ZBAL is one of the best all-in-one ETFs in Canada tailored to investors looking for balanced exposure to stocks and fixed income securities.
Balanced ETFs like ZBAL provide a low-cost diversification to stock and fixed income securities with a low-medium risk level.
With a balanced ETF, you will achieve moderate long-term capital growth income without risking much. This makes ZBAL an alternative investment vehicle to all-equity ETFs and conservative ETFs.
But is it worth investing in ZBAL? What are the pros and cons of investing in ZBAL? What are the best alternatives to ZBAL?
This ZBAL review provides a detailed explanation of what the ETF entails and how it compares with other balanced ETFs in Canada.
Table of Contents
What is ZBAL?
ZBAL is the ticker symbol of the BMO Balanced ETF that’s actively traded on the Toronto Stock Exchange.
The ETF was launched in February 2019 and it operates like other balanced ETFs in Canada. That’s, it seeks to provide long-term capital growth and income by investing most of its funds in equity and fixed income securities.
As a dividend-paying ETF with a quarterly distribution schedule, ZBAL has total net assets of $113.82 million as of the time of writing.
Compared to other actively managed balanced ETFs out there, ZBAL has a low fee schedule based on its management fee and MER. More on this later.
In addition, ZBAL’s past returns and dividends compete significantly with those of other balanced ETFs in Canada.
As you continue reading, you will learn more about what ZBAL entails to make an informed decision.
ZBAL Objective
The objective of ZBAL is to provide investors with moderate long-term capital growth and income. To achieve its objective, ZBAL invests in diversified global equity and fixed income index ETFs.
The Canadian market has a larger weight of the allocation followed by the US market. ZBAL also invests across over 10 other countries including Japan, UK, China and France.
BMO Assets Management, being the portfolio manager rebalances ZBAL’s allocations quarterly to meet the investment objective of the ETF.
Based on the returns of the ETF, it’s safe to say that ZBAL has achieved its investment objective to a significant extent in the past. Of course, that doesn’t guarantee future returns.
ZBAL Allocations
The BMO Balanced ETF (ZBAL) allocates funds across different assets, sectors and markets as those other balanced ETFs in Canada.
Below are the allocations of ZBAL as of the time of writing this review.
Asset Allocations
As a balanced ETF, ZBAL invests in a mix of stocks and fixed income securities. The following are the current assets allocation:
- Stock: 61.84%
- Fixed Income: 38.18%
- Cash and Cash Equivalents: -0.02%
With such a higher allocation on stocks, it’s not surprising why ZBAL’s past returns compete significantly with the returns of other balanced ETFs in Canada.
As expected, the higher ZBAL allocation on stocks exposed it to a higher risk level compared to similar portfolios.
Sector Allocations
As with other BMO all-in-one ETFs, ZBAL sector allocations are not disclosed. This keeps investors in the dark about the particular sectors their funds are invested in and the weight of each sector.
Instead, the portfolio manager discloses information about the percentage of funds it invests in per equity and fixed income sectors. The following are the current sector allocations:
- Equity: 60.93%
- Fixed Income: 39.07%
If you’re a value-based investor, you may find it challenging to invest in ZBAL as you’re not sure where your money goes.
Notwithstanding, ZBAL’s past performance indicates the high quality of the sectors it invests in.
Geographic Allocations
The degree of ETF exposure can also be identified through its geographic allocation. As of the time of writing, ZBAL has the following geographic allocations:
| Country | Allocation |
| Canada | 51.94% |
| United States | 29.43% |
| Other countries | 7.50% |
| Japan | 2.85% |
| United Kingdom | 1.54% |
| China | 1.41% |
| France | 1.29% |
| Australia | 1.01% |
| Germany | 0.94% |
| Switzerland | 0.75% |
| India | 0.67% |
| Netherlands | 0.67% |
Looking at the above table we can see that ZBAL has a home bias as it invests more in the Canadian market followed by the US market.
For a better understanding of ZBAL geographic allocations, let us look at its underlying holdings in the following section.
ZBAL Holdings
ZBAL invests in 10 underlying index ETFs across Canada, US and emerging markets. Below are the 10 holdings with their allocations:
| Index ETF | Ticker | Allocation |
| BMO AGGREGATE BOND INDEX ETF | ZAG | 26.95% |
| BMO S&P 500 INDEX ETF | ZSP | 26.78% |
| BMO S&P/TSX CAPPED COMPOSITE INDEX ETF | ZCN | 16.15% |
| BMO MSCI EAFE INDEX ETF | ZEA | 11.99% |
| BMO GOVERNMENT BOND INDEX ETF | ZGB | 7.60% |
| BMO MSCI EMERGING MARKETS INDEX ETF | ZEM | 4.48% |
| BMO MID-TERM US IG CORPORATE BOND HEDGED TO CAD INDEX ETF | ZMU | 3.62% |
| BMO S&P US MID CAP INDEX ETF | ZMID | 1.72% |
| BMO S&P US SMALL CAP INDEX ETF | ZSML | 0.73% |
| CASH | – | -0.02% |
As you can see, the ETF invests more in Canadian bonds followed by the popular S&P 500 index that tracks the returns of leading companies in the US.
