Are you looking to invest in the stock market but want to minimize risk by investing in a diversified portfolio? If so, ETFs could be your cost-effective option.
ETFs have become very popular in the last few years because of their lower cost compared to mutual funds and broad diversification.
With an all-in-one ETF portfolio, you can make the most of your funds by investing in a diversified low-cost portfolio that suits your risk level. If you have a low-medium risk level, a balanced portfolio like ZBAL could be your perfect option.
In this ZBAL review, I discuss everything you need to know about the balanced portfolio including how it compares with similar portfolios.
Read on for more information!
What is ZBAL?
BMO Balanced ETF (ZBAL) is one of several funds offered by the Bank of Montreal. It is one of the best few balanced ETF portfolios on the market.
It was launched in 2019 as an investment solution for investors who are looking to diversify their investment portfolio between stocks and bonds.
When you invest in ZBAL, you are holding approximately 60% stocks and 40% fixed income in a single fund. The combination of stocks and bonds provides a diversified portfolio for an investor with a moderate risk appetite that does not have the time to manage a comprehensive portfolio.
With a low to medium risk level, ZBAL is a suitable portfolio for investors with medium risk tolerance and can help lower volatility in their portfolio.
ZBAL Key Features
Below is a short list of ZBAL key facts as of March 3, 2023, that you should be aware of before investing in the ETF:
- Inception date: Feb 15, 2019
- Listing currency: CAD
- Net assets: $137 million
- Management fee: 0.18%
- Management Expense Ratio (MER): 0.20%
- Annualized Distribution Yield: 2.64% (as of February 24, 2023)
- Distribution frequency: Quarterly
- Exchange: Toronto Stock Exchange
- Eligible accounts: RRSP, RRIF, RESP, DPSP, TFSA etc.
What Does BMO ZBAL Invest in?
BMO ZBAL is a smart portfolio, which offers investors access to a portfolio of fixed-income and equity securities that are diversified in terms of geographic and industry exposure.
The fixed-income portion of the fund allocates its holdings to corporate and government bonds in both Canada and US. The equity portion of the fund invests globally in Canadian, U.S., and internationally developed market stocks based on market capitalization.
ZBAL invests primarily in large-cap Canadian companies with a moderate allocation to mid and small caps.
The fund seeks to maintain an allocation between bonds (38.15%), equities (61.73%) and cash (0.13%) with quarterly rebalancing to correct any drift from the target allocation.
ZBAL is suitable for long-term investors looking for an all-in-one ETF solution that is diversified without worrying about manual rebalancing and other portfolio management tasks.
ZBAL Holdings is a diversified portfolio of assets designed to create capital appreciation. The shares of ZBAL holdings top holdings consist of a variety of international enterprises.
However, it invests in these companies indirectly through other BMO ETFs. ZBAL’s underlying ETFs and their allocation as of March 3, 2023:
|Holding Name||Funds Allocation|
|BMO AGGREGATE BOND INDEX ETF||26.97%|
|BMO S&P 500 INDEX ETF||25.49%|
|BMO S&P/TSX CAPPED COMPOSITE INDEX ETF||15.65%|
|BMO MSCI EAFE INDEX ETF||13.28%|
|BMO US AGGREGATE BOND INDEX ETF||11.08%|
|BMO MSCI EMERGING MARKETS INDEX ETF||4.77%|
|BMO S&P US MID CAP INDEX ETF||1.79%|
|BMO S&P US SMALL CAP INDEX ETF||0.75%|
|BMO GOVERNMENT BOND INDEX ETF||0.07%|
As of February 28 , 2023, ZBAL provided investors the following returns:
- 1-year return: -3.34%
- 3-year: 0.71%
- 5-year return: 4.45%
- Since inception return: 5.17%
Considering the allocation of the ETF and the returns of similar portfolios, it’s obvious that ZBAL had above-average returns since inception.
You can save money by investing in this ZBAL ETF. With ZBAL, you pay a very low management fee of 0.18% annually.
The MER is also low, at only 0.20%. With an MER of 0.20%, it’s only a fraction of the cost of many traditional mutual funds.
This makes it one of the lowest-fee stock ETFs in Canada. So not only do you earn an excellent return with ZBAL, but you also save thousands in fees.
Therefore, if you’re ready to start investing in a globally diversified portfolio but don’t want to pay the high fees of mutual funds, consider using ZBAL ETF.
Who Should Buy ZBAL?
BMO ZBAL has been designed for investors with a moderate risk tolerance who are looking to maximize potential capital gains over the long term but do not want to spend their time actively trading or paying high fees to do so.
The fund attempts to achieve its objective by investing in an ETF portfolio that offers the potential for market-like returns with significantly less volatility than a typical equity portfolio over the long term.
BMO ZBAL will automatically rebalance your portfolio to ensure that you avoid any potentially damaging concentration levels of assets in Canada and the U.S. on both the equity and fixed income side.
Therefore, if you are a long-term investor and are seeking high long-term returns, ZBAL could be suitable for you.
That said, ZBAL is not suitable for you if you’re looking for a conservative portfolio or an all-equity portfolio. You should also consider other options if you’ll rather handle all portfolio management tasks yourself.
Pros and Cons of ZBAL
ZBAL is one of the best balanced ETF portfolios available to Canadian investors. However, one of the most important things you need to know before investing in the fund is its pros and cons.
