Understanding All-in-One ETFs: A Guide for Beginner Investors
Investing can be daunting, especially for those new to the financial world. If you're a millennial woman in Canada or the US looking to grow your savings without the hassle of constantly managing your investments, all-in-one ETFs (Exchange-Traded Funds) might be the perfect solution for you. Siobhan and I love all-in-one ETFs, and we personally own some. They're ideal for beginner investors or those who prefer a hands-off approach without paying the high fees associated with mutual funds. In this blog, we'll break down what all-in-one ETFs are, how they differ from individual ETFs, their benefits and drawbacks, and how to choose the right one for you.
What are All-in-One ETFs?
All-in-one ETFs are a type of investment fund that bundles together multiple ETFs into a single package. This means that when you invest in an all-in-one ETF, you're essentially buying a diversified portfolio that includes various asset classes such as stocks and bonds. These funds are managed by professionals who rebalance the portfolio periodically to maintain a desired asset allocation.
For example, an all-in-one ETF might include a mix of Canadian, US, and international stocks, as well as government and corporate bonds. This built-in diversification helps spread risk and can provide a more stable return over time compared to investing in a single stock or sector.
How Do All-in-One ETFs Differ from Individual ETFs?
Individual ETFs track specific indices or sectors, such as the S&P 500 or technology stocks. While they offer diversification within a particular area, they don't provide the same level of diversification as an all-in-one ETF. With an individual ETF, you need to select and manage multiple funds to achieve a balanced portfolio. This requires ongoing research and rebalancing, which can be time-consuming and complex.
In contrast, all-in-one ETFs simplify the process by offering a pre-built, balanced portfolio. The fund managers handle the asset allocation and rebalancing, so you don't have to worry about adjusting your investments. This makes all-in-one ETFs a convenient option for those who want to invest without spending a lot of time managing their portfolio.
Benefits of All-in-One ETFs
One of the biggest advantages of all-in-one ETFs is their simplicity. They're designed to be a one-stop solution for your investment needs, providing instant diversification and professional management. Here are some key benefits:
Diversification: All-in-one ETFs offer broad diversification across different asset classes and geographic regions. This can help reduce risk and increase the potential for steady returns.
Convenience: With an all-in-one ETF, you don't need to worry about selecting and managing multiple funds. The fund managers take care of everything, making it an excellent choice for busy individuals or those who prefer a hands-off approach.
Cost-Effective: While all-in-one ETFs typically have higher fees than individual ETFs, they are still much cheaper than mutual funds. This makes them a cost-effective option for investors who want professional management without the high costs.
Rebalancing: The fund managers regularly rebalance the portfolio to maintain the desired asset allocation. This ensures your investments stay aligned with your financial goals without requiring your active involvement.
Drawbacks of All-in-One ETFs
Despite their many benefits, all-in-one ETFs also have some drawbacks to consider:
Higher Fees: Compared to individual ETFs, all-in-one ETFs tend to have higher management fees. This is because they include multiple underlying funds and require active management.
Less Control: When you invest in an all-in-one ETF, you're entrusting the fund managers to make decisions on your behalf. This means you have less control over the specific assets in your portfolio.
Limited Customization: All-in-one ETFs are designed to be one-size-fits-all solutions. While this is great for simplicity, it may not be suitable for investors with specific preferences or investment strategies.
Choosing the Right All-in-One ETF
When selecting an all-in-one ETF, there are several factors to consider:
Asset Allocation: Look for a fund that matches your risk tolerance and investment goals. For example, if you're a conservative investor, you might prefer a fund with a higher allocation to bonds. On the other hand, if you're more aggressive, you might opt for a fund with a higher allocation to stocks.
Fees: Compare the management fees of different all-in-one ETFs. While they tend to be higher than individual ETFs, they should still be reasonable and significantly lower than mutual fund fees.
Performance: Review the historical performance of the ETF. While past performance is not indicative of future results, it can give you an idea of how the fund has managed market fluctuations.
Reputation: Choose a reputable provider with a strong track record. Examples of popular all-in-one ETFs include the Vanguard Growth ETF Portfolio (VGRO) and the iShares Core Growth ETF Portfolio (XGRO) in Canada, and the Schwab U.S. Broad Market ETF (SCHB) and Vanguard Total Stock Market ETF (VTI) in the US.
Our Experience
Siobhan and I love all-in-one ETFs for their simplicity and cost-effectiveness. We currently use Wealthsimple for most of our investing due to its user-friendly interface and no trading fees. It’s also very secure, just like a typical bank. Wealthsimple offers a range of all-in-one ETFs that cater to different risk profiles and investment goals, and they make it super easy to find what you’re looking for with their search tool. If you’re interested in giving Welathsimple a try you can learn more about it here.
Setting Up Automatic Deposits
To make investing even more effortless, consider setting up automatic deposits. By setting up an automatic transfer from your bank account to your investing account every payday, you can consistently invest in your chosen all-in-one ETF without having to think about it. This strategy, known as dollar-cost averaging, helps smooth out the effects of market volatility and can lead to more stable long-term returns.
Final Thoughts
All-in-one ETFs are a fantastic option for beginner investors or those who prefer a hands-off approach. They offer broad diversification, professional management, and convenience at a lower cost than mutual funds. By understanding your investment goals, comparing fees, and choosing reputable providers, you can confidently select the right all-in-one ETF for your needs.
Remember, investing doesn’t have to be complicated. With all-in-one ETFs, you can grow your savings and work towards a comfortable retirement without the stress of managing your portfolio. Happy investing!
About The Authors
Amanda and Siobhan found a shared passion for personal finance shortly after completing their MBAs in 2018. Amanda excelled as a Director of Product in the tech industry, while Siobhan established herself as a leader in e-commerce before transitioning to academia as a Professor.
In 2020, they joined forces to found Hiver Academy, a platform born from their own experiences and triumphs in conquering student loans and building wealth. Realizing that financial success is within reach once the complexities are simplified, their mission now revolves around empowering individuals to achieve financial freedom.
With a wealth of knowledge and a commitment to demystifying money and investing, Amanda and Siobhan are dedicated to helping others navigate the path to success.
