In Canada, younger investors today are more aware than earlier generations of the power of compounding returns in the stock market—especially with inflation near multi-decade highs. Yet newcomers often face a crowded field of choices: individual stocks, mutual funds or exchange-traded funds (ETFs)? Many Canadian investors favor ETFs because they combine diversification with generally lower fees. Still, common questions remain: which ETFs are best, how many should you hold, and how do you buy them in Canada?
Why invest in ETFs?
When you start investing, consider your goals, financial situation, risk tolerance and time horizon. You should also evaluate potential returns, risks, fees, accessibility and how much time you want to spend managing your portfolio. Some investors enjoy researching and trading individual stocks. Others prefer professionally managed, diversified options such as mutual funds or ETFs. Mutual funds often carry higher fees than comparable ETFs, which makes ETFs attractive for many investors. Key advantages of ETFs include:
- Built-in diversification: ETF providers pool money from many investors to create a portfolio of multiple securities—sometimes hundreds. Many ETFs track broad indices like the S&P 500 or the S&P/TSX 60, offering exposure to a wide range of companies through a single product.
- Reduced single-stock risk: Greater diversification helps limit the impact of any single company’s decline. For example, owning dozens of holdings means the poor performance of one or two positions has a smaller effect on overall returns than it would in a concentrated portfolio.
- Lower fees: ETFs and mutual funds charge a management expense ratio (MER), an annual percentage of assets. Passive ETFs often have MERs under 0.10%, while actively managed ETFs can exceed 0.50%. Lower ongoing fees mean more of your returns stay invested and compound over time.
- Liquidity and ease of trading: ETFs trade on stock exchanges like individual stocks, so you can buy and sell them through a brokerage account during market hours. This makes ETFs simple and convenient for new investors to access.
- Online access: Most investors prefer managing portfolios digitally. You can buy, sell and monitor ETFs through a range of online brokers in Canada. Each platform has different features and fee structures, so compare before choosing one that fits your needs.
- Variety of strategies: ETFs cover many asset classes and strategies—from domestic and global equities to bonds, real estate, commodities and even crypto exposure. If you want simplicity, you can also choose an all-in-one ETF that bundles multiple asset classes into a single fund.
What is an all-in-one ETF?
All-in-one ETFs are designed for investors who want a diversified, low-maintenance solution. Instead of buying separate equity and fixed-income ETFs, an all-in-one ETF holds a mix of asset classes inside a single fund and manages allocations for you. For example, Fidelity’s All-in-One Balanced ETF blends equities, fixed income and a small allocation to digital assets to deliver a ready-made diversified portfolio.
All-in-one ETFs typically charge slightly higher fees than the cheapest passively managed index ETFs, but they offer convenience through automatic rebalancing and an established strategic allocation. Rebalancing helps keep asset weights aligned with the fund’s target mix over time without requiring investors to intervene.
Fidelity provides several All-in-One ETFs with different target risk profiles and allocations:
| Fidelity All-in-One ETFs | Conservative | Balanced | Growth | Equity |
|---|---|---|---|---|
| Ticker | FCNS | FBAL | FGRO | FEQT |
| Equity | 40% | 59% | 82% | 97% |
| Fixed income | 59% | 39% | 15% | 0% |
| Crypto | 1% | 2% | 3% | 3% |
Using all-in-one ETFs in a “core and explore” strategy
All-in-one ETFs can be a smart choice for investors who prefer convenience or who are still learning. They offer a simple, diversified core that requires little maintenance. More experienced investors can also use these funds as the passive “core” of a portfolio, while allocating a smaller portion to more specialized or actively managed ETFs as the “explore” component. This approach combines stability and simplicity with opportunities for targeted exposure or higher conviction bets.
Further reading on investing:
- What investments can I put in my TFSA?
- Building a “core and explore” portfolio with an all-in-one ETF
- ETFs and RESPs: It’s always a good time to invest in education
- 5 ways to invest sustainably for Canadian investors
- How first-time home buyers can use an FHSA to save for a down payment
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An important message from Fidelity Investments Canada ULC
Commissions, trailing commissions, management fees, brokerage fees and other expenses may apply to investments in ETFs. Read the ETF prospectus, which contains detailed investment information, before investing. ETFs are not guaranteed; their values change frequently and investors may experience gains or losses. Past performance is no guarantee of future results.
The Fidelity All-in-One ETFs do not charge a direct management fee; they invest in underlying Fidelity ETFs that charge management and/or administration fees. Based on the weighting of underlying funds, the expected effective indirect management and/or administration fees are approximately: 0.35% for the Conservative ETF, 0.36% for the Balanced ETF, 0.38% for the Growth ETF and 0.39% for the Equity ETF. The actual indirect fees may be higher or lower depending on the performance of the underlying funds, rebalancing activity and changes to strategic allocation. Actual indirect fees are reflected in the MER and are posted semi-annually.
Each Fidelity All-in-One ETF maintains a neutral mix that includes a small allocation (between 1% and 3%) to Fidelity Advantage Bitcoin ETF™. Portfolios deviating from their neutral mix by more than 5% will be rebalanced; rebalancing may not occur immediately upon crossing the threshold but will occur shortly thereafter.
The information provided is believed to be reliable and is for informational purposes only. Where information is supplied by third parties, accuracy, completeness and currentness are not guaranteed. This content does not constitute investment, tax or legal advice and is not an offer or solicitation to buy. Charts and graphs are illustrative and do not predict future values or returns. Investment strategies should be evaluated relative to an investor’s objectives and risk tolerance. Fidelity Investments Canada ULC and its affiliates are not liable for any errors, omissions or losses arising from this information.
Portions © 2023 Fidelity Investments Canada ULC. Fidelity Investments is a registered trademark of Fidelity Investments Canada ULC. The presenter is not registered with any securities commission and therefore cannot provide securities advice.