When I first started investing, I had no idea what an exchange traded fund (ETF) was. The only investment vehicle I was ever taught about was mutual funds.
My financial advisor would recommended mutual funds but I had no idea what they meant. They had fancy names like Strategic Income Fund and Global Infrastructure Fund. I had no clue about diversification, the difference between fixed income and equities, and what a management expense ratio was.
Canada has some of the highest investment fees in the world, often 2% or higher. Your financial advisor will almost always recommend funds with high fees. Why? Because they get paid more.
Unlike mutual funds, ETFs trade like stocks on a stock exchange. Investment companies create their own basket of stocks and list them on an exchange as an ETF. One of the largest ETF providers is iShares.
Once a person or financial advisor builds an investment portfolio, they will usually hold a range of investments to create a diversified portfolio based on risk tolerance. An all-in-one ETF is a little different and can offer many benefits.
What is an All-In-One ETF?
An all-in-one ETF is a fund that holds a basket of ETFs. Think about it like this. If an ETF holds a basket of stocks, then an all-in-one ETF holds a basket of ETFs. All-in-one ETFs often hold thousands of underlying stocks across industries and countries.
What are the benefits?
All-in-one ETFs automatically rebalance to ensure exposure to each underlying fund is the same. For example, your portfolio is made of two ETFs’: ETF X and ETF Y. You want to keep them equally weighted at 50%. Over time ETF X gains in value and ETF Y decreases. The portfolio is now out of balance. To rebalance, ETF X is sold and used to buy ETF Y to return to the desired balance.
It’s an excellent way to diversify. Set it and forget it. It’s a basket that holds multiple baskets. It takes the thinking and emotions out of investing.
What or who is iShares?
iShares is an ETF collection owned by BlackRock. Each iShare ETF tracks a specific industry or index. Some examples include the S & P 500, emerging markets, health care, energy, etc. But the more concentrated your investment, the riskier it is. That’s why it’s important to diversity.
What types of All-In-One Portfolios does iShares offer?
iShares offers 5 broad market index funds based on risk tolerance and investment objectives that can be purchased on the Toronto Stock Exchange (TSX). All plans can be held in registed and non-registered accounts.
XINC – iShares Core Income Balanced ETF Portfolio
XCNS – iShares Core Conservative Balanced ETF Portfolio
XBAL – iShares Core Balanced ETF Portfolio
XGRO – iShares Core Growth ETF Portfolio
XEQT – iShares Core Equity ETF Portfolio
What’s inside each All-In-One ETF?
Each iShares All-In-One ETF holds a basket of the ETFs below. What changes between each all-in-one ETF is the weighting of the underlying holdings. XEQT is the exception as it is an all equity portfolio so it doesn’t hold any fixed income. Below is a quick snapshot of the underlying holdings in each portfolio. You can click on the ticker or name to find out more details on each underlying ETF.
| Ticker | Stock Exchange | Name | Equity/ Fixed Income | Region | MER | Holdings | Top Holdings |
|---|---|---|---|---|---|---|---|
| ITOT | NYSE | ISHARES CORE S&P TOTAL U.S. STOCK | Equity | U.S. | 0.03% | 3, 370 | Apple(5%) Microsoft(4%) Amazon(2%) Berkshire(1.5%) |
| XEF | TSX | ISHARES MSCI EAFE IMI INDEX | Equity | International Japan U.K. France | 0.22% | 2, 584 | Nestle(2%) Novo Nordisk(1.3%) |
| XIC | TSX | ISHARES S&P/TSX CAPPED COMPOSITE | Equity | Canada | 0.06% | 236 | Royal Bank(6%) TD Bank(5%) Enbridge(4%) |
| IEMG | NYSE | ISHARES CORE MSCI EMERGING MARKETS | Equity | Emerging Markets China India Taiwan S.Korea | 0.09% | 2, 685 | Taiwan Semi-Conductor (5%) Tencent Holdings(4%) |
| XBB | TSX | ISHARES CORE CAD UNIVERSE BOND INDEX ETF | Bonds Fixed Income | Canada | 0.10% | 1, 476 | Federal Govt Bonds |
| XSH | TSX | iShares Core Canadian Short Term Corporate Bond Index ETF | Bonds Fixed Income | Canada | 0.10% | 429 | Bank of Nova Scotia TD Bank |
| GOVT | NYSE | ISHARES US TREASURY BOND ETF | Treasury Bonds | U.S. | 0.05% | 130 | United States Treasury |
| USIG | NYSE | iShares Broad USD Investment Grade Corporate Bond ETF | Corporate Bonds | U.S. | 0.04% | 9, 313 | Bank of America Corp(2%) JP Morgan(2%) |
XINC in Detail
iShares Core Income Balanced ETF Portfolio
XINC is the most conservative portfolio in the iShares portfolio suite. It has a weighting of 80% fixed income and 20% equities. It is classified as low risk due to its high exposure to fixed income. XINC is best suited for an investor with a short time horizon and wants access to their investments without the risk of them going down. Let’s take a closer look at what’s inside XINC.
