Checking in on the balanced asset allocation ETFs


By Dale Roberts, cutthecrapinvesting

Special to the Financial Independence Hub

If you are not yet familiar with the all-in-one asset allocation ETFs, do yourself a favour and get up to speed. These are game changers for Canadian investors. You might also hear them referred to as one ticket ETFs. TD calls their offerings ‘one click’. And one click explains it quite nicely. With one click on your laptop or smartphone you can purchase a very well-diversified global investment portfolio, with total fees in the range of 0.20%-0.28%. These ETF portfolios are then managed for you. What’s not to love? And you can access the level of risk that’s right for your investment goals and time horizon. Today, we’ll look at the year-to-date performance for the balanced asset allocation ETFs.

Vanguard gets much of the credit for bringing the asset allocation ETFs to Canada. It was actually iShares who were first, but no worries on that front.

Here’s a post on the Vanguard one ticket asset allocation ETFs. That post is entitled ‘which of the Vanguard asset allocation portfolios should you invest in?’ That will help you select the right ETF at the right level of risk.

I recently helped MoneySense refresh and rewrite the Canadian Couch Potato section on their site. In the core couch potato section you’ll also find a table that categorizes and frames the risk levels, while offering the suite of ETFs in each category.

What’s in a one ticket ETF?

You’ll own the majority of publicly-listed stocks in North America and around the globe. Of course the bonds are there to manage the risks. Think of them as portfolio shock absorbers. You’ll usually find Canadian and U.S. bond ETFs in the one ticker offerings.

At one-tenth the cost of a typical Canadian mutual fund, it is a no-brainer.

Yup, you can open up your Questrade account right here and get on with it. That is the top-rated brokerage in many places, including on MoneySense. Who doesn’t want to retire with 30%, 40% or 50% more?

Here’s an example of the ETFs held, using Vanguard’s VBAL.

The portfolios offer a simple but wonderful mix. It’s an easy way to do that couch potato thing. It is also very easy to leave your advisor or bank that might have you invested in high fee mutual funds. I suggest you give that some serious consideration.

The balanced asset allocation ETF returns

And if you want to look back, here’s the performance of the asset allocation ETFs for 2020. You’ll see that Horizons led the charge, followed by BMO, iShares and Vanguard, who were all quite similar in returns offered across the levels of risk.

The returns are year-to-date to the end of September 2021. Returns include all fees and dividend and bond income reinvestment (done for you by the ETF provider).

  • Horizons HBAL 8.34%
  • TD TOCM 7.63%
  • iShares XBAL 6.60%
  • Vanguard VBAL 6.06%
  • BMO ZBAL 5.46%

Keep in mind that the Horizons Balanced ETF portfolio uses 70% stocks and 30% bonds (target) compared to the traditional 60/40 for a balanced portfolio model. That said, they also employ U.S. long term treasuries that punch above their weight when it comes to keeping an eye on those unruly stock markets. IMHO, you’re not taking on much or any additional risk. The proof is in the pudding so far for Horizons, generating the greater returns across the suite.

The big 3 for 2020 and 2021

We see that returns are in favour of (for both years) iShares, then Vanguard and then BMO. And once again, Horizons would be in a class of its own.

Here’s the Horizons asset allocation ETFs – for better asset allocation. You’ll see from that post that the Horizons line-up is tax-efficient.

While the portfolio construction is quite similar for the remaining providers, I am on record as being a big fan of the TD One Click ETF Portfolios.

The portfolios use TD ETFs. It’s an interesting mix that includes a global tech ETF growth kicker, some dividend and low volatility focus, and US treasuries on the bond side. I’m a fan.

More stocks more gains in 2021

And yes there were greater gains to be had in 2021 with a more aggressive portfolio. Bonds have been having a rough go with fears of inflation and rising rates leading to higher bond yields and hence, lower bond prices. Remember, as bond yields go up, prices go down and vice-versa.

The Canadian bond market (let’s use iShares XBB as a benchmark) is down over 4% year to date, and down over 3.4% over the last year.

TD’s Aggressive One Click ETF TOCA is up over 13% year to date, ditto for HGRO.

Balanced Growth Models

The returns are year to date, to the end of September 2021. TD’s TOCA is slightly more stock-heavy, and hence, offered greater returns.

  • TD TOCA 13.0% 
  • iShares XGRO 10.16%
  • Vanguard VGRO 9.33%
  • BMO ZGRO 8.66% 

And let’s flip back to the more conservative models that are more bond heavy. We see those bonds bringing down returns.

Conservative Models

The returns are year to date, to the end of September 2021.

  • Horizons HCON 4.95%
  • iShares XCNS 3.54%
  • Vanguard VCNS 2.82%
  • TD TOCC 2.38%
  • BMO ZCON 2.28%

I would suggest that you not overreact to the underperformance of bonds. For those of us who need to manage the risks, there’s still a place for bonds in your portfolio. Readers will know that I am also a fan of adding additional inflation protection. On that front, have a read of how to protect your portfolio from inflation. In that post you will find a suggestion on how you can bolt on some inflation protection, to your one ticket ETF.

The other one ticket reviews

You can also have a look at my review of BMO’s asset allocation ETFs.

And here’s the iShares asset allocation ETFs post.

Not everyone wants to build their own ETF Portfolio. The asset allocation ETFs offer all in one solutions. You certainly do have to ‘know’ what portfolio to invest in, and you have to have the confidence to press that buy button. If you have any questions on that, send me a note via the contact form on this page.

For those who want advice and lower fee ETF portfolios the Canadian Robo Advisors are a massive step up from Canadian banks mutual funds, and the crap that you’d find in AGF mutual funds.

Here’s the recent performance update vs bank funds and comparison offered by Justwealth. Make that no comparison between Justwealth and big bank funds.

Thanks for reading. Please share this post with friends and family. Friends don’t let friends pay high fees.

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While I do not accept monies for feature blog posts please click here on the mission and ‘how I might get paid’ disclosures. Affiliate partnerships help me pay the bills for this site. That will allow me to keep this site free of ads and easy to read.

You will also earn a break on fees by way of many of those partnership links.

I also have partnerships with several of the leading Canadian Robo Advisors such as JustwealthBMO Smartfolio ,WealthsimpleNest Wealth and Questwealth from Questrade.

Consider Justwealth for RESP accounts. That is THE option in Canada.

Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 1.25%. You’ll find some higher rates on certain GICs. They now also offer U.S. dollar accounts.

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Dale Roberts is the Chief Disruptor at A former ad guy and investment advisor, Dale now helps Canadians say goodbye to paying some of the highest investment fees in the world. This blog originally appeared on Dale’s site on Oct. 8, 2021 and is republished on the Hub with his permission.

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