ZGRO Review 2022: BMO Growth ETF

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This ZGRO Review takes a deep dive into the asset-allocation ETF from BMO.

Due to the high costs of mutual funds, many investors have turned to exchange-traded funds (ETFs) because of their low-cost and convenience.

ETF tracks a basket of different assets depending on what index it is based on. And in recent years, more and more Canadians now use ETFs as the building block for quickly building a low-cost diversified portfolio.

One key advantage of ETFs is their diversification. Instead of owning stocks in a few companies, you can own stocks in hundreds to thousands of companies with a single buy. Asset allocation ETFs takes this one step further by combining different asset types like stocks and bonds.

One such ETF that is gaining popularity is ZGRO. ZGRO is a good example of an all-in-one ETF that tracks some of the biggest and most popular companies in the world.

This ZGRO review article will highlight what makes ZGRO unique and how you can use it to achieve your investment goals.


What is ZGRO?

The BMO Growth ETF (ZGRO) is a one-stop solution for investors looking for a low-cost, all-in-one ETF portfolio that provides exposure to equity and fixed income markets. 

ZGRO offers a simple and convenient way to invest in a diversified portfolio that holds equities and fixed income assets through one ETF. Introduced in 2019, it invests in a portfolio of BMO Exchange-traded funds that target specific asset classes, regions, sectors and strategies. 

The BMO Growth ETF (ZGRO) has a target asset allocation of 80% to equities and 20% to fixed income instruments or bonds. However, the mix of assets targeted will slightly vary over time but rebalanced quarterly.

Also, the low cost and low expense ratio of ZGRO is a plus for any beginner or seasoned investors looking for a low-cost and low-maintenance portfolio.


ZGRO Key Facts

ZGRO’s key facts as of April 6, 2022, are as follows:

  • Inception Date: February 15, 2019
  • Net Assets: $ 153.33 million
  • Annual Management Fee: 0.18%
  • Management Expense Ratio (MER): 0.20%
  • Distribution Frequency: Quarterly
  • Asset Allocation: 80% in equity; 20% in fixed income
  • Annual Distribution Yield: 2.34%
  • Dividend Frequency: Quarterly
  • Exchange: Toronto Stock Exchange
  • Eligible Accounts: TFSA, RRSP, RESP, RRIF, and DPSP
  • Rebalancing Frequency: Quarterly

ZGRO Objective and Portfolio Strategy

The objective of BMO Growth ETF (ZGRO) is to provide long-term capital growth by investing primarily in equity and fixed income securities. ZGRO’s investment strategy is designed to achieve an appropriate blend of risk and return potential through diversification. 

The fund’s portfolio is invested in other BMO exchange-traded funds (“ETFs”). Each underlying ETF is used to gain exposure to the different asset classes.


Pros and Cons of ZGRO 

ZGRO is one of the most popular all-in-one ETF offerings in the Canadian market today. However, like any other investment option, ZGRO ETF has advantages and disadvantages. 

If you are interested in this ETF, it is important to know the pros and cons of investing in it. The following are the pros and cons of investing in ZGRO ETF:

ZGRO Pros

  • It is easy and convenient to buy
  • ZGRO has a low management fee and MER
  • Offers access to a wide range of investments
  • Automatic rebalancing done quarterly

ZGRO Cons

  • Has a home bias to the Canadian market
  • Shorter performance history

Who Can Buy the ZGRO ETF?

ZGRO has been created to provide diversified and all-inclusive asset allocation investment solutions. The fund’s unique combination of fixed income, equity and international markets provides investors with a diversified investment solution without trying to forecast specific returns. 

Also, with a simple, low-cost and diversified solution, ZGRO can help investors reduce the complexity of building a portfolio.

Therefore, investors that want to diversify their portfolio of fixed income and equity on a long-term basis should consider the ZGRO ETF if their investment goals aligns with the 80% equity held by the ETF.


