index Ishares Core CAD St Cor Bond Index (12.62%): Canadian Bond Index Ishares Core S&P Total US stock (9.64%): US equity index Ishares US treasury bond ETF (7.76%): US treasury bond index Ishares Broad USD investment G (7.74%): US bond index Ishares S&P – TSX capped composite (5.46%): Canadian equity index Ishares MSCI EAFE IMI index (5.35%): International equity and bond index outside North America Ishares Core MSCI Emerging markets (0.99%): Emerging markets equity and bond index

Disadvantages of this ETF:

  • The choice of stocks and bonds cannot be personalized; it is a choice made by IShares
  • Over-representation of US stocks and bonds, which causes a high dependence on US market fluctuations

BMO

BMO Asset Allocation ETF Comparison

  ORGA VBAL VCNS
Distribution 80 % shares 20% bonds 60 % shares 40% bonds 40% shares 60% bonds
Formation of ETFs 9 ETFS: 1) BMO S&P 500 index ETF (31.83%) 2) BMO S&P -TSX capped composite index ETF (21.13%) 3) BMO MSCI EAFE index ETF (17.68%) 4) BMO aggregate bond index ETF (13.29%) 5) BMO MSCI emerging markets index etf (7.46%) 6) BMO government BOND index ETF (3.81%0 7) BMO S&P US mid cap index ETF (2.03%) 8) BMO mid-term US IG corporate Bond hedged CAD index ETF (1.79%) 9) BMO S&P US small cap index ETF (0.90%) 9 ETFS: 1) BMO aggregate bond index ETF (26.90%) 2) BMO S&P 500 index ETF (24.15%) 3) BMO S&P -TSX capped composite index ETF (16.03%) 4) BMO MSCI EAFE index ETF (13.31%) 5) BMO government BOND index ETF (7.71%) 6) BMO MSCI emerging markets index etf (5.66%) 7) BMO mid-term US IG corporate Bond hedged CAD index ETF (3.86%) 8) BMO S&P US mid cap index ETF (1.54%) 9) BMO S&P US small cap index ETF (0.69%) 9 ETFS: 1) BMO aggregate bond index ETF (40.82%) 2) BMO S&P 500 index ETF (16.22%) 3) BMO government BOND index ETF (11.70%) 4) BMO S&P -TSX capped composite index ETF (10.80%) 5) BMO MSCI EAFE index ETF (8.97%) 6) BMO mid-term US IG corporate Bond hedged CAD index ETF (5.85%) 7) BMO MSCI emerging markets index etf (3.81%) 8) BMO S&P US mid cap index ETF (1.07%) 9) BMO S&P US small cap index ETF (0.47%)
Management fees 0,20 % 0,20 % 0,20 %

BMO Asset Allocation ETFs in detail

Here’s a quick reminder of BMO’s top asset allocation ETFs: ZGRO (80% stocks, 20% bonds), ZBAL (60% stocks, 40% bonds), ZCON (40% stocks, 60% bonds).   ZGRO: This fund consists of 80% equities and 20% bonds. This bold portfolio aims for medium to long-term growth. The management fee is 0. %.and the annual return in 2020 was 10. %.. Components: BMO S&P 500 Index ETF (31.83%): US Equity Index BMO S&P -TSX capped composite index ETF (21.13%): Canadian equity index BMO MSCI EAFE Index ETF (17.68%): International equity and bond index outside North America BMO Aggregate Bond Index ETF (13.29%): Canadian Bond Index BMO MSCI emerging markets index etf (7.46%): Emerging markets equity and bond index BMO government BOND index ETF (3.81%): Canadian government bond index BMO S&P US mid cap index ETF (2.03%): US mid cap equity index BMO Mid-term US IG Corporate Bond Hedged CAD Index ETF (1.79%): U.S. Corporate Bond Index BMO S&P US small cap index ETF (0.90%): US small cap index   ZBAL: This fund is composed of 60% equities and 40% bonds. This portfolio is focused on a balanced distribution that limits risk exposure. The management fee is 0.20% and the return in 2020 was 10.25 Components: BMO Aggregate Bond Index ETF (26.90%): Canadian Bond Index BMO S&P 500 Index ETF (24.15%): US Equity Index BMO S&P -TSX Capped Composite Index ETF (16.03%): Canadian Equity Index BMO MSCI EAFE Index ETF (13.31%): International equity and bond index outside North America BMO government BOND index ETF (7.71%): Canadian government bond index BMO MSCI emerging markets index etf (5.66%): Emerging markets equity and bond index BMO Mid-term US IG Corporate Bond Hedged CAD Index ETF (3.86% ): U.S. Corporate Bond Index BMO S&P US mid cap index ETF (1.54% ): US mid cap equity index BMO S&P US small cap index ETF (0.69%): US small cap equity index   ZCON: This fund is composed of 40% stocks and 60% bonds. This conservative portfolio tries more than anything else to have a stable return while limiting losses. The management fee is 0. %.and the annualized return for the last year was 9. %.. Components: BMO Aggregate Bond Index ETF (40.82%): Canadian Bond Index BMO S&P 500 Index ETF (16.22%): US Equity Index BMO government BOND index ETF (11.70%): Canadian government bond index BMO S&P -TSX Capped Composite Index ETF (10.80%): Canadian Equity Index BMO MSCI EAFE Index ETF (8.97%): International equity and bond index outside North America BMO Mid-term US IG Corporate Bond Hedged CAD Index ETF (5.85%): U.S. Corporate Bond Index BMO MSCI emerging markets index etf (3.81%): Emerging Markets Equity and Bond Index BMO S&P US mid cap index ETF (1.07%): US mid cap equity index BMO S&P US small cap index ETF (0.47%): US small cap equity index