ZBAL Performance
ZBAL has not yet provided 5-year and 10-year returns yet having been launched in 2019. But its previous 1 to 3-year returns are enough to judge.
The following are the annualized returns of ZBAL as of September 30, 2022:
- 1-year: -11.16%
- 2-year: -0.46%
- 3-year: 2.15%
- Since inception: 3.50%
As noted earlier, ZBAL returns compete significantly with the returns of similar portfolios in Canada. But this is not surprising since ZBAL has a higher stock allocation compared to other balanced ETFs out there.
ZBAL Dividends
ZBAL pays investors dividends on a quarterly distribution schedule. Its previous annualized distribution yield was 2.82% as of October 21, 2022.
Again, the ZBAL dividend yield is competitive compared to the yield of similar portfolios such as VBAL and XBAL.
Depending on your investment time horizon, you can reinvest the ZBAL dividend automatically or take it as cash.
ZBAL Fees
ZBAL fees refer to the management fee and management expense ratio (MER) charged by the portfolio and fund manager. These fees are meant to cover the cost of managing and operating the ETF.
Below are the maximum annual management fee and MER of ZBAL:
- 0.18% management fee
- 0. 20% MER
As an actively managed ETF, ZBAL has a low fee schedule compared to similar portfolios. ZBAL fees also compete with the average fees of mutual funds.
ZBAL Pros and Cons
The easiest way to determine if ZBAL is perfect for you is by looking at its pros and cons. From the above ZBAL review, you may have noticed some of the pros and cons yourself. But for charity, let’s take a closer look at ZBAL’s pros and cons.
Pros
- Competitive performance: Although past performance doesn’t guarantee future returns, ZBAL’s past returns provide an impressive insight into its potential.
- Competitive dividends: ZBAL quarterly distribution yields also compete with the yields of similar portfolios in Canada.
- Low fees: The management fee and MER of ZBAL compete with the fees of not only mutual funds but other balanced ETFs.
- Tax-efficiency: ZBAL is eligible for registered accounts such as TFSA, RESP, RRSP, RRIF, and DPSP.
Cons
- Limited holdings: ZBAL’s 10 underlying holdings limit its level of diversification which results in higher risk.
- Undisclosed sector allocations: If you’re a value-based investor, you may find it challenging to invest in ZBAL as you’re not sure where your money goes.
How to Invest in ZBAL ETF
If you find ZBAL ideal for your investment objective and risk tolerance, you can’t go wrong by investing in it.
But when it comes to investing in ZBAL, the process depends on your investment skills and availability.
If you have the average investment skills and availability to handle the entire investment, you can save costs in investing in ZBAL by using a discount brokerage.
Online discount brokerages like Wealthsimple Trade provide you with a platform to buy and sell securities of your choice. In the case of Wealthsimple Trade, you can buy and sell any ETF or stock of your choice without paying commission or trading fees.
The process of investing through an online discount brokerage is straightforward. All you need is to open an account with your chosen brokerage, fund your account and order for your favourite security.
If you don’t have the investment skills or availability, you can invest in a ZBAL through your financial advisor or a robo-advisor.
Your financial advisor has the required knowledge to handle everything on your behalf. By investing through your financial advisor, you will likely reduce your investment risk. The major drawback of this option is that it is more costly than all the options discussed here.
Alternatively, you can also have a robo-advisor invest in ZBAL on your behalf if you don’t have the investment skills or time. Here you will be charged a management fee and MER which will be lower than the cost of investing through a financial advisor.
Questwealth Portfolios is popularly regarded as a low-cost robo-advisor in Canada due to its low management fees and MERs. However, you need a minimum balance of $1,000 to start investing in Questwealth.
The major drawback of investing through a robo-advisor is that you have no control over how your money is invested.
How ZBAL Compares
Regardless of whether ZBAL suits your needs or not, it’s critical to understand how it compares so as to make an informed investment decision.
The following is a quick comparison of ZBAL vs VBAL and XBAL.
ZBAL vs VBAL
| Feature | ZBAL | VBAL |
| Date of inception | February 15, 2019 | January 25, 2018 |
| Exchange | Toronto Stock Exchange | Toronto Stock Exchange |
| Portfolio manager | BMO Assets Management Inc. | Vanguard Investments Canada Inc. |
| Underlying holdings | 10 | 31,815 |
| Management fee | 0.18% | 0.22% |
| MER | 0.20% | 0.24% |
| Annual returns since inception | 3.50% | +2.81% |
| Dividend yield | 2.82% | 2.29% |
| Distribution frequency | Quarterly | Quarterly |
| Eligible for registered accounts | Yes | N/A |
The Vanguard Balanced ETF Portfolio is also traded on the Toronto Stock Exchange with the ticker “VBAL”.