ZGRO Holdings

ZGRO allocates assets among its underlying ETF holdings. As of April, 2022, ZGRO has the following holdings:

Name of HoldingAllocation
BMO S&P 500 INDEX ETF34.11%
BMO S&P/TSX CAPPED COMPOSITE INDEX ETF22.17%
BMO MSCI EAFE INDEX ETF15.95%
AGGREGATE BOND INDEX ETF13.03%
BMO MSCI EMERGING MARKETS INDEX ETF6.35%
BMO GOVERNMENT BOND INDEX ETF3.58%
BMO S&P US MID CAP INDEX ETF2.03%
BMO MID-TERM US IG CORPORATE BOND HEDGED TO CAD INDEX ETF1.84%
BMO S&P US SMALL CAP INDEX ETF0.87%
CASH0.08%
Source: www. BMOgam.com

ZGRO Asset Allocation

ZGRO’s investment portfolio is designed to be diversified across the different asset classes and regions. Understanding the asset allocation helps investors to understand the benefits and risks associated with each investment portfolio.

The ZGRO asset allocation structure is a diversification instrument consisting of 2 main groups: Equity, and fixed income. 

ZGRO invests 80% of its funds in equity and 20% in fixed income. When combined, they generate an optimally diversified portfolio with a maximum return at an acceptable level of risk. 

At 80%, ZGRO is riskier than your average conservative ETF portfolio. So it’s important for you to consider your risk tolerance and investment goals before investing in the ETFs.

If you have short term goals like house or car down payment, vacation savings and so on, ZGRO is definitely not where you want to keep your funds. But if you won’t be needing the funds for some years and are comfortable with some volatility every now and then , then VGRO may be right for you.


ZGRO Geographic Allocation

ZGRO is diversified worldwide. With a single buy, you get access to companies in Canada, United States, UKI, japan and many other developed and emerging market economies.

Here are the geographical allocation of ZGRO at the time of writing this post:

Geographical LocationAllocation
Canada38.41%
United States35.61%
Japan3.72%
United Kingdom2.25%
China2.08%
France1.82%
Switzerland1.76%
Germany1.41%
Australia1.37%
Taiwan1.13%
Netherlands0.94%
Other9.50%

ZGRO Return/Performance

One thing that investors often overlook is the historical performance of an investment asset. While it isn’t the be-all and end-all, considering that past performance is not an indicator of the future, reviewing an ETF’s performance can give you a better sense of what to expect from your investment. 

Unfortunately, ZGRO is relatively young so we have few years data to work with. Nevertheless, ZGRO has had a successful start to its existence as an ETF and compares favourably to similar all-in-one ETFs from other ETF issuers.

That said, the ZGRO performance for the past three years as at March 2022 are as follows:

  • Since Inception: 10.00%
  • 1 Year: 6.70%
  • 2 Year: 17.83%
  • 3 Year: 9.46%

ZGRO Fees

Exchange-traded funds (ETFs) are an excellent choice for people who want to invest but can’t afford professional money managers. 

ZGRO has a management fee of 0.18% and an all-in MER of 0.20%. That means if you invested $1,000 with ZGRO, you will only pay an MER of $2.

Outside of the MER that goes to ZGRO to cover its portfolio management, you may also have to pay some commissions to buy the ETF depending on the brokerage you use.

Good news is, Canadians now have several brokerages that offer commission-free ETF purchases such as Wealthsimple Trade, Questrade, Qtrade and more.


ZGRO Dividend

ZGRO is a quarterly dividend payer. The ZGRO dividend yield is currently 2.34% as of March 31, 2022.

Dividend yields provide an estimate of a fund’s distribution rate but will differ from the fund’s total return, which includes capital gains and losses. But if you’re hoping for some regular cash flow from your portfolio without selling your investments, you may want to look at other income-focused ETFs with higher allocation to fixed-income assets.


How to Buy ZGRO 

You can buy ZGRO for free at two of Canada’s leading online brokerages: Wealthsimple Trade and Questrade.

Wealthsimple Trade is an easy-to-use, beginner-friendly app that can be used to buy and sell thousands of stocks and ETFs without charging any fees. 

If you are interested in Wealthsimple Trade, please click here to get a sign-up bonus of $50 when you trade stocks of up to $150.

Questrade is another great option for investors looking for a way to self-direct their investments. Questrade also offers no-fee ETF purchases, including ZGRO ETF, as well as many other low-cost investment vehicles.

If you would like to open an account with Questrade, please click here to earn a trade rebate of $50.

Once you create and fund your account with either Questrade or Wealthsimple Trade, simply search for ZGRO ETF in the search bar of your trading platform. Click on the result and choose how much to buy.

However, if you don’t want the hassle of managing your investments on your own, there are plenty of Robo-advisors out there that provide online investment management services at a low cost. 

