ZBAL ETF Review

ZBAL ETF is a multi-asset ETF providing exposure to equity and fixed income securities.

The BMO ETF offers moderate long-term capital growth as well as income to investors. ZBAL ETF provides exposure to a portfolio of global equity and fixed income ETFs.

It is professionally managed by BMO Global Asset Management.

Pros of Vanguard ZBAL ETF

  • Inexpensive ETF with an MER of 0.20%.
  • Index-based asset allocation
  • Continuously monitored and rebalanced quarterly.
  • ZBAL provides exposure to ETFs that are diversified across regions and asset classes.

Cons of Vanguard ZBAL ETF

  • Provides exposure to equity ETFs managed only by BMO.
  • A small ETF by Net Assets

BMO ZBAL ETF Facts

  • Inception Date: February 15, 2019
  • Benchmark: None
  • Net Assets: $106M
  • MER: 0.20%
  • Distribution Yield: 2.50%
  • Dividend Schedule: Quarterly

BMO ZBAL ETF MER – Management Expense Ratio 

ZBAL’s management fee stands at 0.18% and MER is 0.20%. Its contemporaries Vanguard’s VBAL, iShares XBAL, and Horizon’s HBAL have MERs of 0.25%, 0.20%, and 0.15%, respectively.

While the MER differs, don’t invest based on MER alone, look at the Net Assets, or NAV, so that you have a more easily traded ETF.

The MER is what BMO takes to manage the fund for you. It’s much cheaper than mutual funds and in some cases cheaper than investing on your own.

Mutual funds can charge over 2% and it robs you of your returns. It’s time to ditch your mutual funds and switch to ETF ASAP. Many brokers such as Questrade offer free ETFs. Couple the free ETFs with low MER and you are ahead of many.

BMO ZBAL ETF Performance

The annual rate of return for BMO ZBAL ETF since inception is 9.87%. It has underperformed the broader S&P500 index in the last two years.

My opinion is that investing in the S&P500 is simple and works. The only question is whether you hedge or not.

The debare over CAD-Hedged or not is out there and most of it is based on your understanding and expectation of the USD currency. It’s not worth fussing over it in my opinion.

Take your TFSA account as an example. The rules are the same for everyone and I mean everyone. The growth is ultimately a factor of your investment performance provided you make your TFSA contribution limit every year. The annual performance of an ETF matters as you can see below the growth over 20+ years.

wdt_ID Year Yearly Limit Cumulative 5% Growth 10% Growth Dividend Earner Spousal
1 2009 5,000 5,000 5,250 5,500 Not Tracked Not Started
2 2010 5,000 10,000 10,762 11,550 Not Tracked Not Started
3 2011 5,000 15,000 16,550 18,205 Not Tracked Not Started
4 2012 5,000 20,000 22,628 25,525 Not Tracked Not Started
5 2013 5,500 25,500 29,534 34,128 $41,742 Not Started
6 2014 5,500 31,000 36,786 43,590 $52,820 Not Started
7 2015 10,000 41,000 49,125 58,949 $56,307 Not Started
8 2016 5,500 46,500 57,356 70,984 $70,200 Not Started
9 2017 5,500 52,000 65,999 84,034 $78,900 $13,308
10 2018 5,500 57,500 75,074 98,487 $96,937 $58,818
11 2019 6,000 63,500 85,128 114,986 $129,467 $82,596
12 2020 6,000 69,500 95,684 133,030 $153,993 $95,906
13 2021 6,000 75,500 106,769 152,933 $181,601 $113,194
14 2022 6,000 81,500 118,407 174,827 $169,702 YTD $128,018 YTD
15 2023 6,500 88,000 131,152 199,459
16 2024 6,500 94,500 144,536 226,555
17 2025 6,500 101,000 158,587 256,361
18 2026 6,500 107,500 173,342 289,147
19 2027 7,000 114,500 189,359 325,762
20 2028 7,000 121,500 206,177 366,038
21 2029 7,000 128,500 223,836 410,342
22 2030 7,500 136,000 242,902 459,626
23 2031 7,500 143,500 262,923 513,838
24 2032 7,500 151,000 283,944 573,472
25 2033 7,500 158,500 306,016 639,069
26 2034 7,500 166,000 329,192 711,226
27 2035 7,500 173,500 353,526 790,599
28 2036 7,500 181,000 379,078 877,909
29 2037 7,500 188,500 405,906 973,950
30 2038 7,500 196,000 434,077 1,079,595

BMO ZBAL ETF Holdings

ZBAL ETF invests ~60% in equities and ~40% in fixed income.

Its top four holdings constitute ~80% of the total fund. The ETF also has a very small cash holding (~0.15%).

By industries, financials, technology, consumer cyclical, healthcare and industrials are ZBAL’s largest allocations.

wdt_ID Sector Ratio
1 ZSP - BMO S&P 500 INDEX ETF 25.05
3 ZEA - BMO MSCI EAFE INDEX ETF 13.15
4 ZCN - BMO S&P/TSX CAPPED COMPOSITE INDEX ETF 15.47
5 ZMU - BMO MID-TERM US IG CORPORATE BOND HEDGED TO CAD INDEX ETF 3.95
6 ZGB - BMO GOVERNMENT BOND INDEX ETF 7.48
7
9 ZEM - BMO MSCI EMERGING MARKETS INDEX ETF 5.48
12 ZAG - BMO AGGREGATE BOND INDEX ETF 27.06
13 ZMID - BMO S&P US MID CAP INDEX ETF 1.56
14 ZSML - BMO S&P US SMALL CAP INDEX ETF 0.67

Why hold BMO ZBAL ETF

ZBAL offers a balanced allocation of 60% equity and 40% bonds. It may be what you are looking for and it could be a good fit.

Should you go with VBAL or ZBAL? I say you pick the VBAL ETF due to the Net Asset Value. ZBAL is too small for my liking. VBAL is in fact 10 times bigger.

The ETF provides a good opportunity to long-term investors who want to limit their investment risk, as opposed to investing 100% either in equity or in bonds. Its fees, automatic portfolio rebalance, and asset and region diversification is cherry on top.

If you want the dividends, it’s not clear you will get the same growth but the the best banks and the best utility stocks will give you more income.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.