By Aditya Nain on September 11, 2023
Estimated reading time: 7 minutes

How many ETFs can Canadian investors own?

By Aditya Nain on September 11, 2023
Estimated reading time: 7 minutes

ETFs offer Canadian investors an appealing combination of convenience, diversification and low fees. But how many ETFs should you own, and which ones?

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In Canada, today’s new investors and young people are probably more aware than any previous generation of the possibility of compounding their money in the stock markets—especially with Canada’s inflation at its highest level in over 20 years. At the same time, there can be the problem of having too much to choose from. Should you buy stocks, mutual funds or exchange-traded funds (ETFs)? Many Canadian investors veer towards ETFs because of their diversified portfolios and relatively low fees. But it’s an investment jungle out there, and more questions invariably pop up: Which is the best ETF to buy? How many ETFs should I own? And how should I buy ETFs in Canada?

Why invest in ETFs?

As a new investor, you have much to think about, including your investment objectives, your financial circumstances, your risk tolerance and your time horizon. When choosing investments, you’ll also need to consider these factors: return potential, risk factors, fees, ease of access, and the effort needed to maintain their portfolio.

Some investors are comfortable with buying, selling and monitoring the performance of individual stocks. Others prefer investments with built-in diversification that are professionally managed, such as mutual funds and ETFs. However, mutual funds usually have a substantially higher fee than comparable ETFs. Here’s a more detailed look at the benefits of ETFs:

Built-in diversification: ETF providers pool money from many investors and invest it in a portfolio of many stocks—potentially hundreds. For example, many popular ETFs attempt to replicate the performance of stock market indexes like the S&P 500 or the S&P/TSX 60.

Lower risk: Greater diversification has the potential to lower investment risk. For example, if you own 10 stocks, each making up 10% of your portfolio, and if one of those stocks crashes by 50%, your overall portfolio will take a big hit. However, if you own 50 stocks, each making up 2% of your portfolio, poor performance by one or two stocks will not create as big a dent in your returns.

Lower fees: ETFs and mutual funds charge investors a fee—the management expense ratio (MER)—calculated as an annual percentage of your invested money. ETF MERs are usually lower than those of comparable mutual funds. ETF fees typically range from under 0.1% (for passive ETFs) to over 0.5% (for actively managed ETFs). Plus, having lower fees means more investment gains you can compound over the long run.

Easy to buy and sell: ETFs are bought and sold on stock exchanges, like stocks are. All you need is a brokerage account. This makes it easy and convenient for new investors to access ETFs.

Access through an online broker: It’s 2023, so you probably want to access and manage your investments digitally. I do! You can easily buy, sell and manage ETFs through one of the many online brokers in Canada. Each broker has its pros and cons. Learn more about the best online brokers in Canada in 2023.

Different types of ETFs: There’s an ETF for different types of investors and risk profiles. For example, you could choose to buy one that tracks the U.S. stock market, one that tracks the global stock market, or one that invests in alternative assets like real estate, precious metals—and even bitcoin. Some people like to build a portfolio of multiple ETFs, but if you’re a new investor and want an even easier, done-for-you option, you could consider all-in-one ETFs.

What is an all-in-one ETF?

All-in-one ETFs may be a good option for investors who don’t want to spend a lot of time maintaining their portfolios. These ETFs offer diversification across asset classes in just one ETF. For example, in the past, if you wanted to invest in a balanced portfolio of equity and fixed income, you’d have to buy at least two ETFs—one for each asset class. Now, you can consider investing in a solution like Fidelity’s All-in-One Balanced ETF, which invests about 59% of its funds in equity, about 39% in fixed income, and about 2% in crypto.

While the fee for an all-in-one ETF is typically higher than that of an ETF that passively tracks a stock market index, the added advantage of a Fidelity All-in-One ETF is the convenience of automatic portfolio rebalancing, which means Fidelity periodically buys and sells assets to maintain the ETF’s strategic asset allocation.

Fidelity offers All-in-One ETFs with the following target allocations:

Fidelity All-in-One ETFs	Conservative	Balanced	Growth	Equity
Ticker	FCNS	FBAL	FGRO	FEQT
Equity	40%	59%	82%	97%
Fixed income	59%	39%	15%	0%
Crypto	1%	2%	3%	3%

Source: Fidelity Investments Canada ULC

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All-in-one ETFs for “core and explore” investing

So, are all-in-one ETFs right for you? If you’re a new investor who’s still learning the ropes, or if you prefer ease and convenience over flexibility, they’re worth considering.

Even experienced and seasoned investors who enjoy investment research, portfolio construction and portfolio management may find a use for all-in-one ETFs, as part of a core-and-explore approach to investing. In this case, all-in-one ETFs could form the passive “core” of the portfolio, with other individual ETFs forming the more actively managed “explore” portion of the portfolio.

This article is sponsored.

This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.

An important message from Fidelity Investments Canada ULC

Commissions, trailing commissions, management fees, brokerage fees and expenses may be associated with investments in ETFs. Please read the ETF’s prospectus, which contains detailed investment information, before investing. ETFs are not guaranteed. Their values change frequently, and investors may experience a gain or a loss. Past performance may not be repeated.

The management fees directly payable by the Fidelity All-in-One ETFs are nil. The Fidelity All-in-One ETFs invest in other underlying Fidelity ETFs that charge a direct management fee and/or administration fee. Based on the weightings of underlying Fidelity ETFs, it is expected that the effective indirect management and/or administration fee for Fidelity All-in-One Conservative ETF will be approximately 0.35%, Fidelity All-in-One Balanced ETF will be approximately 0.36%, Fidelity All-in-One Growth ETF will be approximately 0.38% and Fidelity All-in-One Equity ETF will be approximately 0.39%. The actual effective, indirect fees may be higher or lower than the estimated rates shown above based on the performance of the underlying Fidelity ETFs, rebalancing events initiated by the portfolio management team of the Fidelity All-in-One ETFs and changes to the strategic allocation, which may include the removal or addition of underlying Fidelity ETFs. Actual indirect fees will be reflected in the MER (in addition to sales tax, fixed admin fees, commissions, portfolio transaction costs and other expenses, as applicable, of each Fidelity All-in-One ETF and mutual fund version), posted semi-annually.

Each of the Fidelity All-in-One ETFs has a neutral mix, which includes a small allocation to Fidelity Advantage Bitcoin ETF™ ranging between 1% and 3%. If each portfolio deviates from its neutral mix by greater than 5% between annual rebalances, it will also be rebalanced. Such rebalancing activity may not occur immediately upon crossing that threshold but will occur shortly thereafter.

The statements contained herein are based on information believed to be reliable and are provided for information purposes only. Where such information is based in whole or in part on information provided by third parties, we cannot guarantee that it is accurate, complete or current at all times. It does not provide investment, tax or legal advice, and is not an offer or solicitation to buy. Graphs and charts are used for illustrative purposes only and do not reflect future values or returns on investment of any fund or portfolio. Particular investment strategies should be evaluated according to an investor’s investment objectives and tolerance for risk. Fidelity Investments Canada ULC and its affiliates and related entities are not liable for any errors or omissions in the information or for any loss or damage suffered.

The presenter is not registered with any securities commission and therefore cannot provide advice regarding securities.

About Aditya Nain

Aditya Nain is an author, speaker and educator who writes about Canadian investments, personal finance and crypto. He has co-authored two books and taught at universities for 12 years.

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