Today’s episode is going to be especially useful if you’re a Canadian DIY investor and you want to build an optimized, passive, low-cost portfolio, but you still have questions about some of the practical details.

For example, should you just buy one all-in-one asset allocation ETF, or is there a benefit to buying the underlying ETFs individually? How much should you care about ETF trading volume? What does liquidity actually mean when we’re talking about ETFs? Should you use market orders or limit orders when buying ETFs? And if you’re an income-focused investor, what are the pros and cons of building your portfolio around dividends?

We also get into the active versus passive investing debate, why it’s so difficult for stock pickers and active managers to consistently beat the market over the long term, and how investors can think about risk when comparing traditional bonds with things like low-volatility ETFs.

Also as a Build Wealth Canada listener, we have a brand new free issue of Canadian MoneySaver magazine for you. The issue focuses specifically on ETFs here in Canada, I wrote an article for it as well, and you can get the digital version of the entire magazine for free by going to buildwealthcanada.ca/magazine.

Links from the episode:

The free issue of Canadian MoneySaver Magazine for Build Wealth Canada listeners

ETF Comparison Tool

SPIVA Report (How Active Management Compares to Passive Index Investing)

A Big Thanks to Our Sponsors:

BMO Asset Allocation ETFs: One of the Lowest Cost Options in Canada:

Do you keep hearing about these “All-in-one ETFs” lately? Well, I have some exciting news:

BMO ETFs just cut the fees on their flagship all-in-one ETFs to 0.15% making them one of the lowest cost options in Canada. That’s right – more value, same smart diversification, all in a single ETF.

Whether you’re just starting out, or simplifying your portfolio, BMOs all in one ETFs make it easy to invest with confidence.

Just Zed it and forget it by considering ETFs like ZEQT, BMO’s All Equity ETF or ZGRO, BMO’s Growth ETF.

TELUS Online Security

I’ve been using TELUS Online Security to keep my family’s and my devices secure across our entire home, and when we are away travelling with the kids. My favourite part about the service is that it’s a comprehensive, all-in-one suite of tools that have everything that I need to maximize our security, all within a single app. 

Instead of having to deal with multiple companies and services to cover all my bases when it comes to security, I instead now have everything that I need in one place. This makes things easier to manage, is more cost effective, and the app is very intuitive and easy to use, so it’s really nice not to have to learn a separate app for every component of our online security (i.e. anti-virus, VPN, dark web monitoring, malware and ransomware scanning, and many more). 

A big thanks to TELUS for putting all this together in an affordable and easy-to-use package. It’s really nice to have that piece-of-mind knowing that the family and I have all our bases covered when it comes to our online and device security. 

Check them out over at TELUS Online Security. Plans start at just $12/month.

“Views from the Desk” Podcast

On this podcast, we often cover best practices that can not only help you now, but will also be relevant throughout your investment lifetime. But what if you also want an update on what is happening with your investments, the markets, and the economy right now?

To help me stay up-to-date on these topics, a great Canadian podcast that I listen to weekly is called “Views from the Desk” (Apple, Spotify, Direct).

They provide timely information for us Canadians on what is happening to our investments right now, as well as other key factors affecting us like changes to our interest rates, our inflation, and regulatory changes that we should know about.

The podcast is hosted by BMO ETFs. I’m a huge fan of theirs, I own a lot of BMO ETFs myself, and it’s a great free resource for both new and existing ETF investors.

I hope you check them out. All episodes are available for free in your favourite podcast player. Just search for “Views from the Desk” or click one of the links below:

• Apple Podcasts
• Spotify
• Directly from their Site

ETF Market Insights and BMO ETFs

Catch the latest episodes on YouTube Here.

There are so many opinions on how to invest your money today, but it can be hard to find credible voices to rely on in the world of finance and investing.

One resource I turn to every week is the ETF Market Insights YouTube channel, led by today’s episode sponsor, BMO ETFs.

Market Insights brings in industry experts and their weekly episodes cover the hottest themes like inflation, infrastructure, healthcare, and more. Tuning in helps me stay up-to-date on what’s happening so I can be a smarter investor. You can also submit your own ETF questions, to be answered on the show.

Do yourself a favour and subscribe on YouTube to ETF Market Insights, or visit ETFMarketInsights.com so you can be notified when future episodes go live.

BMO Asset Allocation ETFs:

Asset allocation explains over 90 per cent of the variation in a portfolio’s quarterly returns, so it’s no wonder Canadian investors are turning to these ETFs!

Today’s sponsor, BMO ETFs, offers these innovative all-in-one solutions with the BMO All-Equity ETF (ZEQT), BMO Growth ETF (ZGRO), BMO Balanced ETF (ZBAL), BMO Conservative ETF (ZCON), and more. BMO developed these to help provide investors with ETFs that offer broad diversification and are also low-cost and simple to use.

