By Aditya Nain on December 20, 2023
Estimated reading time: 7 minutes

Should you consider ETFs that include crypto?

By Aditya Nain on December 20, 2023
Estimated reading time: 7 minutes

Canadians who want to invest in bitcoin and ethereum but don’t want to buy them directly can gain exposure through ETFs. Here’s how.

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If you’ve been following news stories about bitcoin and ethereum, you know that these digital currencies, and the crypto asset class as a whole, have had their ups and downs. Like other types of investments, crypto goes through boom and bust cycles—and from late 2021 to late 2022, it was almost all bad news for Canadian crypto investors, as the total crypto market capitalization plummeted from about $2.7 trillion to about $850 billion (all figures in U.S. dollars).

But 2023 has been different. Aside from a few prominent scandals, it’s been a year of resurgence and renewed investor interest. The price of bitcoin (BTC) has risen from about $16,500 at the start of the year to about $41,300, as of Dec. 18, 2023—an eye-popping gain of about 150%. But is crypto too volatile to invest in—especially if you’re a conservative investor? Is it worth exploring, or should you stay away from all the hype?

What are cryptocurrencies? A quick refresher for Canadian investors

Cryptocurrency is a form of digital money based on blockchain technology, which securely and permanently records transactions in a digital ledger. Unlike traditional fiat currency, crypto isn’t created, managed or backed by banks. Bitcoin, for example, operates on a multitude of computers around the world (called “nodes”) that run a specific algorithm. Together, they contribute massive amounts of computing power to create new coins, process transactions and maintain the decentralized ledger of these transactions.

In the past, Canadian crypto investors bought coins, or fractions of coins, via crypto exchanges. Today, you can invest in exchange-traded funds (ETFs) that hold bitcoin and ethereum, making crypto more accessible to a wide range of investors.

The potential benefits of investing in crypto

Many Canadian investors remain cautious about crypto, wary of the dizzying volatility of crypto prices. Nonetheless, crypto is quickly emerging as an asset class for some long-term investors, exemplified by Fidelity’s All-in-One ETFs—which blend a small yet potentially impactful allocation of 1% to 3% of cryptocurrency into diversified portfolios of stocks and bonds. Adding a sprinkling of crypto assets to your portfolio could have these advantages:

Diversification and hedging against traditional markets

Diversification has typically meant allocating your portfolio to a certain percentage of stocks and bonds. However, bonds have had a torrid couple of years, and high inflation rates are spooking stock markets. So, investors are seeking fresh ideas. Diversifying with crypto could be promising because—although volatile and risky in itself—crypto does not suffer from all the same systemic risks that some stocks and bonds do. However, investors need to consider other crypto risks, such as regulatory uncertainty and technology risks.

Potential for higher returns

In diversified portfolios, stocks have so far been the growth engine. But, with crypto offering higher historical returns over the past 10 years, even a small allocation of 1% to 3% to crypto can potentially enhance an ETF’s returns.

A slice of the future

A small allocation to crypto gives you a slice of (what could be) the future of money and investments. Nobody knows how big the crypto market will be in 10 years and what role crypto will play in the future. A Fidelity All-in-One ETF with a small 1% to 3% allocation to crypto allows you to participate in the (possible) future without managing or storing it yourself.

Pure crypto ETFs vs. all-in-one ETFs

Fidelity’s All-in-One ETFs allocate 1% to 3% to crypto. It’s a low percentage, but BTC has delivered annualized gains of over 50% over the last five years, so even a small allocation can give your investments a big boost. While many Canadian investors will be content with this 1% to 3% crypto allocation, some experienced investors may want to manage their crypto allocation themselves—with the ability to increase or decrease their crypto allocation independently. For these investors, there’s the Fidelity Advantage Bitcoin ETF, which invests substantially all of its holdings in bitcoin. In fact, Fidelity’s All-in-One ETFs gain exposure to BTC through this very ETF. Here’s an overview of Fidelity’s All-in-One ETFs that include crypto in their neutral asset allocation mix (as at Oct. 31, 2023).

		All-in-One ETFs			Crypto-Asset ETF
Fidelity ETFs	Conservative	Balanced	Growth	Equity	Fidelity Advantage Bitcoin ETF
Ticker	FCNS	FBAL	FGRO	FEQT	FBTC
Equity	40%	59%	82%	97%	0%
Fixed income	59%	39%	15%	0%	0%
Crypto	1%	2%	3%	3%	99.83%

Source: Fidelity Investments Canada ULC

How to buy Fidelity’s All-in-One ETFs that include crypto

If you think a sprinkling of crypto in your portfolio may suit your financial goals, time horizon and risk profile, there are two ways to access Fidelity’s All-in-One ETFs.

Financial advisor: You can invest in Fidelity ETFs through your financial advisor. They can help you decide whether active ETFs are a good fit for your portfolio and investment goals, which one(s) to buy and how much to invest.
Online brokerage: Fidelity’s ETFs are available through most online brokerages. When logged in to your online brokerage account, search for an ETF’s ticker symbol as you would search for a stock.

In investing, it’s essential to be disciplined and to invest only in those ETFs that suit your financial needs. While some investors may want to experiment with crypto and manage their portfolio independently, Fidelity’s All-in-One ETFs help ensure that you don’t get carried away in good times or panic in bad times.

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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. The indicated rates of return are historical annual compounded total returns for the period indicated including changes in unit value and reinvestment of distributions. The indicated rates of return do not take into account sales, redemption, distribution or option charges or income taxes payable by any unitholder that would have reduced returns. 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 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 management expense ratio (in addition to sales tax, fixed administration 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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