Let’s take an even closer look…..
| What’s Inside? | XBB CDN Fed Bonds | XSH CDN Corp Bonds | GOVT U.S. Treasury | USIG U.S. Corp Bonds | ITOT U.S. | XEF Intl. | XIC CDN | IEMG Emerging Markets | Cash |
|---|---|---|---|---|---|---|---|---|---|
| XINC | 50.72% | 12.76% | 7.86% | 8.09% | 9.15% | 4.92% | 4.95% | 1.05% | 0.5% |
What’s the true cost to hold XINC?
Suppose we invest a hypothetical $100, 000 into XINC. How much are we paying for convenience for iShares to continually keep the desired balance?
| Ticker | ITOT U.S. | XEF Intl. | XIC CDN | IEMG Emerg | XBB CDN Fed Bonds | XSH CDN Corp Bonds | GOVT U.S. Treasury Bonds | USIG U.S. Corp Bonds | Cash |
|---|---|---|---|---|---|---|---|---|---|
| % of XINC | 9.15% | 4.92% | 4.95% | 1.05% | 50.72% | 12.76% | 7.86% | 8.09% | 0.5% |
| $100, 000 | $9,150 | $4920 | $4950 | $1050 | $50720 | $12,760 | $7860 | $8090 | $500 |
| MER(%) | 0.03% | 0.22% | 0.06% | 0.09% | 0.10% | 0.10% | 0.05% | 0.04% | 0 |
| MER($) | $2.75 | $10.82 | $2.97 | $0.95 | $50.72 | $12.76 | $3.93 | $3.24 | 0 |
If you held each fund separately, the total fees to hold $100,000 of XINC would be $88.14.
The MER on ZINC is 0.20% which is $200 on a $100 000 investment.
So the premium paid to hold $100,000 worth of XINC is $200 – $88.14 = $111.86
To figure out the average MER for holding all ETFs separately, use the formula Fees/Total Invested. $88.14/$100 000 = 0.0008814. To convert to a percent simply multiply by 100.
0.0008814 x 100 = 0.08814 which rounds to 0.09%
XCNS in Detail
iShares Core Conservative Balanced ETF Portfolio
XCNS is classified as a conservative ETF because of its 60% fixed income and 40% equity exposure. It’s low risk due to its high weighting in fixed income. This portfolio is meant for investors with a shorter time horizon and who will need access to their funds in the near future. Let’s take a closer looks at what’s inside.
Let’s take an even closer look……
| What’s Inside? | XBB CDN Fed Bonds | XSH CDN Corp Bonds | GOVT U.S. Treasury | USIG U.S. Corp Bonds | ITOT U.S. | XEF Intl. | XIC CDN | IEMG Emerging Markets | Cash |
|---|---|---|---|---|---|---|---|---|---|
| XCNS | 37.91% | 9.40% | 6.17% | 5.96% | 18.19% | 9.82% | 10.03% | 1.97% | 0.55% |
What is the true cost to own XCNS?
Suppose we invest a hypothetical $100, 000 into XINC. How much are we paying for convenience for iShares to continually keep the desired balance?
| What’s Inside? | ITOT | XEF | XIC | IEMG | XBB | XSH | GOVT | USIG | Cash |
|---|---|---|---|---|---|---|---|---|---|
| XCNS | 18.19% | 9.82% | 10.03% | 1.97% | 37.91% | 9.40% | 6.17% | 5.96% | 0.55% |
| $100,000 | $18,190 | $9,820 | $10,300 | $1970 | $37,910 | $9400 | $6170 | $5960 | $550 |
| MER(%) | 0.03% | 0.22% | 0.06% | 0.09% | 0.10% | 0.10% | 0.05% | 0.04% | 0 |
| MER($) | $5.46 | $21.60 | $6.18 | $1.77 | $37.91 | $9.40 | $3.09 | $2.38 | 0 |
If you held each fund separately, the total fees to hold $100,000 of XCNS would be $87.79.
