Why Asset Allocation ETFs Should Be In Your Portfolio


Exchange-traded funds have taken Canada by storm, with assets under management growing year-over-year by 35.5% in 2021 and 26.7% in 2022, according to the Canadian ETF Association . Also in recent years, a new type of ETF has emerged, offering broad diversification at low cost.

Here’s what you need to know about Asset Allocation ETFs and why you might consider adding them to your portfolio, even if you tend to be a do-it-yourself investor.

What is an asset allocation ETF? Basically, it’s an ETF made up of other ETFs. If you think of it as the equivalent of a balanced mutual fund made up of different types of securities, like stocks and bonds, you’re on the right track. Both products strive to provide broad asset allocation, all in a simple, low-cost solution.

Why should I worry about asset allocation? Research has shown that this is fundamentally important. More than 90% of the ups and downs of your portfolio’s performance variations come from asset allocation.

The reasoning behind asset allocation is simple – by holding investments from different asset classes (like equities, fixed income investments, like bonds, and alternative investments), as well as different geographies and sectors , you can smooth out market shocks. . Different assets behave differently depending on market conditions, so even if one investment goes down, others may go up in value.

For example, with an asset allocation ETF, you don’t have to guess which geographic area is about to outperform, or which asset class you should overweight or underweight. The ETF gives you broad diversification on a single note, and it automatically rebalances itself, so you don’t have to think about it.

Why buy an asset allocation ETF? The short answer? For fee-sensitive investors, ETFs can be a cost-effective and convenient way to achieve a broad asset allocation in your portfolio through a single solution. They are easily accessible; you can buy and sell them like shares via an exchange (for example: TSX).

Broad diversification and low fees are important because, as investors, we cannot control the whims of the markets or whether interest rates will rise or fall. But we can control investment costs and over time reducing your investment costs can have a huge impact on the growth of your portfolio.

Why should I consider a made in Canada solution? Fees and performance aren’t the only considerations when looking for an ETF that can meet your asset allocation needs. Mackenzie has been in Canada for over 50 years and the company launched its ETF business in 2016. When designing its ETF products, the company considers a myriad of factors that can affect returns for Canadians, such as tax treatment and currency exchange rates. Mackenzie has always strived to create solutions designed for Canadian investors.

Commissions, management fees, brokerage fees, and expenses can all be associated with exchange-traded funds. Please read the prospectus before investing. Exchange traded funds are not guaranteed, their values ​​change frequently and past performance may not be repeated. The contents of this article (including any facts, views, opinions, recommendations, descriptions of, or references to any products or securities) should not be used or construed as investment advice, an offer to sell, or the solicitation of an offer to purchase, or an endorsement, recommendation or sponsorship of any named entity or security. Although we make every effort to ensure its accuracy and completeness, we assume no responsibility for reliance.

This document may contain forward-looking information that reflects our current expectations or those of third parties or our expectations of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, but are not limited to, general economic, political and market factors, interest and foreign exchange rates, stock and capital market volatility, business competition, changes in technology, changes in government regulations, changes in tax laws, legal or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and do not place undue reliance on any forward-looking information. The forward-looking information contained herein is current only as of April 30, 2022. This information should not be expected to be updated, supplemented or revised under any circumstances, whether as a result of new information, changed circumstances, future events or otherwise. .

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