Robo-advisors are great for people who don’t have time to manage their portfolios or those who don’t know anything about investing. Some of the popular Canadian Robo-advisors include  Wealthsimple Invest and Questwealth Portfolios.

Once you have created an account with your preferred Robo advisor, all you need to do is deposit some funds and it will automatically invest your money in a portfolio that includes ZGRO based on your investment goals and risk tolerance.


ZGRO Alternatives

ZGRO is a solid option for those seeking an ETF with lots of growth potential and some income. But how does it compare with other ETFs?

Next in this ZGRO review, we’ll take a look at some ZGRO alternatives:

ZGRO vs VGRO

The VGRO fund was introduced in 2018, a year before ZGRO. So like ZGRO, VGRO is also a relatively new ETF in the space.

Vanguard’s VGRO fund is very similar to ZGRO. Both have exposure to global stock and bond markets. Just like ZGRO, VGRO is a Canada-listed ETF that trades on the TSX. Its objective is to provide long-term capital growth and income by investing in a diversified portfolio.

Both ZGRO and VGRO also have the same target asset allocation and pay dividends quarterly. In term of performance, both ETFs are almost at par. VGRO has a 3-year performance of 9.54% compared to the 9.46% return for ZGRO.

That said, there are a few differences between the two funds:

The first obvious difference is the difference in MER. While ZGRO has a 0.20% MER, VGRO’s MER is currently 0.24%. But this difference is small and immaterial. The difference in fees is only $4 on a $10,000 investment.

So overall, either VGRO or ZGRO will do if you’re looking for a growth ETF with lower fees.

Learn more: VGRO Review

ZGRO vs XGRO

ZGRO and XGRO are two funds you can use to diversify your investment portfolio. Both funds charge the same annual fee, and they have similar investment strategies.

XGRO is an 80%/20% growth ETF from BlackRock’s iShares ETFs. It’s been around since 2007, making it one of the oldest all-in-one ETFs in Canada with an MER of just 0.2%.

Like VGRO, there are very differences between ZGRO and XGRO. Either ETF will definitely meet your objectives if you want an ETF with high exposure to equities and some fixed income element to generate income.

However, XGRO has a much lower distribution yield of 1.40% and a 12-month trailing yield of 1.71% compared to the 2.34% distribution yield for ZGRO.

Learn more: XGRO Review

ZGRO vs ZBAL

ZBAL is also an asset-allocation ETF from BMO that offers investors a quick way to invest in a diversified portfolio.

The major difference between the 2 ETFs is their asset allocation or weight. ZBAL has a lower equity allocation of 60% compared to ZGRO’s 80%. All things equal, you’ll expect less volatility with ZBAL and slightly lower returns.

On the flip side, ZBAL has a higher distribution yield than ZGRO. So if you’re not comfortable with the level of equity exposure in ZGRO, ZBAL is definitely is a great alternative.

Learn more: ZBAL Review


ZGRO vs VGRO vs XGRO

ZGRO, VGRO and XGRO are all-in-one ETFs that offer an easy way to build a globally diversified portfolio with only one ETF purchase. 

Let’s look at the key features of these three options and see which is the best for investment needs.

Key FactsZGROVGROXGRO
Inception DateFebruary 15, 2019January 25, 2018June 21, 2007
Management Fees0.18%0.22%0.18%
MER0.20%0.24%0.20%
Annual Distribution Yield2.34%2.34%1.41%
Dividend FrequencyQuarterlyQuarterlyQuarterly
Asset Allocation80% equity: 20% fixed income80% equity: 20% fixed income80% equity: 20% fixed income

ZGRO Review Conclusion

ZGRO appears to be an interesting and worthwhile means of diversifying your investment portfolio. This ZGRO review is positive. Even though the ETF is relatively younger than similar ETFs, it compares favourably with them with its low-cost and comparable performance.

However, be sure to compare ZGRO with its alternatives before deciding which one is best for you. Hopefully, you have a clearer picture of what ZGRO is and have a better idea of whether or not ZGRO is the right choice for you.

If you have more questions about the fund, feel free to drop a comment.

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ZGRO Review
4.7

Summary

The BMO Growth ETF (ZGRO) is a one-stop solution for investors looking for a low-cost, all-in-one ETF portfolio that provides exposure to equity and fixed income.

Simon is a CPA by day and a Personal Finance Blogger by night. With over a decade experience in financial services, he's passionate about personal finance, investing and helping people take control of their financial life.

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