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BMO’s Asset Allocation ETFs Seen as Powerful Core Investment Tool

September 11, 2023

Studies show that asset allocation - the mix of fixed income securities, stocks and bonds within a portfolio - accounts for over 90% of its variation in return* (how much the return on an investment changes over time), making it more important than security selection or any other tactical shift you make as an investor. It’s also a clear indication that a portfolio with an appropriate asset allocation over the long run can be key to helping you meet your financial goals. Fortunately, you don’t need to be a financial guru to take advantage of this strategy, thanks to BMO Asset Allocation ETFs.

BMO Asset Allocation ETFs, which have skyrocketed in popularity since they were launched in Canada in 2018, are all-in-one globally diversified portfolios of approximately 7-10 underlying ETFs (Exchange Trades Funds), each consisting of stocks and/or fixed income securities.

These funds offer several benefits: They provide a ready-made, globally diversified portfolio in one powerful tool; they can be easily bought and sold like a stock on an exchange at any time; and they are very cost-efficient.

Just as importantly, each BMO Asset Allocation ETF is professionally managed for you, making it a simple investment solution that any investor can take advantage of. Each portfolio is designed by industry experts to determine an optimal asset mix of fixed income securities, as well as large and small cap equities covering a variety of geographies and sectors.

BMO portfolio managers also provide significant value through regular rebalancing of each asset allocation ETF to counter the effects of rising or falling stocks and sectors due to market fluctuations. This rebalancing helps maintain the original asset mix of each fund and helps ensure you stay on track to reach your goals without taking on additional risk.

“If you had a balanced portfolio, you wouldn't want to be over-weighted in tech stocks if for example they had done very well in a given year, because that would impact your risk level” Erin Allen, Vice President of Online Distribution at BMO ETFs advised. Allen added, “Rebalancing is hard for investors to do on their own because of the emotional decisions that come with rebalancing. People put it off, often because it involves selling your winners and reallocating funds to your losers. But rebalancing can also add value to your portfolio over time because the fund is selling stocks when they’re high and buying them when they’re low, which is what Warren Buffett always tells us to do, right? Obviously, it's worked for him”.

Regular rebalancing also provides investors with some significant cost savings by helping them avoid commissions that they would otherwise incur buying and selling individual underlying ETFs on their own.

BMO offers a suite of asset allocation ETFs suitable for a variety of different risk levels, ranging from a conservative solution (ZCON - 60% fixed income, 40% equity); a balanced solution (ZBAL - fixed income 40%, equity 60%); and a growth solution (ZGRO - fixed income 20%, equity 80%) just to name a few. BMO has also introduced a more niche ESG (environmental, social, governance) asset allocation ETF (ZESG) built around the idea of responsible investment.

A more recent BMO innovation, and a first for this space, are T Series Asset Allocation ETFs, which were created for individuals who are entering the decumulation stage of their investment journey or in retirement. These ETFs aim to provide a consistent monthly cash flow for investors based on a 6% annual distribution.

Whatever solution you choose, you can rest assured you will be getting good value.

The management fee for BMO Asset Allocation ETFs is very attractive at 18 basis points, or 0.18%, significantly less expensive than many other investment products, which means at the end of the day, you get to keep a bigger portion of your earnings.

All this from a provider that has been number one in net new flows of ETFs for 12 years in a row**, making it one of the largest Canadian ETF providers in Canada, with one of the most comprehensive suites of solutions in the industry.

BMO asset allocation ETFs can be easily purchased through a discount broker or your investment advisor. To learn more, visit

* 1986 Study, “Determinants of Portfolio Performance,” Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower

** Bloomberg, Jan 2023

This communication is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Particular investments and/or trading strategies should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance. Distributions are not guaranteed and may fluctuate. Distribution rates may change without notice (up or down) depending on market conditions. The payment of distributions should not be confused with an investment fund’s performance, rate of return or yield. If distributions paid by an investment fund are greater than the performance of the fund, your original investment will shrink. Distributions paid as a result of capital gains realized by an investment fund, and income and dividends earned by an investment fund, are taxable in your hands in the year they are paid. Your adjusted cost base will be reduced by the amount of any returns of capital. If your adjusted cost base goes below zero, you will have to pay capital gains tax on the amount below zero. Please refer to the distribution policy for BMO Mutual Fund set out in the prospectus. For further information, see the distribution policy for the applicable BMO Mutual Fund in the simplified prospectus. Commissions, trailing commissions (if applicable), management fees and expenses all may be associated with mutual fund investments. Please read the fund facts or prospectus of the relevant mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Distributions are not guaranteed and are subject to change and/or elimination. For a summary of the risks of an investment in BMO Mutual Funds, please see the specific risks set out in the prospectus. BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.

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