Are you looking for a safe space to park your funds and make your money work for you? Storing cash in a High-Interest Savings Account (HISA) cannot get you the returns you might like to keep pace with inflation. However, investing it in equity securities entails a risk to your capital that many people aren’t willing to take. Manually rebalancing your portfolio is also a major hassle for new investors to deal with.
Exchange-traded funds (ETFs) offer you a low-cost opportunity to invest in a basket of securities aligned with particular investment goals. All-in-one ETF portfolios are ETFs that consist of several underlying ETFs that offer further diversification to investors.
Balanced portfolios like the BMO Balanced ETF Portfolio (ZBAL) are suitable for investors with moderate risk tolerance, provide you with capital preservation, and relatively lower volatility in a turbulent market. My BMO ZBAL review will help you decide whether this low-cost solution is the right fit for your investment portfolio.
Pros of BMO ZBAL
- One-fund-solution with automatic rebalancing.
- Low MER.
- Easy to purchase.
Cons of BMO ZBAL
- Does not offer a real 50/50 balance.
Table of Contents
What is BMO ZBAL ETF Portfolio?
BMO ZBAL is an ETF that invests in several underlying ETFs issued by BMO Global Asset Management. BMO already offers a comprehensive suite of ETFs that include several actively managed ETFs that align with various investment goals.
BMO ZBAL came along as one of its three one-ticket solutions to provide investors with further diversity. ZBAL is the balanced one-ticket ETF portfolio offered from the three all-in-one solutions that provide investors with exposure to a broad range of geographically diversified stocks by investing in multiple BMO ETF products.
BMO ZBAL effectively allows you to generate more money using your capital through a carefully crafted portfolio of fixed income and equity securities diversified across several ETFs.
How do All-In-One Portfolios Work?
All-in-one ETFs are essentially a portfolio of several ETFs designed to make diversified and passive investing easier for investors.
Making an ETF portfolio offers you a lot of diversity in terms of equity and fixed-income securities. However, manually rebalancing your ETF portfolio can be a significant problem, especially if you are new to investing or you do not have the time. You would have to purchase several ETFs yourself and keep rebalancing them to align with your investment goals and risk tolerance based on each ETF’s performance.
ETF Portfolios like BMO ZBAL eliminate the need to manually rebalance your ETF portfolio by doing the task for you. All you need to do to align with your investment goal is remain invested in the ETF portfolio until your investment goals change.
You can find out more details about all-in-one ETFs in my list of the best all-in-one ETFs in Canada.
What does BMO ZBAL Invest in?
BMO ZBAL is considered a balanced all-in-one ETF portfolio that invests in ETFs distributed by the Bank of Montreal Global Asset Management. It offers investors with broadly diversified exposure to fixed-income, and equity securities diversified geographically and in terms of industry.
ZBAL invests around half of its funds in Canadian securities, almost 30% in US securities, while the rest is distributed across several other emerging and developed economies.
BMO ZBAL Asset Allocation
BMO ZBAL is called a balanced portfolio by BMO Global Assets, but it redefines what is considered a balanced portfolio. Typically, a balanced ETF portfolio might provide investors with a 50/50 split between equity and fixed-income securities. However, BMO ZBAL focuses on long-term capital growth with a 60/40 equity to fixed-income security split.
The result is growth and performance that enjoys stability through exposure to fixed-income securities, but it can grow or decline based on the performance of stock markets because of its inclination towards equity securities.
BMO Global Asset Management’s BMO ZBAL offers investors exposure to a geographically diversified portfolio of underlying securities. However, ZBAL veers heavily towards Canadian securities. As of January 20, 2021, 50.61% of its exposure is towards Canadian securities. Its second-most significant exposure is towards the US market, with 29.71% of its funds allocated to US securities. The remaining funds are diversified broadly across several countries in both emerging and developed economies.
BMO ZBAL Top Holdings
BMO ZBAL’s top 7 holdings constitute 99.84% of its holdings. Its most significant investments are in the BMO Aggregate Bond Index ETF at 27.10% and the BMO S&P 500 Index ETF at 25.97%. It holds 0.05% of its funds in cash or cash equivalents.