These ETFs invest in a number of underlying index based ETFs and are rebalanced automatically back to your set asset allocation or mix of stocks and bonds. They offer a hands free approach to investing that is built on disciplined weights to provide exposure to different geographies and sectors all in one solution.

BMO actually offers eight asset allocation ETFs. Learn more at BMOETFs.com.

Questions Covered:

1. Danielle, let’s start with the fundamental debate in the investing world. Time and time again, the data shows that active stock pickers struggle to beat the market over the long term, especially once fees are factored in. You wrote an entire article about this in the magazine. For those listeners who might be tempted to hunt for the next big winning stock, why is it so notoriously difficult for active managers and individual stock pickers to consistently win?

2. Danielle, let’s transition to the actual mechanics of buying and selling, specifically regarding liquidity. To set the stage for our newer DIY investors, how do you define liquidity, and how does liquidity work differently for an ETF compared to an individual stock?

3. Chris, this naturally leads us to the ‘bid-ask spread.’ Could you break down exactly what that is, and what do we need to know about it as DIY investors?

4. Danielle and Chris, when we are ready to hit ‘buy’ inside our brokerage accounts, we are faced with choosing an order type. Can you explain the mechanics of a market order versus a limit order, and what are your recommended best practices when executing ETF trades?

5. Danielle, a common hesitation we see from investors looking at specific Canadian ETFs is the trading volume. They’ll look at an ETF and say, ‘But this barely trades today, I shouldn’t buy it.’ Why is low daily trading volume not the red flag for ETFs that it might be for individual stocks?

6. Danielle, one of the most common dilemmas DIY investors face today is choosing their portfolio structure. On one hand, you have the simplicity of a single asset allocation ETF; the ‘all-in-one’ portfolio. On the other hand, you can purchase the underlying ETFs individually. For someone completely new to this, can you first explain what these two methods actually are?

7. Chris, in your experience, what are some of the reasons that an investor may choose to buy multiple different ETFs, instead of just keeping it simple with a single, all-in-one, asset allocation ETF?

8. Follow up question: For investors that would rather purchase individual ETFs instead of a single, all-in-one ETF, what are some portfolio maintenance best practices that they should do on an ongoing basis?”

9. Chris, let’s shift gears to a strategy that is incredibly popular here in Canada: dividend and income-focused investing. A lot of investors love the psychological comfort of semi-reliable dividends, especially because it means they don’t have to sell shares at a loss during market downturns. What are the pros and cons of this purely income-focused approach?

10. Danielle, if a Canadian investor decides this is the right path for them, what are some of the options available to them in the Canadian marketplace?

11. In the magazine, there was also a Q&A section and one of the interesting questions from a reader was: ‘Should I replace my bonds with a low volatility ETF?’ This is an interesting dilemma, for someone trying to manage risk while potentially chasing higher returns. Chris, what is your take on this? And what are the pros and cons of substituting traditional fixed income with low-volatility equity ETFs?”

Thank you so much to both of you for coming on and for making this issue of Canadian MoneySaver magazine available for free to Build Wealth Canada listeners. The link that you can go to get this issue for free is over at buildwealthcanada.ca/magazine.

Danielle, where can we learn more from you and the team?

And Chris, thanks so much for coming on and sharing your expertise. Of course, we can see more of your work at Canadian MoneySaver magazine, but where else can listeners go to learn from you?

Disclaimer:

This content is sponsored by BMO Exchange Traded Funds.

This content is intended for information purposes only. Build Wealth Canada is compensated under this arrangement by BMO Exchange Traded Funds. The views expressed herein are subject to change without notice. The content contained herein is not, and should not be construed as, investment advice to any party. Particular investments and/or trading strategies should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.

BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate.
This podcast is for information purposes only. The information contained herein is not, and should not be construed as investment, tax or legal advice to any party. Particular investments and/or trading strategies should be evaluated and professional advice should be obtained with respect to any circumstance.

ETF and Mutual Fund portfolio holdings are subject to change without notice at any time. Index returns do not reflect transactions costs or the deduction of other fees and expenses and it is not possible to invest directly in an Index. Past performance is no guarantee of future results.

Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent prospectus.

Commissions, management fees and expenses all may be associated with investments in exchange-traded funds. Please read the ETF Facts or prospectus of the BMO ETFs before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Exchange-traded funds are not guaranteed, their values change frequently and past performance may not be repeated.

For a summary of the risks of an investment in the BMO ETFs, please see the specific risks set out in the BMO ETF’s prospectus. BMO ETFs trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.

BMO ETFs are managed and administered by BMO Asset Management Inc., an investment fund manager and a portfolio manager, and a separate legal entity from Bank of Montreal. BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate.

“BMO” is a registered trademark of Bank of Montreal, used under licence.