The question of what to invest in can very often be settled with just three words: Asset allocation ETF.
Whether you’re aggressive, balanced or conservative as an investor, these exchange-traded funds pack a low-cost, fully diversified portfolio in a single product. A recent change made to TD Asset Management’s ETF lineup makes them even more appealing.
TD TD-T recently announced that the management fee for its three asset allocation ETFs has dropped significantly – to 0.15 per cent from 0.25 per cent. Management fees account for the bulk of the cost of owning an ETF or mutual. The more all-encompassing management expense ratio for these funds is currently 0.28 per cent – expect it to fall to somewhere around 0.18 per cent going forward.
This, my fellow investors, is a very fine deal. In fact, it might be the cheapest option in allocation ETF investing today. Other players, including BMO, Fidelity, iShares and Vanguard, are in the 0.2-to-0.43-per-cent range for MERs. TD’s move to cut fees will put pressure on the competition to do likewise. Regardless, asset allocation funds remain an extremely cost-effective way to invest for long-term objectives such as retirement.
TD says it’s able to lower the management fee for its asset allocation funds by swapping out a weighting of roughly 25 per cent in actively managed TD ETFs and replacing it with low-cost in-house index tracking funds. Index trackers already account for the majority of the portfolios for these ETFs.
The asset allocations will remain the same for each of the TD asset allocation ETFs – 90 per cent stocks and 10 per cent bonds for the TD Growth ETF Portfolio (TGRO-T, the new ticker for TOCA), 60-40 for the TD Balanced ETF Portfolio (TBAL-T, the new ticker for TOCM) and 30-70 for the TD Conservative ETF Portfolio (TCON-T, the new ticker for TOCC). The published MER for each of these funds includes the cost of the underlying indexes.
Vanguard brought asset allocation ETFs to Canada in 2018 and the category has since attracted more than $13-billion in assets from investors and advisers seeking an optimum mix of cost and efficiency.
Another change by TD highlights a shift in the investing universe in recent years. TD launched these funds in 2020 under the TD One-Click name. Today, a lot of investors aren’t clicking a mouse to buy these funds on a computer. Instead, they’re swiping and typing on their mobile phones. One-click was a smart name a few years ago, but today it sounds kind of boomer-ish.
Rob Carrick