All-in-One ETF Portfolio: Benefits, Risks, and What to Consider

Are all-in-one ETFs a good choice?

Diversification is one of the primary goals for any investor: spreading risk so you don’t “put all your eggs in one basket.” But a well-designed balanced ETF isn’t really a single basket; it’s a ready-made diversified portfolio packaged inside one fund. So yes, Bernie, allocating your RRIF to a single product such as Vanguard’s Conservative ETF Portfolio (VCNS) can be a perfectly reasonable approach.

A quick refresher: Vanguard introduced a family of asset allocation ETFs in early 2018 that mirror the structure of a balanced mutual fund but in ETF form. Each fund holds several underlying ETFs—typically a mix of bond ETFs and equity ETFs—that together provide exposure to Canadian, U.S. and international markets. In practice, that means exposure to thousands of individual bonds and equities across sectors and regions, delivering broad diversification that few DIY portfolios can match without extensive effort.

In fact, putting your money into the three ETFs you proposed would likely be less diversified than an all-in-one fund like VCNS. Your selection focuses on large-cap Canadian and U.S. equities and short-term Canadian corporate bonds only—it lacks international equity exposure and a range of bond types and maturities. By contrast, VCNS includes a wider spread of fixed-income holdings (government and corporate, across maturities and countries) and equity exposure across multiple regions, which reduces concentration risk.

Another practical advantage of a single balanced ETF in a RRIF is simplicity. These funds are managed to maintain their target asset allocation; the fund manager handles rebalancing periodically, so you don’t need to rebalance the holdings yourself. For RRIF withdrawals, your main practical task is selling enough ETF units when you need cash to meet minimum withdrawals. That makes ongoing management straightforward, especially for investors who prefer a low-maintenance approach.

There are valid reasons, however, to choose individual ETFs instead of an all-in-one product. Holding separate ETFs gives you greater flexibility to tailor the exact asset allocation. For example, Vanguard’s asset allocation ETFs come in preset mixes—0%, 20%, 40%, 50% and 60% bonds, depending on the fund. If you prefer a nonstandard target such as 45% bonds, you can combine two funds in different proportions to arrive at your desired split.

Tax efficiency and account placement are other reasons to use individual ETFs. If you’re an experienced DIY investor, you can distribute asset classes across accounts to reduce taxes—for example, keeping equities in a TFSA and placing higher-yield or interest-generating assets in an RRIF or non-registered account. That type of tax-aware positioning is harder to achieve if all of your assets are wrapped inside a single balanced ETF.

For many investors, though, the combination of low cost, broad diversification and minimal maintenance makes asset allocation ETFs from providers such as Vanguard, iShares, BMO and Horizons an attractive option. They provide a simple, low-fee path to a diversified portfolio without the hassle of selecting and rebalancing multiple funds.

Read more about ETFs:

• ETFs aren’t just for passive investing anymore
• How to choose ETFs for your investment portfolio
• Are ETFs a good investment for an all‑weather portfolio?
• What seasoned investors look for in an ETF prospectus