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The balanced ETF is arguably one of the best investing innovations of the century – all 20 years of it.

But companies in the exchange-traded-fund world are failing to clear up a key point about this product that keeps tripping up investors. It’s all about the fees, which is ironic because low, easy to understand fees are one of the biggest reasons to invest in ETFs rather than mutual funds.

Dozens of times, investors have asked me to sort out the fees on balanced ETFs. The latest query comes from a B.C. reader who is helping someone transition to do-it-yourself investing using ETFs. The two of them are looking at balanced ETFs because of the low management expense ratios. But they’ve noticed that balanced ETF portfolios are built using a mix of stock and bond ETFs, each with its own MER. “So the question is this: Is the MER you see for the balanced ETF really the only fee you are paying?” the reader asked.

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The answer to this question is yes: The published MER for a balanced ETF is the sole fee investors need to concern themselves with, other than brokerage commissions for buying and selling ETFs. The fees for the underlying ETFs in the portfolio are covered by the published MER.

Question to the ETF industry: Why don’t you make this clear and explicit on the balanced ETF profiles on your website? Just add a little note saying something like: “This MER includes the cost of the ETFs in the portfolio.”

Investors often come to ETFs having fled mutual funds because of the high fees. These investors are skeptical and cranky because of their dissatisfaction with their investing experience. It’s not confidence-inspiring to pivot to ETFs and find the industry’s best product, the balanced ETF, has an ambiguous fee structure.

The typical balanced ETF has an MER in the low 0.2 per cent range, which is an incredible value. You get a portfolio with a conservative, middling or aggressive mix of stocks and bonds, and you get automatic rebalancing to keep the mix in line. Balanced ETFs could well be exactly what someone starting life as a DIY investor needs. Why get the relationship off to a rocky start with unclear fee disclosure?

-- Rob Carrick

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

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Docebo Inc. (DCBO-T) This stock is showing positive momentum, soaring to a record high. Year-to-date, the share price is up an astounding 72 per cent. Last quarter, the technology company that provides e-learning solutions had customer wins with retail giant Walmart Inc. and leading international pasta maker Barilla. Growth investors may want to put the stock on their radar screens and wait for a pullback in the share price, says our equities analyst Jennifer Dowty. (for subscribers)

The Rundown

World’s ultrawealthy go for gold amid stimulus bonanza

As stock markets roar back from the coronavirus-led rout, advisers to the world’s wealthy are urging them to hold more gold, questioning the strength of the rally and the long-term impact of global central banks’ cash splurge, Reuters reports. (for everyone)

Second-wave wobble reveals more about markets than the virus

It’s hard to find an investor who hadn’t already assumed some form of second wave of COVID-19 when economies reopen, so why did stock markets panic at the hint of a relapse last week? Mike Dolan of Reuters has found some answers. (for everyone)

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Also see: Wall Street rally wins more fans as economy hints at recovery

Others (for subscribers)

The week’s most oversold and overbought stocks on the TSX

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

Thursday’s Insider Report: Four dividend stocks that are being purchased

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What’s the secret behind this portfolio manager’s sky-high returns?

Number Cruncher: These 10 U.S. industrial stocks show momentum in a hot sector

Number Cruncher: These 15 U.S. dividend stocks have their own economic moat

Vanguard names names and backs some calls for climate steps

The tech IPO comes roaring back in the pandemic

Others (for everyone)

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For the brave investor, frontier market bonds could be attractive buys right now

India’s pursuit of global investors hits turbulence

Short selling tests China’s zeal for market reform

What’s up in the days ahead

Tim Shufelt will look at the recent surge in trading among retail investors in Canada.

Click here to see the Globe Investor earnings and economic news calendar.

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More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

Compiled by Globe Investor Staff

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