What are the benefits of investing globally in all-in-one ETFs?

Building a globally diversified portfolio used to mean juggling multiple funds, tracking different regions and rebalancing along the way. A single global ETF can make that process much simpler. These funds bundle exposure to U.S., international developed and emerging markets into one holding, giving you access to thousands of companies across dozens of countries with a single purchase.

Why global investing matters for Canadian portfolios

Canada represents approximately 3% of global market capitalization based on equity market data as of late 2024. Investing only in Canadian stocks means you’re excluding roughly 97% of the world's publicly traded companies. The Canadian market is also heavily weighted toward financials, energy and materials, which means a Canada-only portfolio can create more concentration than you intended.

It's also important to recognize that different regions grow at different times. When Canadian markets are sluggish, technology companies in the U.S. or manufacturers in Asia may be thriving. Spreading investments across geographies can help smooth returns over time, although it won’t eliminate market volatility. This is a core idea behind diversification, and it’s something you’ll often see discussed in how ETFs can act as building blocks for a balanced portfolio.

What does “global exposure” mean in an ETF?

When an ETF describes itself as global, it typically includes three main components, although specific allocations vary by fund and index methodology.

U.S. Market

U.S. market exposure often accounts for approximately 60% of allocations in market-cap-weighted global funds, reflecting the sheer size of the U.S. market. Often, U.S. companies dominate sectors like technology, healthcare and consumer discretionary (companies that sell non-essential goods and services), which can give you broader sector diversity than the Canadian market alone.

International developed markets

International developed markets include Europe, Japan, Australia and other advanced economies. These markets provide exposure to different economic cycles, currencies and industries. They typically exhibit lower growth rates than emerging markets, but offer more regulatory stability.

Emerging markets

Emerging markets include countries like China, India and Brazil, which have faster-growing economies but less mature financial systems. These markets offer higher growth potential, but they can also come with more volatility and risk in your portfolio. Most global ETFs allocate approximately 5% to 10% to emerging markets, though this varies by fund.

How one ETF can provide global diversification

Global ETFs typically use a fund-of-funds structure. Instead of holding thousands of individual stocks directly, the ETF holds other ETFs that specialize in specific regions or market segments. For instance, a global ETF might hold a U.S. equity ETF, a European equity ETF, an Asia-Pacific ETF and an emerging markets ETF, all wrapped into one.

A single global ETF can provide exposure to over 13,000 companies across dozens of countries, all through one investment, giving you geographic, sector and currency diversification in one purchase.

Most global ETFs use market capitalization weighting, meaning regions and countries are represented based on the size of their stock markets. The U.S. typically receives the largest allocation, followed by developed international markets and then emerging markets. Some funds use fixed allocations instead, which can shape how your exposure is distributed across regions.

Rebalancing typically happens inside the fund according to the fund's stated methodology. In practice, this means you may not need to monitor global market shifts, decide how much to allocate to each region or execute multiple trades, although it’s a good idea to review your holdings from time to time to make sure everything remains aligned with your goals.

How do you choose the right global ETF for your risk tolerance?

One of the most practical frameworks for choosing a global ETF is by looking at its mix of equities and bonds, and how that fits your time horizon and how comfortable you are with market swings.

If you need the money within five years, a conservative or balanced fund with a meaningful bond allocation generally makes more sense. The shorter the timeline, the less room you have to recover from a sharp decline before you need access to the funds.

If your horizon is 10 years or more, a growth-oriented or all-equity global fund may be worth considering, depending on your risk tolerance. A longer time horizon can make it easier for you to stay invested through periods of volatility.

Most global ETFs listed in Canada are priced in Canadian dollars, which can make it more straightforward for you to buy and hold them. This can reduce the foreign exchange friction that typically comes with holding U.S.-listed funds in a Canadian brokerage account.

Global ETF options available to Canadians

Canadian investors have several types of global ETFs to consider.

All-in-one asset allocation ETFs

All-in-one asset allocation ETFs combine global equity exposure with bonds and sometimes alternative assets. They provide a complete portfolio in a single fund with automatic rebalancing. These ETFs have different risk profiles, so it’s important to choose from what’s available for all-in-one ETFs for Canadian investors based on your goals and timeline.

All-equity global ETFs

This type of all equity ETF focuses exclusively on a range of global equity stocks with no bond exposure. All-equity global ETFs are designed for long-term growth and may be appropriate for investors with longer time horizons who can tolerate higher short-term volatility.