BMO ZBAL Sector Weighting
BMO ZBAL diversifies its funds across several industries but focuses more on financial services, technology, and healthcare sectors. As of January 21, 2020, it has allocated 18.30% of its portfolio towards the financial services sector. It has allocated 16.88% of its funds to the technology sector and 10.35% to the healthcare sector. Its least significant allocation is towards the real estate sector at 2.93%.
BMO ZBAL MER and Fees
BMO ZBAL has a Management Expense Ratio (MER) of 0.20%. It may be slightly higher than the likes of Horizons HBAL but is lower than many other ETF portfolios.
Considering the charges for mutual fund products being over 2% on average, it is easy to see why many Canadians choose all-in-one ETF portfolios like BMO ZBAL over mutual funds.
BMO ZBAL Performance and Returns
BMO ZBAL is a balanced ETF portfolio that veers slightly more aggressively than a conservative portfolio that is geared towards providing investors with long-term capital growth. Its performance in the last year reflects the portfolio’s alignment towards slow but steady capital growth.
BMO ZBAL’s 60/40 split between equity and fixed-income securities makes the fund’s performance align with the equity market. The stock market experienced a sudden decline between February and March 2020, causing a decline in ZBAL earnings. However, the markets recovered quickly, and ZBAL is up from the point it was 12 months ago.
Its exposure to fixed-income securities provides the ETF portfolio some stability during a turbulent market, allowing it to grow as the economy recovers.
BMO ZBAL vs. Other ETFs
BMO ZBAL vs. Vanguard VBAL
Vanguard VBAL is Vanguard’s Balanced All-In-One ETF portfolio that is comparable to BMO ZBAL in terms of what it invests in and its investment goals. VBAL provides investors with greater exposure to US stocks than BMO ZBAL. VBAL has a higher MER of 0.25% compared to ZBAL’s 0.20%. Read my full Vanguard VBAL Review here to find out more.
BMO ZBAL vs. Horizons HBAL
Horizons HBAL is Horizon’s one-ticket balanced ETF portfolio that is comparable to BMO ZBAL in terms of its investment goals. HBAL tends to take a more aggressive approach to invest, with a 70/30 split between equity and fixed-income securities. It also offers a significantly lower exposure to Canadian securities than ZBAL. Horizons HBAL offers more substantial growth to its investors but comes with a slightly greater risk to your capital. Read my full Horizons HBAL Review here to find out more.
Is BMO ZBAL a Good Investment For You?
Balanced ETF portfolios like BMO ZBAL are suitable for investors who have moderate risk tolerance. It means that the ETF portfolio can provide you with capital growth but involves more risk to your capital than a conservative portfolio during turbulent markets.
BMO ZBAL is considered a balanced portfolio, but it has a slightly higher focus on equity securities. Its 60/40 split between stocks and bonds means that its performance and returns will more likely follow the growth and decline of the equity market, but its exposure to fixed-income securities will provide a certain measure of stability.
BMO ZBAL could be suitable for you if:
- You are seeking long-term capital growth.
- Can tolerate moderate risk to your capital.
- Do not want to manually rebalance your ETF portfolio.
- Have a long-term investment horizon.
How to Buy BMO ZBAL ETF in Canada
My two favourite ways to buy ETFs in Canada are the following:
- Questrade – Canada’s leading discount broker, I use Questrade to trade most of my stocks. It has a desktop and mobile trading platform. All Canadian ETF purchases are commission-free, but be aware that selling ETFs will cost a small fee. With this special offer, you can also get $50 of commission-free stock trades here.
- Wealthsimple Trade – Better known as a robo-advisor, Wealthsimple has now released this fantastic trading platform that now comes in both desktop and mobile versions. All Canadian stock and ETF trades are commission-free. Get a $10 signup bonus when you sign up here.
Many new or passive investors try their hand at investing in a portfolio of stocks and bonds but feel overwhelmed by everything they need to track so they can align the portfolio with their financial goals.
ETFs provide diversified exposure to securities but are also liable to changing economic conditions. Depending on your changing investment goals, you might have to manually rebalance your ETF portfolio as well.
One-ticket solutions like the BMO Balanced ETF Portfolio can eliminate the hassle of tracking individual securities or ETFs by automatically rebalancing the portfolio for you. BMO ZBAL gets a Wealth Awesome stamp of approval for investors with moderate risk tolerance.