Model Portfolios

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Model Portfolios

Introduction

The objective of successful index investing should be straightforward: low-cost funds with broad diversification and stick to that strategy for the long-term (set it and forget it!). Asset allocation ETFs, commonly referred to as All-in-One ETF Portfolios, check all of these boxes for you. With just one or two holdings, anyone can build a diverse portfolio with extremely low fees and minimal maintenance. These 'One Fund' solutions are the best solution for the vast majority of DIY or index investors.

Some of the largest ETF providers in Canada — Vanguard, BlackRock (iShares), and TD — offer a family of asset allocation ETFs with options ranging from aggressive growth to conservative investing solutions. Their products are not identical, but the differences are minor, and they are all exceptional choices.

Asset Allocation ETFs

The ETF portfolios below include Canadian stocks, US stocks, and international stocks (from both developed and emerging countries), giving you broad exposure to the global equity market. You'll also find 2 recommended gold ETFs: BlackRock (iShares) Gold Bullion ETF (CGL) or Purpose Gold Bullion Fund ETF (KILO). Northern Nest Egg currently recommends maintaining a small portion (10% or less) of gold in your portfolio for the following reasons:

Gold is a hedge against inflation, and it retains its value even if a nation's currency becomes devalued.
In contrast to stocks and bonds, gold has virtually no risk of becoming worthless. That makes it a safe haven in uncertain or volatile economic times.
Gold is a commodity, so it further diversifies your portfolio; it is not affected by movement in stocks, bonds, or real estate.
Gold's price tends to move in the opposite direction of the US dollar and interest rates (i.e., when the US dollar is weak, gold tends to be stronger. When interest rates/real yields fall, gold prices tend to rise).

Finding the appropriate combination of stocks and bonds is the most important decision you'll make on your investing journey. One-Fund solutions are some of the best products available on the market for DIY investors, and they typically fall into set asset mixes of 100%, 80%, 60%, 40%, or 20% stocks and the remaining in fixed-income or bond ETFs.

Asset Allocation ETFs

Asset Allocation	Vanguard ETF	iShares ETF	TD ETF
100% stocks	Vanguard All-Equity ETF Portfolio (VEQT)	iShares Core Equity ETF Portfolio (XEQT)	N/A
80% stocks / 20% bonds	Vanguard Growth ETF Portfolio (VGRO)	iShares Core Growth ETF Portfolio (XGRO)	TD Growth ETF Portfolio (TGRO)
60% stocks / 40% bonds	Vanguard Balanced ETF Portfolio (VBAL)	iShares Core Balanced ETF Portfolio (XBAL)	TD Balanced ETF Portfolio (TBAL)
40% stocks / 60% bonds	Vanguard Conservative ETF Portfolio (VCNS)	iShares Core Conservative Balanced ETF Portfolio (XCNS)	TD Conservative ETF Portfolio (TCON)
20% stocks / 80% bonds	Vanguard Conservative Income ETF Portfolio (VCIP)	iShares Core Income Balanced ETF Portfolio (XINC)	N/A

Annual fee (MER): Vanguard: 0.24%, iShares: 0.20%, TD: 0.17%

Note: Some All-in-One TD ETF Portfolio Solutions have slightly different asset allocations. TGRO is 90% Equity / 10% Fixed Income, and TCON is 30% Equity / 70% Fixed Income.

Gold ETFs

Asset Allocation	iShares	Purpose
100% commodities	iShares Gold Bullion ETF (CGL)	Purpose Gold Bullion Fund (KILO)

Annual fee (MER): iShares: 0.56%, Purpose: 0.20%

Custom Allocation

If you choose an asset allocation that differs from the pre-set All-in-One portfolios above (for example, 65% stocks / 35% bonds or 50% stocks / 50% bonds), you can combine an all-equity ETF with a bond ETF. In this case, you will occasionally need to rebalance your portfolio by selling a portion of one of the ETFs and buying more of the other to return to your target allocation.

Asset Class	Vanguard ETF	iShares ETF
Stocks	Vanguard All-Equity ETF Portfolio (VEQT)	iShares Core Equity ETF Portfolio (XEQT)
Bonds	Vanguard Canadian Aggregate Bond Index ETF (VAB)	iShares Core Canadian Universe Bond Index ETF (XBB)

To keep investing costs to a minimum, try using an online brokerage that allows you to buy ETFs with no trading commissions.