5 reasons new investors should consider All-in-One ETFs

As younger Canadians start saving more of their money, they’re realizing something that older Canadians have known for years: easy, cost-effective access to investing is key to growing a retirement portfolio. Back in the day, though, people didn’t have the same kinds of inexpensive options as they do now, which means that if new investors play their cards right, they could retire with a larger nest egg than their parents.

Over the last few years, many investors have bought exchange-traded funds (ETFs), low-cost investments that give you quick access to a basket of stocks and bonds. Millennials, though, have embraced these securities more than most. According to one survey, 42% of those between the ages of 21 and 35 invest in ETFs. Still, creating a portfolio of ETFs can take time, which is why some companies, like Fidelity, have developed all-in-one ETFs that hold equities and fixed income assets. Use them in a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP) and away you go.

All-in-one ETFs could be a game-changer for busy, young professionals who don’t have time to pick their own investments. Here’s why.

1. Diversification

To reach your financial goals, you typically need to hold a diversified portfolio. As enticing as it may be to put all your money into a hot Reddit-approved stock, sticking too much into one security will cause a lot of heartache if that investment falls. When you diversify, you hold numerous stocks and bonds across a variety of asset classes and countries, so if one company gets into trouble, it won’t drag down your whole portfolio with it. All-in-one ETFs hold diverse sets of equity and fixed income securities that help balance the overall experience, so no company-specific event can affect your returns.

2. Lower investment fees

While no one wants to pay more than they need to for financial services, cost savings are particularly important for younger investors who may not have as much disposable income to put into the market. Because of how ETFs are created and traded, they’re one of the lower-cost investment options on the market. However, depending on what you buy, putting together a basket of ETFs yourself could get expensive. With all-in-one ETFs, you’re paying a single fee for hundreds of securities. It’s more transparent – you know exactly what you’re paying – and it’s easier to manage.

3. Automatic rebalancing

As markets fluctuate, so does the value of assets held within portfolios. That 60% you had in equities, for example, might account for 75% of your holdings after an extended stock rally, while your fixed income assets may have gone down to 25% from your original 40% target. Investors must rebalance their portfolios regularly by purchasing or trading assets in the right amounts to get back to their desired allocation. Unfortunately, many neglect this step, either because they’re not sure how to rebalance or because they have too many other priorities on their to-do list. Fortunately, with all-in-one ETFs, that rebalancing happens automatically. The funds adjust their holdings on a regular basis to maintain the target asset allocation.

4. Asset allocation

Young investors – especially those saving for retirement – have decades to let their money grow. With that kind of time horizon, it can make sense to choose an asset allocation that favours stocks, which fluctuate more than bond, but offer greater returns over the long term. After all, the younger you are, the more time you have to recover from a market downturn. If you have a nearer-term goal like saving for your first house, or if you’re uncomfortable taking on too much risk, then consider holding a more even mix of equities and fixed income. At a younger age, you’ll still want to hold more stocks, so you can get long-term growth, but the bonds will lessen the ups and downs.

5. Investment management

Do-it-yourself investing is not easy. It takes a lot of time and knowledge and a stomach made of steel to deal with market volatility. That goes for ETF investing, too. Even if you hold a few ETFs, you’ll need to keep an eye on whether you have enough money in each one, and if they still make sense to own as your life changes. With an all-in-one ETF, you hold a single security. The stocks and bonds that are inside of it are already chosen for you, and the fund is designed to help you build wealth for the future. If you want to get more conservative, maybe, as you get older, that’s also simple to do: move all your assets from one all-in-one to another.

With built-in diversification, lower fees and automatic rebalancing, all-in-one ETFs are ideal for younger Canadians who would rather build their careers than build a portfolio. Ready to make a smart choice to meet your investment objectives? Find out more about Fidelity All-in-One ETFs and how we can help you reach your financial goals faster.