Like ZBAL, VBAL seeks to provide capital growth and moderate income for the long term. Another similarity between ZBAL and VBAL is that they both distribute dividends quarterly.
Beyond that, VBAL differs from ZBAL considerably. Firstly, VBAL has more underlying holdings than ZBAL. Even though VBAL is about 1-year younger than ZBAL, it has high assets under management of $2.082 billion.
In terms of fees, VBAL is relatively more costly than ZBAL. As shown in the above comparison table, ZBAL has better returns than VBAL. This is expected as VBAL invests less in stocks than ZBAL. The current VBAL allocations are highlighted below:
- Stocks = 59.14%
- Bonds = 40.77%
- Short-term reserves = 0.09%
It’s worth noting that VBAL sector allocations are visible for all to see, unlike ZBAL. The following are the sector allocations of VBAL:
| Sector | Allocation |
| Financials | 19.90% |
| Technology | 15.60% |
| Industrials | 12.50% |
| Consumer Discretionary | 11.90% |
| Health Care | 9.00% |
| Energy | 8.70% |
| Basic Materials | 6.30% |
| Consumer Staples | 5.40% |
| Utilities | 4.20% |
| Real Estate | 3.20% |
| Telecommunications | 3.20% |
Unlike ZBAL, VBAL invests more in the US market than the Canadian market. This makes VBAL ideal for investors looking for more exposure to US companies.
ZBAL vs XBAL
| Feature | ZBAL | XBAL |
| Date of inception | February 15, 2019 | June 21, 2007 |
| Exchange | Toronto Stock Exchange | Toronto Stock Exchange |
| Portfolio manager | BMO Assets Management Inc. | BlackRock Canada |
| Underlying holdings | 10 | 8 |
| Management fee | 0.18% | 0.18% |
| MER | 0.20% | 0.20% |
| Annual returns since inception | 3.50% | 4.27% |
| Dividend yield | 2.82% | 1.86% |
| Distribution frequency | Quarterly | Quarterly |
| Eligible for registered accounts | Yes | Yes |
XBAL is the ticker symbol of the iShares Core Balanced ETF that’s also traded on the Toronto Stock Exchange.
As one of the oldest balanced ETFs in Canada, XBAL also seeks to offer investors capital growth and income for the long term by investing more in equity and fixed income.
XBAL shares a lot in common with ZBAL as shown in the above comparison table. Both ETFs have the same fee schedule, and distribution schedule and they can be invested through registered accounts.
However, even though ZBAL invests more in stocks, XBAL has better returns as shown below:
- 1-year: -11.84%
- 3-year: 2.39%
- 5-year: 3.69%
- 10-year: 4.55%
- Since inception: 4.27%
Unlike ZBAL which doesn’t disclose its sector allocations, XBAL sector allocations are visible. The ETF invests across information technology, financials, energy, consumer discretionary, industrials and other sectors.
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Which Balanced ETF to Choose?
From the above comparison of ZBAL vs VBAL and XBAL, you may be confused about which to choose. But you don’t have to be.
Even though all the above ETFs have their pros and cons, one of them may be more suitable to your investment needs and risk tolerance.
To make an informed decision, it’s essential to first understand your risk tolerance and investment objective to know whether you truly need a balanced ETF.
It’s safe to consider a balanced ETF if you have low-moderate risk tolerance and are looking for moderate long-term capital growth and income.
If that’s your case, consider the following factors to choose the best balanced ETF:
- Fees: The management fees and MERs can impact your annual investment return. Going with an ETF will low fees will save you more in the long run
- Assets allocation: Not all balanced ETFs have the same asset allocation. Some invest more in stocks than others. As always, the higher the stock allocation the higher risk you take. You should weigh the asset allocation with your risk tolerance before selecting a given ETF.
- Holdings: The underlying holdings of the ETF impact the degree of the ETF exposure. The more underlying holdings the better diversification you will get.
- Returns: Although past performance doesn’t guarantee future returns, looking at the ETF’s past returns will give you a better insight into the portfolio potential.
- Dividend yield All the above balanced ETFs distribute dividends quarterly with varying dividend yields. Bear in mind that the higher the dividend yield, the better.
The Bottom Line on ZBAL Review
No doubt, ZBAL is one of the best balanced ETFs in Canada. Its past returns and dividend yields outshine those of other balanced ETFs in the country.
Even though you can’t go wrong with ZBAL, there’s a lot you need to consider to make an informed decision.
With the above comprehensive review and side-by-side comparison of ZBAL vs VBAL and XBAL, you should now make an informed decision on where to go from here.
But if you’re still unsure about whether ZBAL is perfect for you or not, kindly contact your financial advisor.
Note that Financial Ox is not liable for the outcome of your investment based on the information you read on our blog. Learn more about our disclosure here.
That brings us to the end of this ZBAL review. For more related information, check out our Investing Archive. And if you have any questions or concerns, drop them in the comment or forward them to our expert team at [email protected].