Disadvantages of this ETF:

  • The choice of stocks and bonds cannot be personalized; it is a choice made by BMO
  • Less diversified portfolios than Vanguard and IShares resulting in lower returns

Horizons

Horizons Asset Allocation ETFs Comparison

  VEQT VGRO VRIF
Distribution
100% equity
70 % shares 30% bonds 50% shares 50% bonds
Formation of ETFs 6 ETFS: 1) Horizons US large cap index ETF (32.86%) 2) Horizons NASDAQ-100 index ETF (21.42%) 3) Horizons S&P – TSX 60 index ETF (17.64%) 4) Horizons INTL developed markets (13.96%) 5) Horizons Europe 50 index ETF (7.42%) 6) Horizons Emerging markets ETF (6.43%) 8 ETFS: 1) Horizons US large cap index ETF (23.9%) 2) Horizons CDN select universe ETF (18.5%) 3) Horizons NASDAQ-100 index ETF (16.98%) 4) Horizons S&P – TSX 60 index ETF (11.26%) 5) Horizons INTL developed markets (10.14%) 6) Horizons US 7-10 year treasury ETF (8.91%) 7) Horizons Europe 50 index ETF (5.41%) 8) Horizons Emerging markets ETF (4.68%) 8 ETFS: 1) Horizons CDN select universe ETF (31.63%) 2) Horizons US large cap index ETF (17.52%) 3) Horizons US 7-10 year treasury ETF (15.25%) 4) Horizons NASDAQ-100 index ETF (12.47%) 5) Horizons S&P – TSX 60 index ETF (8.25%) 6) Horizons INTL developed markets (7.44%) 7) Horizons Europe 50 index ETF (3.97%) 8) Horizons Emerging markets ETF (3.42%)
Management fees 0,28 % 0,20 % 0,18 %

Horizons Asset Allocation ETFs in detail

Finally, here are the main funds offered by Horizons: HGRO (100% stocks), HBAL (70% stocks, 30% bonds) and HCON (50% stocks, 50% bonds).   HGRO: This fund consists entirely of equities. This is the most daring portfolio offered by Horizons. The management fee is 0.28% and the annualized return was 17.29%. Components: Horizons US large cap index ETF (32.86%): US equity index Horizons NASDAQ-100 Index ETF (21.42%): U.S. equity index (technology index) Horizons S&P TSX 60 Index ETF (17.64%): Canadian Equity Index Horizons INTL developed markets (13.96%): Developed countries equity index outside North America Horizons Europe 50 Index ETF (7.42%): European Power Equity Index Horizons Emerging markets ETF (6.43%); Emerging Markets Equity Index   HBAL: This fund is 70% equities and 30% bonds. This portfolio is focused on medium to long-term growth. The management fee is 0. %.and the return in 2020 was 14. %.. Components: Horizons US large cap index ETF (23.9%): US large cap equity index Horizons CDN select universe ETF (18.5%): Canadian equity and bond index Horizons NASDAQ-100 Index ETF (16.98%): U.S. equity index derived from the NASDAQ (technology index) Horizons S&P TSX 60 Index ETF (11.26%): Canadian Equity Index Horizons INTL developed markets (10.14%): Developed markets equity and bond index Horizons US 7-10 year treasury ETF (8.91%): US 7-10 year treasury bond index Horizons Europe 50 Index ETF (5.41%): Index of European equities and bonds Horizons Emerging markets ETF (4.68%): Emerging markets equity and bond index   HCON: This fund consists of 50% equities and 50% bonds. This portfolio is focused on a balanced distribution that limits risk exposure. The management fee is 0. %.and the return in 2020 was 13. %.. Components: Horizons CDN select universe ETF (31.63%): Canadian equity and bond index Horizons US large cap index ETF (17.52%): US large cap equity index Horizons US 7-10 year treasury ETF (15.25%): US 7-10 year bond index Horizons NASDAQ-100 Index ETF (12.47%): NASDAQ U.S. Equity Index (technology index) Horizons S&P TSX 60 Index ETF (8.25%): Canadian Equity Index Horizons INTL developed markets (7.44%): Developed markets equity and bond index Horizons Europe 50 Index ETF (3.97%): Index of European equities and bonds Horizons Emerging markets ETF (3.42%): Emerging markets equity and bond index

Disadvantages of this ETF:

  • The choice of stocks and bonds cannot be personalized; it is a choice made by Horizons
  • Overrepresentation of the technology sector in portfolios; less diversification than with other asset allocation ETF providers

Conclusion

Based on the observations in this article, we see that the supply for asset allocation ETFs is diversifying. In addition, management fees are minimal, which is good news for investors. Finally, it is now very easy to obtain these ETFs as more than ten online brokerage sites allow the purchase of these funds. All in all, we believe that these asset allocation ETFs represent an excellent entry point for those new to stock market investing. This is a very good option for experienced investors with a long-term investment horizon. Indeed, the multi-sector diversification of stocks and bonds makes these portfolios a must. It should be noted, however, that the choice of these actions and obligations is made by the supplier and cannot be customized. This so-called “passive” selection is automated and follows the major international stock market indices. Now that you know more about asset allocation ETFs, it’s your turn to play!

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