The MER on XCNS is 0.20% which is $200 on a $100 000 investment.
So the premium paid to hold $100,000 worth of XCNS is $200 – $87.79 = $111.86
To figure out the average MER for holding all ETFs separately, use the formula Fees/Total Invested. $87.79/$100 000 = 0.0008779. To convert to a percent simply multiply by 100.
0.0008779 x 100 = 0.08779 which rounds to 0.09%
| ETFs Held Separately | XINC | |
|---|---|---|
| MER | 0.09% | 0.20% |
| $100 000 | $88.14 | $200 |
The premium paid to hold XCNS is $200 – $87.79 = $112.21 in a $100 000 portfolio.
XBAL in Detail
iShares Core Balanced ETF Portfolio
XBAL is classified as a moderate risk ETF because of its 60% equity and 40% fixed income exposure. XBAL is more weighted in equities so you will need to be comfortable with market fluctuations and have a longer time horizon.
Let’s take an even closer look…..
| What’s Inside? | ITOT | XEF | XIC | IEMG | XBB | XSH | GOVT | USIG | Cash |
|---|---|---|---|---|---|---|---|---|---|
| XBAL | 27.28% U.S. | 14.89% Intl | 15.18% CDN | 3.03% Emerging Markets | 24.57% CDN Fed Bonds | 6.43% CDN Corp Bonds | 4.08% U.S. Treasury | 3.94% U.S. Corp Bonds | 0.61% |
What is the true cost to own XBAL?
Suppose we invest a hypothetical $100, 000 into XBAL. How much are we paying for convenience for iShares to continually keep the desired balance?
| What’s Inside? | ITOT | XEF | XIC | IEMG | XBB | XSH | GOVT | USIG | Cash |
|---|---|---|---|---|---|---|---|---|---|
| XBAL | 27.28% | 14.89% | 15.18% | 3.03% | 24.57% | 6.43% | 4.08% | 3.94% | 0.61% |
| $100,000 | $27,280 | $14,890 | $15,180 | $3,030 | $24,570 | $6,430 | $4,080 | $3,940 | $610 |
| MER(%) | 0.03% | 0.22% | 0.06% | 0.09% | 0.10% | 0.10% | 0.05% | 0.04% | |
| MER($) | $8.18 | $32.76 | $9.11 | $2.73 | $24.57 | $6.43 | $2.04 | $1.57 |
If you held each fund separately, the total fees to hold $100,000 of XBAL would be $87.39.
The MER on XCNS is 0.20% which is $200 on a $100 000 investment.
So the premium paid to hold $100,000 worth of XBAL is $200 – $87.39 = $112.61
To figure out the average MER for holding all ETFs separately, use the formula Fees/Total Invested. $87.39/$100 000 = 0.0008739. To convert to a percent simply multiply by 100.
0.0008739 x 100 = 0.08739 which rounds to 0.09%
| ETFs Held Separately | XBAL | |
|---|---|---|
| MER | 0.09% | 0.20% |
| $100 000 | $88.14 | $200 |
XGRO in Detail
iShares Core Growth ETF Portfolio
XGRO is classified as an aggressive ETF due to its 80% exposure to equities. It has 20% fixed income exposure to reduce losses during stock crashes and bear markets. You will need to comfortable with market fluctuations due to the high exposure to stocks.
Let’s take an even closer look inside……
| What’s Inside? | ITOT | XEF | XIC | IEMG | XBB | XSH | GOVT | USIG | Cash |
|---|---|---|---|---|---|---|---|---|---|
| XGRO | 35.73% | 19.94% | 19.83% | 4.31% | 12.39% | 3.25% | 2.02% | 1.95% | 0.65% |
What is the true cost to own XGRO?
Suppose we invest a hypothetical $100,000 into XGRO. How much are we paying for convenience for iShares to continually keep the desired balance?
| What’s Inside? | ITOT | XEF | XIC | IEMG | XBB | XSH | GOVT | USIG | Cash |
|---|---|---|---|---|---|---|---|---|---|
| XGRO | 35.73% | 19.94% | 19.83% | 4.31% | 12.39% | 3.25% | 2.02% | 1.95% | 0.65% |
| $100,000 | $35,730 | $19,949 | $19,830 | $4310 | $12,390 | $3250 | $2020 | $1950 | $650 |
| MER(%) | 0.03% | 0.22% | 0.06% | 0.09% | 0.10% | 0.10% | 0.05% | 0.04% | |
| MER($) | $10.72 | $43.89 | $11.90 | $3.88 | $12.39 | $3.25 | $1.01 | $0.78 |
If you held each fund separately, the total fees to hold $100,000 of XGRO would be $87.82.
