Five ways to worry less about your investments with an all-in-one ETF

Neither of these approaches is beneficial for your long-term financial well-being. Emotion is the enemy of investing, goes the adage. Impulsive investment decisions can be detrimental to the long-term performance of your portfolio.

Taking emotions out of investment decisions and incorporating a professional, process-driven approach to managing your money is the best way to avoid investing missteps and misadventures.

One way to do that is through exchange-traded funds, or ETFs for short. An ETF is a basket of individual stocks and bonds, similar to mutual funds, that may be purchased for one price. Investors can buy shares of ETFs, known as units, and gain exposure to the performance of securities within the fund. ETF companies deduct a small management fee as part of a fund’s management expense ratio (MER).

Unlike mutual funds, though, ETFs trade on exchanges like equities, and their unit prices change throughout the day. ETFs are constructed and managed by investment firms. In essence, ETFs are a way for investors to shift the burden and anxiety of making investing decisions to professionals who have the experience and resources to navigate the complex investing landscape and capitalize on its opportunities.

Canadian investors have ploughed a record $48 billion into ETFs so far this year, surpassing 2020’s inflows, according to the Canadian ETF Association. With the soaring popularity of ETFs, issuers are using creative ways to tap a wider pool of securities, across sectors, factors and geographies, to maximize long-term capital growth while minimizing risk. One investment product that checks all these boxes is an all-in-one ETF, such as Fidelity All-in-One Balanced ETF (FBAL) or Fidelity All-in-One Growth ETF (FGRO).

An all-in-one ETF is a pool of low-cost ETFs that provide broad market exposure in a convenient and cost-efficient way by investing in a globally diversified selection of stocks and bonds that caters to various investment styles.

Here are five key benefits of all-in-one ETFs and how they can help simplify your investing:

1. The investments have been selected for you.

The average investor has neither the time nor the know-how to analyze individual securities, understand business fundamentals, evaluate balance sheets, follow market trends and track changes to economic indicators. Fortunately, with all-in-one ETFs, investors can delegate these tasks to professionals. Fidelity’s FBAL and FGRO funds are one-ticket solutions diversified across regions, market caps and investment factors, with the benefits of professional management.

FBAL is designed for investors who are looking for a balanced approach and have a lower risk appetite: approximately 60% of the portfolio is allocated to equities, and approximately 40% is allocated to fixed income investments.

FGRO may be better suited for investors with longer time horizons and who can tolerate slightly more equity risk, with the reward of potentially higher returns. Compared to FBAL, it puts greater emphasis on equities, which make up approximately 85% of the portfolio. The remaining 15% (approximately) is allocated to fixed income investments.

2. All-in-one ETFs are easy to buy and sell—all you need is a brokerage account.

Since ETFs trade on exchanges like stocks do, you can buy and sell them throughout the trading day. To buy ETFs, including FBAL and FGRO, you just need a brokerage account, online or conventional.

A trading account’s maintenance and transaction fees can vary depending on whether the account is with a large institution such as a leading bank, or with a smaller online, discount or full-service brokerage firm.

Whether you’re investing for retirement, planning a big purchase or saving for a down payment, you can put your savings to work in Fidelity’s All-in-One ETFs—FBAL or FGRO, depending on your investment goal—and let compounding do its magic. Moreover, investors can hold Fidelity’s All-in-One ETFs in their TFSA, RRSP or RESP account.

When you need to access your funds, you can sell these ETFs with the click of a mouse. 

3. All-in-one ETFs have low management fees.

Many investors are drawn to ETFs because these funds tend to have lower management fees than mutual funds. Fees are an important consideration as they can erode your returns over the long term. The lower the fees, the more money investors keep.  

For perspective, consider a $100,000 investment in a fund that charges 0.5% in management fees and returns 8% annually. Over a 30-year horizon, the investment will generate $875,495 in return. However, the same investment would generate $761,225 if the fund charged a 1% fee. That’s a whopping $114,270 lost to fees. There’s also an opportunity cost—additional gains you could have generated by investing that amount.

Fidelity’s All-in-One ETFs combine simplicity with cost-efficiency. The indirect management fee for FBAL was 0.37% (as at December 14, 2021), and FGRO was 0.39% (as at December 14, 2021). Their lower costs make these funds an affordable way to own a well-diversified investment portfolio.

4. No need to rebalance—it’s done for you.

Portfolio rebalancing takes skill and intimate knowledge of business fundamentals, industry trends and financial markets. It is best, therefore, to leave portfolio rebalancing to the experts. Investing in all-in-one ETFs achieves exactly that. It saves investors from making rash or uninformed decisions that could have serious financial implications.

An all-in-one ETF mixes and matches different low-cost ETFs so you don’t have to worry about building, managing or tracking its assets.

To optimize portfolio performance while minimizing risk, Fidelity’s All-in-One ETFs target known equity factors like value, momentum, low volatility and quality, while the fixed income sleeve provides diversification and downside protection.

5. An all-in-one saves us from our own human nature.

Behavioural finance gurus stress that one of the biggest risks to an investment portfolio is investors themselves. Emotional responses to day-to-day events and market fluctuations can cost investors dearly. These responses could include chasing hot trends, knee-jerk reactions to news headlines or trying to capitalize on daily market swings, among others.

All-in-one ETFs are the perfect antidote to human emotion in all types of market conditions. Investing in Fidelity’s All-in-One ETFs means fretting less about whether your portfolio has too much exposure to Canadian equities based on your risk tolerance, or what portion of your portfolio is tethered to cyclicality, or whether it is adequately tapped into secular winds.

Each ETF is structured to be a one-ticket, lower-cost solution diversified across regions, market caps and investment styles. Each comes with the benefit of professional management. Focus on the things you love and let experts handle the rest.

For important information regarding Fidelity’s All-in-One ETFs, click here.

Read more on investing:

• Building a “core and explore” portfolio with an all-in-one ETF
• Using ETFs to get the most out of your TFSA contribution room