Model ETF Portfolios

The model portfolios included below invest in a mix of stocks and bonds, ranging from very conservative (80% bonds, 20% stocks) to very aggressive (100% stocks). By following the steps we’ve outlined below, you’ll be well on your way to becoming a successful index investor!

Step 1: Choose Your Portfolio’s Asset Allocation.

When determining your ideal mix between safer bonds and riskier stocks, a good place to start is by completing a risk profile questionnaire. Vanguard Canada has provided a decent online form, which we’ve linked to below. It includes 11 questions to help you consider your personal risk profile, as well as your investment circumstances. Be sure to also check out our video on how to choose an appropriate asset mix for your portfolio. The video includes important information that will help you make a more informed asset allocation decision.

Vanguard Investor Questionnaire

Step 2: Choose Your Asset Allocation ETF

Since the introduction of one-ticket asset allocation ETFs, getting started as an index investor has never been easier. With the click of a mouse, you can now invest in a globally diversified portfolio of stocks and bonds, all for a very low cost. The ETF providers will even take care of the rebalancing for you, freeing you up to focus on more important things (like your savings strategy).

Vanguard and iShares offer five flavours of asset allocation ETFs, with options for 20%, 40%, 60%, 80% and 100% stocks. BMO has so far only released options with 40%, 60% and 80% stock allocations, but this selection should still be adequate for most investors’ risk appetites. Each model portfolio also includes back-tested returns going back 50 years. Past performance is no guarantee of future results.

If the investor questionnaire you completed in Step 1 has recommended a target asset mix that is not available in a single asset allocation ETF (such as 70% stocks), the model portfolios also provide suggestions for combining two ETFs together to achieve this target weight.

When it comes to choosing between the Vanguard, iShares and BMO asset allocation ETFs, you really can’t go wrong. But to help with your decision, we’ve created videos that discuss the slight differences between these three investment options.

Watch the video
Watch the video
Watch the video

Step 3: Buy Your Asset Allocation ETF

Now that you’ve chosen your asset allocation ETF, the next step is to place your trades at a Canadian discount brokerage. There are currently two brokerages you should consider, depending on the size of your investment accounts:

Option 1 (for smaller accounts): Questrade

If you’re just starting off on your investing journey (and have only a modest amount to invest), Questrade is your best option, as they do not charge annual fees on TFSAs, RRSPs or RESP accounts. ETF purchases (but not sales) are also commission-free, although you will generally pay small electronic communication network (ECN) fees. These ECN fees are charged on most ETF purchases and will set you back $0.0035 per share. For example, if you buy 97 shares of the iShares Core Balanced ETF Portfolio (XBAL) at Questrade, you will generally pay around $0.34 in ECN fees, which is calculated as 97 shares × $0.0035 per share.

Option 2 (for larger accounts): BMO InvestorLine

BMO now offers commission-free trading (buys and sells) on all asset allocation ETFs in our model portfolios (even the Vanguard and iShares options), as long as you don’t buy and sell the same ETF in a single day (so no day trading allowed). This offer sounds too good to be true, and it can be, if your accounts aren’t large enough to avoid BMO’s annual account fees.

For example, BMO charges $100 per year on RRSP accounts below $25,000, and $50 for RESP accounts below $25,000. A $25 quarterly fee also applies for non-registered accounts below $15,000 (that is, unless you also hold a registered account with BMO). TFSAs are the only account type where BMO doesn’t charge an annual fee. In other words, only consider using BMO as your brokerage if you can completely avoid these pesky annual or quarterly fees.

Step 4: Track the Adjusted Cost Base (ACB) of Your ETF

If you hold your asset allocation ETF in a non-registered account, you’ll be responsible for tracking your adjusted cost base (or ACB). Sure, you could just assume your brokerage is tracking this accurately for you, but in our experience, they rarely get it right. To assist you with this tedious annual task, we’ve included our guide on how to track the ACB of your ETF below, as well as a step-by-step video to walk you through the entire process.