Active versus passive global ETFs

Most global ETFs follow a passive strategy, tracking broad market indexes. However, some are actively managed, where portfolio managers adjust allocations or sector exposure. While passive ETFs offer low-cost, rules-based exposure, active ETFs in Canada (and elsewhere) rely on professional judgment and typically come with higher fees.

Benefits of using one global ETF instead of many global funds

Investors often choose one global ETF because they don’t have to juggle multiple global funds, and they get a diversified portfolio in one place:

• Simplicity and ease of management: One ETF often means fewer transactions, lower trading costs and simpler tracking. Regular contributions are also more manageable with one ETF.
• Instant diversification: A single global ETF provides geographic, sector and currency diversification right away. This means you’ll be exposed to different economic cycles, political environments and growth drivers simultaneously, reducing the impact when any single country or region underperforms.
• Automatic rebalancing: The ETF manager handles rebalancing based on the fund's stated methodology. No need to monitor your portfolio’s drifts or rebalance yourself.
• Currency efficiency: Most global ETFs available to Canadian investors are listed in Canadian dollars, removing the need to convert currency and reducing the foreign exchange costs that come with buying U.S.-listed funds directly.
• Behavioural benefits: Holding a single global ETF can help reduce the temptation to frequently adjust your portfolio, which can help you stay disciplined and invested during periods of market volatility.

What are the trade-offs to using a single global ETF?

While there are numerous benefits to holding a single global ETF, it’s also important to understand any tradeoffs you may experience:

Less customization: When you buy a global ETF, you accept the fund's regional allocations. In other words, you won’t be able to adjust the weight of specific regions without buying additional funds.

Currency exposure: Global ETFs expose you to foreign currencies. When the Canadian dollar strengthens against other currencies, your foreign holdings may lose value in Canadian dollar terms, even if they perform well in local currency. Currency movements add a layer of volatility that domestic investments don’t have.

Volatility still exists: Global equity ETFs can experience short-term volatility, especially during market downturns when correlations between regions tend to increase. When trying to find the right ETF for you, it’s important to consider your risk tolerance and think through which option matches your goals.

Using a global ETF in different account types

Where you hold your global ETF can affect your after-tax returns. Tax treatment depends on both the account type and the ETF's structure, so it’s important to review  the ETF Facts document and prospectus for any specific fund.

Here are some accounts that may be available to you:

Tax-Free Savings Account (TFSA) for tax-free growth

In a TFSA, growth is generally tax-free, making  these accounts well suited for long-term equity investments.  However, foreign withholding taxes may still apply on certain income, depending on the ETF’s underlying structure.

Registered Retirement Savings Plan (RRSP) for tax-deferred growth

In an RRSP, earnings and growth are generally tax-deferred until withdrawal. While withholding taxes on certain U.S. dividends may benefit from the Canada US tax treaty, foreign withholding taxes may still apply on certain income, depending on the ETF’s underlying structure.

Non-registered accounts taxed as income

In non-registered accounts, global ETFs may generate distributions that include foreign dividends, which are generally included in income and taxed at your marginal tax rate.

Capital gains are currently 50% taxable at your marginal tax rate

Currency gains and losses may also have tax implications.

Because tax treatment can vary depending on your individual situation, you should review the fund’s disclosure documents and consult a qualified tax professional for guidance specific to your circumstances.

How global ETFs fit into a broader portfolio

Some investors use a single global ETF as their entire equity allocation, particularly with all-in-one asset allocation ETFs that include both stocks and bonds. For investors who want simplicity and are comfortable with the fund's preset allocations, this approach minimizes complexity.

Others use a global equity ETF as their core holding and add other funds to customize exposure, such as a fixed income ETF for income or an active ETF for specific opportunities. This core-satellite approach provides a diversified base, while still leaving room for flexibility.  

Common misunderstandings about global ETFs

Like all investing options, you’ll want to make sure you have a clear picture of global ETFs, including their benefits and drawbacks. Here are some myths to be aware of:

Myth: "Global ETFs remove all risk.”

Global diversification reduces specific risks related to individual countries or sectors, but during broad market downturns most equity markets tend to decline together.

Myth: "Emerging markets dominate returns.”

While emerging markets can deliver strong growth periods, they also experience higher volatility. Most global ETFs allocate only 5% to 10% to emerging markets by design.

Myth:"One ETF means one country.”

A global ETF provides exposure to dozens of countries, not just one market. A single fund can hold thousands of individual companies across multiple continents.

Frequently asked questions (FAQs) about global ETFs for Canadians

It’s natural to have a few questions before getting started. Here are some of the common questions investors have about global equity ETFs, and what to consider as you think about how global exposure can fit into your overall financial plan.