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ETFs Vanguard, iShares or BMO? A side-by-side comparison of the new all-in-one diversified ETF portfolios

In many aspects of our lives, we embrace convenience. We buy prepared meals instead of assembling and cooking the ingredients ourselves. We shop in malls rather than driving to four or five individual stores. We recognize our time is valuable and our mental bandwidth is limited, so we look for very good solutions, not perfect ones.

Except when it comes to investing. It’s the one area where simple, excellent options are available, yet too many people resist them because they’re too, well, simple. Here’s hoping a recent trend in the ETF marketplace will help investors overcome that tendency.

In the past year or so, all three of Canada’s largest exchange-traded-fund providers have launched products that allow investors to own a complete portfolio with just one trade. Each includes a mix of global stocks and bonds, so anyone with a brokerage account can get extremely broad diversification with minimal maintenance and rock-bottom costs.

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Vanguard Canada was the first ETF provider to launch one-ticket solutions just over a year ago, and iShares followed in December. Earlier this month, BMO joined the party with its own family of all-in-one portfolios.

Let’s look at a typical example: the Vanguard Balanced ETF Portfolio (VBAL). Like its counterparts, it’s a “fund of funds” built using seven underlying ETFs. There are three for fixed income: one each for Canadian, the United States, and global bonds. Then there are four equity components: Canadian, U.S., international developed and emerging markets. Vanguard has estimated that the portfolio offers exposure to about 94 per cent of the world’s public markets.

VBAL has a long-term target of 40-per-cent bonds and 60-per-cent stocks, which is the traditional split for a balanced portfolio. But there are other options for people with different risk profiles, ranging from just 20-per-cent stocks in the Vanguard Conservative Income ETF Portfolio (VCIP) to 80-per-cent stocks in the aggressive Vanguard Growth ETF Portfolio (VGRO). All the funds have the same components, just in different proportions.

The iShares and BMO families are very similar. They vary in their specific holdings, but they all include a target allocation of Canadian and non-Canadian bonds, plus an equity mix with one-quarter to one-third domestic stocks, with the remainder split between the U.S. and overseas markets. In all, we’re talking about thousands of stocks and bonds from around the world, which is all the diversification anyone needs.

Moreover, as markets move in different directions and at different rates, the ETFs will be rebalanced so they maintain those long-term targets. This feature makes them virtually maintenance-free, and it puts some competitive heat on robo-advisers, the online services that charge about 0.50 per cent and advertise automatic rebalancing as one of their key benefits.

And the price tag for this elegant portfolio? The management fees range from 0.18 per cent to 0.22 per cent, which is about 90-per-cent cheaper than traditional balanced mutual funds. On a $100,000 portfolio, the monthly cost is a little more than you’re paying for Netflix.

The good news is that these all-in-one ETF portfolios have been embraced by many do-it-yourself investors: VGRO, for example, has attracted more than $570-million in assets in barely a year. But there has been resistance, too. I’ve heard from many investors who are concerned the funds are not optimized for tax-efficiency, or that you could reduce your fees even further by buying the underlying holdings individually. But how many honestly believe they can build and maintain a better portfolio? In the real world – where people are busy with work and family, and would rather watch the hockey game than fiddle with a spreadsheet – no one manages their portfolio optimally.

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Others dismiss these funds as cookie-cutter solutions, or argue that they’re only appropriate for very small accounts or unsophisticated investors. What nonsense. I’ve reviewed a lot of portfolios over the years, with six- and seven-figure balances, many of which were designed by people who manage money for a living. Almost none of them were more thoughtfully structured than what Vanguard, iShares and BMO have packed into a single ETF.

Are these products right for everyone? Certainly not. Are they perfect? No, but neither is any other option. And here’s the thing: You don’t need an optimal portfolio, you just need an excellent one. No one has ever failed to meet their financial goals because they had exposure to only 94 per cent of the world’s stock and bond markets, or because they failed to keep their investing costs lower than 0.18 per cent. Countless millions have failed by trying to do better.

Eating well and staying in shape takes a lot of effort: It’s much easier to flop on the couch and order pizza. Learning to speak Gaelic, playing the trombone, nurturing a romantic relationship – these take a lot of work. But successful investing is the opposite: You usually thrive by doing less, not more. With the appearance of these all-in-one ETFs, building an extremely well-diversified portfolio has never been easier or cheaper. The only problem that lingers is the one in the mirror.

All-in-one portfolio: elegant, cheap and virtually maintenance-free

All three of Canada's largest ETF providers have recently launched one-ticket portfolios that include a globally diversified mix of stocks and bonds. Each family includes options for investors with different risk profiles, from conservative to aggressive. While all the ETFs are similar in overall concept, they vary in their target allocations for each specific asset class.

All-in-One ETFTickerManagement feeCanadian bondsU.S. bondsGlobal bondsTOTAL FIXED INCOMECanadian equitiesU.S. equitiesInternational equitiesEmerging marketsTOTAL EQUITY
Vanguard Conservative Income ETF PortfolioVCIP-T0.22%47%14.9%18.1%80%6%7.8%4.7%1.5%20%
Vanguard Conservative ETF PortfolioVCNS-T0.22%35.3%11.1%13.6%60%12%15.6%9.4%3%40%
Vanguard Balanced ETF PortfolioVBAL-T0.22%23.5%7.4%9.1%40%18%23.3%14.2%4.5%60%
Vanguard Growth ETF PortfolioVGRO-T0.22%11.8%3.7%4.5%20%24%31.1%18.9%6%80%
iShares Core Balanced ETF PortfolioXBAL-T0.18%32%8%-40%15%27%15%3%60%
iShares Core Growth ETF PortfolioXGRO-T0.18%16%4%-20%20%36%20%4%80%
BMO Conservative ETFZCON-T0.18%54%6%-60%10%16%10%4%40%
BMO Balanced ETFZBAL-T0.18%36%4%-40%15%24%15%6%60%
BMO Growth ETFZGRO-T0.18%18%2%-20%20%33%20%7%80%

Sources: Vanguard Canada, BlackRock, BMO ETFs

Dan Bortolotti, CFP, CIM, is a portfolio manager at PWL Capital in Toronto. He is the creator of Canadian Couch Potato, an award-winning blog about index investing.

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