Want to Build Wealth in the Stock Market With Next to No Effort? Start With This Type of Investment

BMO’s selection of asset-allocation ETFs are tailored for DIY, hands-off investors.

Not every investor finds joy in the minutiae of stock picking, pouring over earnings reports, or staying abreast of the latest economic news. In fact, for many, the idea of dedicating substantial time and energy to manage a stock portfolio is far from appealing.

If this resonates with you, you’re in luck. The investment world has evolved in such a way that growing your portfolio over the long term, without the need for a financial advisor or resorting to costly mutual funds, is entirely feasible.

Enter the asset allocation exchange-traded fund (ETF), an investment tool tailor-made for the “couch potato” investors among us. This type of ETF is designed to simplify the investment process, offering a diversified portfolio in a single transaction.

Let’s explore how this special type of ETF can be the cornerstone of a hassle-free investment strategy.

grow money, wealth build

Image source: Getty Images

What is an asset-allocation ETF?

Asset allocation is a fundamental concept in building a successful investment portfolio. It involves dividing your investments among different asset categories, such as stocks, bonds, and cash.

The idea is that by spreading your investments across various asset types, you can reduce risk and take advantage of the different returns each asset class offers over time. The mix of assets you choose is based on your financial goals, risk tolerance, and investment time frame.

For example, stocks are known for their potential for high returns but come with higher volatility, meaning their value can fluctuate widely in the short term. Bonds, however, generally offer more stable returns and lower volatility, making them a safer bet during market downturns. Cash, while offering the least potential for growth, provides liquidity and a buffer against market volatility.

An asset-allocation ETF simplifies this process by doing the hard work for you. It’s a type of fund that selects the right mix of assets (like stocks, bonds, and cash) and weights them in a manner that’s aimed at achieving specific investment goals.

This means you don’t have to worry about picking individual stocks or bonds or deciding how much to invest in each asset class. The ETF manages all these decisions on your behalf.

You can buy shares of an asset-allocation ETF just like you would with any other stock, through a brokerage account. This makes it an all-in-one investment solution that provides instant diversification across a wide range of assets.

Three asset-allocation ETFs to watch

For hands-off investors with different risk tolerances and investment time horizons, I recommend keeping an eye on three BMO asset-allocation ETFs. Each is designed to cater to various investment strategies, whether you’re seeking aggressive growth, a balanced approach, or something in between. Here’s a closer look at each option:

BMO All-Equity ETF (TSX: ZEQT): This ETF is composed of 100% globally diversified stocks, making it an ideal choice for aggressive investors, typically younger individuals who can afford to take on more risk in exchange for the potential for higher returns over the long term.

BMO Growth ETF (TSX: ZGRO): With an 80% allocation to stocks and 20% to bonds, ZGRO is suited for investors looking for substantial growth but with a slightly more conservative stance than ZEQT. This mix can help smooth out the volatility while still aiming for strong growth, making it a good fit for investors with a moderate risk tolerance.

BMO Balanced ETF (TSX: ZBAL): For those seeking a more cautious investment approach, ZBAL offers a 60% allocation to stocks and 40% to bonds. This balance provides a solid foundation for growth with reduced risk compared to a more stock-heavy portfolio, ideal for investors who prefer a conservative approach but still want exposure to the growth potential of the equity markets.

Finally, all three of these ETFs come with a low expense ratio of 0.20%, meaning a $10,000 investment incurs just $20 in annual fees.

Fool contributor Tony Dong has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

customer uses bank ATM
Stocks for Beginners

Your GIC Is Maturing as Rates Rise: I Wouldn’t Automatically Lock It Up Again

A maturing GIC may offer an attractive guaranteed rate, but long-term investors could sacrifice considerably more growth by renewing automatically.

Read more »

A worker overlooks an oil refinery plant.
Stocks for Beginners

Canada Wants More Major Projects: This TSX Stock Already Has a $10.5 Billion Backlog

Canada’s major-project push is creating real contract opportunities for one increasingly busy TSX infrastructure builder.

Read more »

shopper checks her receipt
Dividend Stocks

Your OAS Increase May Not Keep Up With Your Real Retirement Costs

OAS is rising with headline inflation, but individual retirement expenses can increase much faster than the national average.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Dividend Stocks

The Next AI Winners May Own Trusted Data: I’d Watch This Canadian Stock

As AI models become widely available, trusted professional data could become a more valuable competitive advantage.

Read more »

A meter measures energy use.
Energy Stocks

Bond Yields Are Pressuring Utility Stocks: This Selloff Could Be a 10-Year Opportunity

Higher government-bond yields pressure utility valuations, but long-term investors can use that competition to find better entry points.

Read more »

man in bowtie poses with abacus
Dividend Stocks

How Much Would You Need in a TFSA to Earn $500 a Month?

A $500 monthly TFSA income target requires $6,000 annually, and higher yields dramatically reduce the capital required.

Read more »

Woman in private jet airplane
Stocks for Beginners

Air Canada Spent $800 Million Buying Back Shares: Should You Buy Too?

Air Canada's enormous share repurchase could boost future per-share results, but it doesn't remove the risks of owning an airline.

Read more »

RRSP (Registered Retirement Savings Plan) on wooden blocks and Canadian one hundred dollar bills.
Stocks for Beginners

Your RRSP Could Be Too Large by 71: Here’s What I’d Do in My 60s

A large RRSP can eventually force substantial taxable withdrawals, making the years before 71 unusually valuable for tax planning.

Read more »