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All-in-One ETFs

Updated: Feb 7, 2023

Simple, easy, and great value

Investing can be simple.

So simple, in fact, that you can hold just one investment and get exposure to 37 countries, 13,644 stocks, 17,941 bonds and all 11 sectors of the economy. You don’t have to have a lot of money, you don’t have to pay someone a ton in fees, and unlike what fictional mobster Tony Soprano in the excellent TV series The Sopranos thinks, you don’t have to “know someone”. (“Stocks? You gotta be high up in the corporate structure to make that sh*t work for you.”)

All-in-one ETFs are the “every-person’s” ticket to investing in the global stock and bond markets. If you were to invest in individual stocks and bonds, you’d need a tidy sum of money to be similarly diversified. Since most of us don’t have that kind of wealth, the emergence of ETFs is a game-changer.

How an all-in-one ETF works

An all-in-one ETF, also called an asset allocation ETF, is a fund made up of other funds. Instead of investing in stocks and bonds, an all-in-one ETF invests in other ETFs. For example, it might invest in one U.S. equity ETF, one Canadian equity ETF, in international equity ETF, and a bond ETF. Each of those ETFs in turn hold hundreds or even thousands of investments. That’s how you get to the 13,644 stocks and 17,941 bonds.

Warren Buffet, a man of many quotable quotes, once said “Diversification is protection against ignorance.” For professional money managers – like Buffett – diversification, he says, makes little sense. Better to make bigger bets on the companies you are confident will do well. But most people don’t know much about picking stocks – because picking stocks is really hard and requires a lot of time and effort – so diversification is the #1 risk management tool available to us regular folk. And ETFs give you that in spades.

Choosing the right one

When choosing which all-in-one ETF to own, you first need to determine what mix of bonds and stocks is best for you. This is called asset allocation: how you’ll allocate your money between asset classes. This is a fairly easy decision to make, and you can use a simple online questionnaire like this one from Vanguard to give you guidance. Many other financial institutions also have these questionnaires, so try a few and see what mix they recommend.

Then, have a look at what all-in-one ETFs match your asset allocation. There are many products to choose from and I like to use the MoneySense list of Best ETFs in Canada to narrow down the choices. Let’s look at the Vanguard Growth ETF Portfolio, ticker symbol VGRO, as an example. (ETF investors love using the ticker symbols to talk about their funds. It’s the lingo of ETF investing, as in, “I just bought more VGRO.”) This fund owns seven ETFs, has an allocation of 20% to bonds, and 80% to stocks. In the stock portion of the fund, 42% of the stocks are in the U.S., 31% in Canada and the rest is distributed across an additional 35 countries. The bond portion is similarly distributed across countries.

Is it really that easy?

Just buy one fund? Yes, it really is. You don’t have to fool around with choosing individual funds to get to your proper asset allocation or engaging in buying and selling depending on what the market is doing. The fund manager looks after this for you, including making sure that the allocation to stocks remains at the proper levels (80% for example).

And the icing on the cake (or the chocolate sauce on Tony’s sundae) is that it’s cheap. You can get a great asset allocation ETF for about 0.2% to 0.3% per year. Remember, a regular mutual fund charges about 1.8% to 2.5% per year, and a financial advisor probably charges somewhere around 1%. It’s a great deal. On a $20,000 investment, you’ll pay just $40 to $60 a year for this product, plus the one-time trading fee, which is usually $10 per trade. Seriously, such a bargain.

To invest in ETFs, you’ll need an online brokerage account. Don’t be intimidated by the name – an online brokerage account is simply an account that allows you to buy investments yourself on a website or through an app. You can get an account through your bank or from a non-bank provider like Questrade or WealthSimple. These investing websites are easy to learn. With a tiny bit of education – watching a video or working with me – you’ll be placing trades over breakfast before you know it.

As Carmela Soprano says to Tony when he resists her attempts to invest their money, “There’s always some excuse.” Well, take the “complicated” excuse off the list – an all-in-one ETF makes it easy.


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