The choice between high-fee active mutual funds and the 90%-off sale of a one-ticket option could be called a no-brainer. It makes you wonder why the majority of Canadian investors are still invested in high-fee products.
The one decision you do have to make is which all in-one ETF is most suitable for your goals, time horizon and risk level. And you’ll need to press the buy button yourself. As such, this option is for the self-directed investor.
Types of asset-allocation ETFs
One-ticket asset allocation ETFs are offered by iShares, Vanguard, BMO, TD, Horizons, and other ETF providers. Check out the MoneySense Best all-in-one ETFs ranking and you’ll see that most of them hold seven or eight individual ETFs from different asset classes.
While the Tangerine and TD e-Series approach will consist of Canadian, U.S. and international stocks combined with Canadian bonds, the one-ticket ETF portfolios offer additional diversification, namely U.S. and international bonds including U.S. treasuries and high yield bonds. This provides some useful additional diversification, in my opinion.
On the stock or equity side, a few one-ticket ETFs get more adventurous, straying from traditional passive-market ETFs. They might shade in a few active ETFs that focus on low-volatility, dividend or technology stocks. There is nothing too extravagant or exotic in that type of mix, but they could lead to some underperformance or outperformance compared to plain vanilla indexing.
For a more traditional portfolio approach, choose Vanguard, BMO and iShares asset allocation ETFs. You’ll see more off-script options from TD and Horizons; the latter even offers a tax-efficient one-ticket solution, which is handy for non-registered (taxable) accounts.
How to find the right one-ticket option
Strongly consider your tolerance for risk (be very honest with yourself!) and your time horizon. Then use the following portfolio risk table to help you select the most appropriate one-ticket ETF.
One-ticket asset allocation ETF portfolio risk levels
|Time horizon||1-2 years||3-5 years||5-7 years||7-10 years||10+ years|
|Risk level||No risk||Low||Low-medium||Medium||Medium-high|
|Stock to bond ratio||None||70%-80% bonds,
|Portfolios||Cash and GICs||iShares XINC||iShares XCNS||iShares XGRO||iShares XEQT|
|Vanguard VCIP||iShares XBAL||Vanguard VGRO||Vanguard VEQT|
|TD TOCC||Vanguard VCNS||BMO ZGRO||Horizons HGRO|
|Vanguard VBAL||Horizons HBAL||TD TOCA|
*This table is to be used as a starting point for risk assessment. You might consult an advisor or planner to gain a professional opinion. Risk levels are my own and based on industry averages This table does not constitute investment or financial advice. The portfolio asset allocations presented are not tailored to any particular investor’s circumstances.
Investors might also complete the investor profile questionnaire at Tangerine and the risk assessment tool at Vanguard. You will receive a suggested stock to bond allocation. You can then match your suggested risk assessment to your asset allocation selection.
There is no guarantee of returns for any of the given periods. It is possible that stock and bond portfolios can fail for extended periods.
MoneySense or the author are not responsible for any investment decisions or losses based on portfolio selection.
Please ensure that you understand investment risks and know your risk tolerance level.
Option 4: Build your own ETF portfolio
If you’re comfortable buying, selling and rebalancing funds, you can build your own ETF portfolio. This is the most cost-effective Couch Potato approach, with individual ETF MERs that are as low as 0.04%, and portfolios in the 0.20% range. As with all the Couch Potato options, at a minimum you’ll want your ETF portfolio to include Canadian, U.S. and global equities, as well as Canadian bonds.