How to use an All-in-One ETF in your TFSA

According to a 2017 Statistics Canada survey, younger Canadians love the Tax-Free Savings Account (TFSA), with 42% of investors between the ages of 25 and 34 preferring a TFSA to a Registered Retirement Savings Plan (RRSP). It’s easy to understand why: it’s easy to use and doesn’t come with complicated tax considerations, and money can be withdrawn at any point, which is ideal for both short-term and long-term savings.

It’s no coincidence, then, that exchange-traded funds (ETFs), which are simple-to-buy, low-cost baskets of stocks and bonds, have grown in popularity along with the TFSA. Both are easy to manage: buy a few, stash them into a TFSA, and you’re set for the long term. That process is now even easier with all-in-one ETFs, which are single securities that hold both equity and fixed income assets. They’re great for younger Canadians who may not have a lot to spend in the market, or don’t have the time to build a portfolio. Before you buy, we’ll help you understand how to use all-in-one ETFs in your TFSA.

Make the most of your money in the shorter and longer term

When it comes to choosing an all-in-one ETF for your TFSA, start by identifying what you plan to do with the money you’re investing. Are you expecting to stay invested for decades, such as until retirement, or do you think you might use your savings sooner? Also consider how much risk you can stomach: do you think you’ll get nervous every time the market drops, or will you be OK watching your portfolio’s value fall occasionally, as long as it continues to rise over time?

If you can deal with the ups and downs, and if you do have a longer investment horizon, which gives you time to recover from any market decline, then consider purchasing an investment that holds more stocks than bonds. Here are options to consider, which can be easily bought and added to a TFSA. Now with exposure to crypto*

Fidelity All-in-One Conservative ETF

• This ETF has approximately 40% of its assets in stocks and 59% in bonds and 1% in cryptocurrencies. It’s designed for lower risk profile investors that still want to get some long-term growth but prefer less volatility. If you need your money sooner rather than later, and don’t want to risk losing dollars in a down market, then consider this option.

Fidelity All-in-One Balanced ETF

• This ETF has approximately 59% of its assets in stocks and 39% in bonds and 2% in cryptocurrencies. It’s designed for investors who still want to get some long-term growth but prefer less volatility than a pure equity fund. If you need your money sooner rather than later, and don’t want to risk losing dollars in a down market, then consider this option.

Fidelity All-in-One Growth ETF

• This ETF has approximately 82% of its assets in stocks and 15% in bonds and 3% in cryptocurrencies, which gives holders good potential for long-term portfolio growth. It’s designed for investors who can handle a bit more equity and cryptocurrency risk in exchange for potentially higher returns. If you have a longer time horizon, then this ETF could be a good fit.

Fidelity All-in-One Equity ETF

• This ETF has approximately 97% of its assets in stocks and 3% in cryptocurrencies, which gives holders good potential for long-term portfolio growth. It’s designed for investors who can handle equity and cryptocurrency risk in exchange for potentially higher returns. If you’re looking for a growth strategy, then this ETF could be a good fit.
  

Own a diversified and easy-to-manage portfolio.

The main advantage of an all-in-one ETF, especially for newer investors, is that it’s essentially a complete portfolio in a single security. For instance, each one is highly diversified, as it holds a variety of equity and fixed income securities across various sectors and geographic regions. You don’t have to worry about one bad stock tanking your savings. It’s also easier to manage than a multi-security portfolio. You just have to invest in one security, and it automatically rebalances back to its intended asset mix if, say, markets rise and the portfolio ends up with more money in stocks than bonds. Finally, because of how the ETF is created, it comes with cheaper fees than other investments. And because assets inside of a TFSA are never taxed, those savings can quickly compound year after year.

Access returns without worrying about tax.

Unlike RRSP withdrawals, which in most cases are added to your annual taxable income (and trigger withholding taxes on the withdrawal), you can withdraw money from your TFSA tax-free, at any time and for any reason. That’s good news for young investors who may need to save for all kinds of things, such as a house, a car or a wedding. The capital you invest in the account can grow without the threat of a tax hit, which means that whatever’s in there can be used as you see fit.

Holding an all-in-one ETF in a TFSA also makes it even easier to see how much you’ve saved. You don’t have to add up multiple investment values, there aren’t a variety of fees to worry about, and you can more easily create a portfolio that matches your needs.

All-in-one ETFs fit nicely inside the TFSA structure. Choose the one that fits best with your goals and your financial plan. And consider All-in-One ETFs, which are easy, convenient, flexible and cost-efficient solutions that give you the flexibility you need to save for any financial goal.