A better understanding of both will help you make an intelligent financial decision. Here are some of the pros and cons of ZBAL:
- Easy and simple to buy
- Low management fees
- Rebalancing is performed automatically by BMO
- The portfolio is designed to be suitable for the typical investor who is okay with accepting a low to medium level of risk and wants to maximize returns
- It has a high concentration to Canadian companies
How to Buy ZBAL in Canada
If you are looking to invest in ZBAL, you may be wondering where to purchase it in Canada. The easiest way to start investing in ZBAL is by directly buying its shares through your existing brokerage account.
To keep your costs low, you should consider one of the brokerages that support free ETF purchases like Wealthsimple Trade or Questrade.
How to Buy ZBAL on Wealthsimple Trade
Wealthsimple Trade is a free app that allows you to buy and sell stocks, ETFs and cryptocurrencies (e.g. Bitcoin) from your mobile device or desktop.
Wealthsimple Trade doesn’t charge trading fees for assets listed in Canadian dollars (CAD), including exchange-traded funds (ETFs) like ZBAL. This means you can buy and sell ZBAL without paying trading commissions when you make transactions.
Here’s how to get started with Wealthsimple Trade:
Create an account with Wealthsimple Trade on your mobile device or computer and verify your identity by providing basic information about yourself.
After your account has been validated and reimbursed, you can then search for the symbol “ZBAL” and make an order to purchase it.
Get a $25 sign-up bonus when you create an account through our referral link and trade stock of $150 or more.
Learn more: Wealthsimple Trade Review
How to Buy ZBAL on Questrade
Questrade is an online brokerage firm that has earned the trust of many Canadians. It offers a wide variety of investment options, including free ETF purchases.
You can buy an ETF like ZBAL on Questrade for free but you will be charged a fee of $4.95- $9.95 per trade to sell your ETF.
Here is how to get started with Questrade:
If you already have an account, log in to your Questrade account and click on the “Buy” option and search for the “ZBAL” symbol to buy your ZBAL ETF.
But, if you are a new user, you can create an account using this link to open an account with Questrade and get a trade rebate of $50.
After you successfully create and verify your account, select the “Buy” option and search for the “ZBAL” symbol to make a purchase.
Learn more: Wealthsimple Trade vs Questrade
Is BMO ZBAL A Good Investment?
BMO ZBAL is an ETF that provides an all-in-one solution for investors who want to maintain a balanced portfolio.
It is designed to preserve your capital while aiming to generate some capital appreciation over the long term. It invests 61.73% of its funds in stocks, 38.15% in bonds and 0.13% in cash equivalents.
Also, the BMO ZBAL fund is designed for investors who do not want to spend a lot of time managing their portfolios.
With the BMO ZBAL, investors can immediately benefit from professional management and diversification, while enjoying the low fees that come with investing.
Therefore, the BMO ZBAL is a good choice for you if you are looking for an all-in-one portfolio with a medium-risk profile.
However, you should be aware that BMO ZBAL is likely not suitable for very conservative investors with an aversion to financial market volatility.
ZBAL is a great ETF. But there are other alternatives out there that may be a better fit for your needs.
In the following section of this ZBAL review, we’ll look at how ZBAL compares to some of the other popular all-in-one ETF portfolios from other ETF issuers.
ZBAL vs VBAL
ZBAL and VBAL are similar because they both invest in Canadian, US, international and emerging market equities.
Also, both funds invest in a mix of equities and fixed-income securities. They offer an attractive way to create a diversified portfolio with a single investment.
Both are low-cost ETFs, but ZBAL has a lower MER of 0.20% while VBAL’s MER is 0.24%. This makes ZBAL more cost-effective.
Despite some differences between the two ETFs, they are both well-diversified funds that can form the foundation of your investment portfolio.
Learn more: VBAL Review
ZBAL vs XBAL
ZBAL and XBAL are two popular all-in-one ETFs that provide a balanced exposure to equities and bonds. Both ETFs have the same allocation strategy and invest 60% in equity, and 40% in fixed income.
Also, both ZBAL and XBAL have the same MER and management fees. They both charge an MER of 0.20% and a management fee of 0.18%.
Although both funds have similar strategies, there are some differences between their asset allocation across the different markets. That said, both ZBAL and XBAL exhibit some home bias to Canadian market.
ZBAL vs Robo-Advisors
If you’re looking for an even more hands-off approach to investing, consider a Robo-advisor. A Robo-advisor is an online service that manages your investments for you for a relatively low fee.
It’s automated because it uses software to create portfolios and uses algorithms to determine how much of each asset class the account should hold, rebalancing as needed to maintain the desired allocation.
You choose an ideal investment portfolio, and the Robo-advisor takes care of the entire investing process for you. This includes regular rebalancing to ensure your investments match your goals and tax loss harvesting on taxable accounts.
You will be able to customize how much control you want over your investments while maintaining the convenience of having everything done automatically.
Here are some of the most popular and top performing Robo-advisors in Canada:
Learn more: Questwealth vs Wealthsimple Invest
Final Thoughts on ZBAL Review
ZBAL is a simple yet powerful ETF portfolio that will help you to quickly build a diversified investment portfolio for a fraction of the cost of building one with individual stocks..
If you are looking for an easy way to diversify your portfolio alongside bonds, and stocks, ZBAL may be your ideal choice.
This ETF is incredibly easy to use and is built for people looking for a low to medium risk portfolio. However, if it doesn’t meet your needs or if you want some other options, you can give some of the alternatives above a shot.
Choose an option that will give you the growth potential you’re looking for without sacrificing too much stability in the process.
Hopefully, we’ve helped you narrow down your options and choose the ETF portfolio that is best for you.
Also read: VFV Review: Vanguard S&P 500 ETF
ZBAL, a BMO Balanced ETF, is suitable for people looking for a low to medium risk portfolio.