The MER on XGRO is 0.20% which is $200 on a $100 000 investment.
So the premium paid to hold $100,000 worth of XGRO is $200 – $87.82 = $112.18
To figure out the average MER for holding all ETFs separately, use the formula Fees/Total Invested. $87.39/$100 000 = 0.0008782. To convert to a percent simply multiply by 100.
0.0008782 x 100 = 0.08782 which rounds to 0.09%
| ETFs Held Separately | XGRO | |
|---|---|---|
| MER | 0.09% | 0.20% |
| $100 000 | $87.82 | $200 |
XEQT in Detail
iShares Core Equity ETF Portfolio
XEQT is a 100% equity all in one ETF. For this reason it is considered to be a very aggressive portfolio. Investors should expect to hold for the long term and be comfortable with the ups and downs of the stock market.
| What’s Inside? | ITOT | XEF | XIC | IEMG | Cash |
|---|---|---|---|---|---|
| XEQT | 44.76% | 24.78% | 24.81% | 4.95% | 0.7% |
Let’s take an even closer look……
What is the true cost to own XEQT?
Suppose we invest a hypothetical $100,000 into XEQT. How much are we paying for convenience for iShares to continually keep the desired balance?
| What’s Inside? | ITOT | XEF | XIC | IEMG | Cash |
|---|---|---|---|---|---|
| XEQT | 44.76% | 24.78% | 24.81% | 4.95% | 0.7% |
| $100,000 | $44,760 | $24,780 | $24,810 | $4950 | $700 |
| MER(%) | 0.03% | 0.22% | 0.06% | 0.09% | NA |
| MER($) | $13.43 | $54.52 | $14.87 | $4.46 | NA |
If you held each fund separately, the total fees to hold $100,000 of XEQT would be $87.28.
The MER on XGRO is 0.20% which is $200 on a $100 000 investment.
So the premium paid to hold $100,000 worth of XEQT is $200 – $87.28 = $112.72
To figure out the average MER for holding all ETFs separately, use the formula Fees/Total Invested. $87.28/$100 000 = 0.0008728. To convert to a percent simply multiply by 100.
0.0008728 x 100 = 0.08728 which rounds to 0.09%
| ETFs Held Separately | XEQT | |
|---|---|---|
| MER | 0.09% | 0.20% |
| $100 000 | $87.28 | $200 |
iShares All-In-One ETF Overview
| Fund Facts | XINC | XCNS | XBAL | XGRO | XEQT |
|---|---|---|---|---|---|
| Equity Allocation | 20% | 40% | 60% | 80% | 100% |
| Fixed Income Allocation | 80% | 60% | 40% | 20% | 0% |
| Visual Allocation |  |  |  |  |  |
| Number of ETFs | 8 | 8 | 8 | 8 | 4 |
| Underlying Holdings | 20, 410 | 20, 410 | 20, 410 | 20, 410 | 9, 341 |
| Distribution Frequency | Quarterly | Quarterly | Quarterly | Quarterly | Quarterly |
| Yield | 2.58% | 1.99% | 1.97% | 1.50% | 2.77% |
| MER | 0.20% | 0.20% | 0.20% | 0.20% | 0.20% |
What I don’t like about iShares All-In-One ETFs?
The one thing I don’t like about iShares All-In-One ETFs is that they are too heavily weighted in Canadian stocks. Canadian stocks account for roughly 3% of the global stock market but they represent around 20% of XEQT and XGRO.
The number of holdings is somewhat misleading because the US Corporate Bond ETF has over 9000 underlying holdings but only represents a fraction of each portfolio. So the number of holdings in each iShares all-in-one portfolio is closer to 11 000.
You need to decide for yourself it it’s worth it to hold the funds separately or pay for convenience
Conclusion and Recommendation
If you plan to buy shares in ETFs regularly, don’t pay trading fees. Qtrade has 100s of free ETFs that you can trade with no commission. The iShares all-in-one ETFs listed above can be traded on Qtrade with no commission chargers. Also, Wealthsimple allows you to buy any ETF with no commission and allows you buy fractional shares.
If you held each underlying ETF separately, your fees would be cheaper but not by much. You pay for convenience by having iShares automatically and continually balance your desired asset allocation.
If you don’t want to think about your investments and rebalance your portfolio throughout the year, then an all-in-one ETF is the way to go.