One of the best investing products around these days is an all-in-one portfolio-building tool called the asset allocation ETF.
These exchange-traded funds are cheap to own, simple to buy and transparent in their construction. Many of the country’s biggest investment companies offer asset allocation ETFs, which means the portfolio mixes they use are indicative of current thinking on how to blend stocks from around the world.
What we find when we pop the hood on these ETFs is that while we may live, invest and ultimately spend our money in Canada, the U.S. stock market is of primary interest. Canada ranks a distant second to the U.S. market, with exposure levels comparable to stock markets outside of North America. Let’s see how a few balanced asset allocation ETFs handle their global stock market exposure. Balanced means 60 per cent of the portfolio is in stocks, with 40 per cent in bonds. The percentages shown below apply to the entire portfolio.
- BMO Balanced ETF (ZBAL-T): U.S. 30 per cent, Canada 15.3 per cent, international stocks 12.1 per cent, emerging markets 4.6 per cent.
- Fidelity All-in-One Balanced ETF/Fund (FBAL-T): U.S. stocks 29.4 per cent, Canadian stocks 14.3 per cent and international stocks 14.5 per cent.
- Global X Balanced Asset Allocation ETF (HBAL-T): U.S. 29 per cent, Canada 12.5 per cent, international 15.5 per cent, emerging markets 6 per cent.
- iShares Core Balanced ETF Portfolio (XBAL-T): U.S. 26.7 per cent, Canada 15.1 per cent, international 15 per cent, emerging markets 3 per cent.
- TD Balanced ETF Portfolio (TBAL-T): U.S. 25.1 per cent, Canada 20.8 per cent, international 15.3 per cent.
- Vanguard Balanced ETF Portfolio (VBAL-T): U.S. 27.2 per cent, Canada 18.1 per cent, international 11.3 per cent, emerging markets 4.1 per cent.
Even these middling allocations to Canada seem large when you consider this country’s weighting in the global stock market. In the MSCI World Index, Canada accounts for about 3 per cent and the U.S. for 71 per cent.
Rob Carrick