I’m a big fan of diversification. It’s often called the only free lunch in investing. Proper diversification lets you earn the same returns with less risk or higher returns for the same level of risk. It’s one of the rare tools investors have that doesn’t require extra work, skill, or market timing to be effective.
However, achieving real diversification as a retail investor isn’t as easy as picking a few stocks from different sectors and calling it a day. There’s a science to it. You want broad exposure across geographies, asset classes, and company sizes. You also want a structure that re-balances automatically so you’re not constantly tinkering with your allocation.
Here’s one exchange-traded fund (ETF) built with exactly that kind of baked-in diversification. It’s one I’d feel totally comfortable putting $7,200 into today without a second thought.
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Why I like this ETF
BMO Growth ETF (TSX:ZGRO) is built for investors who want broad diversification and long-term growth without the hassle of managing a portfolio themselves. This ETF has a management expense ratio of just 0.20%, which is a fraction of what traditional mutual funds charge for a similar strategy.
ZGRO balances its holdings across U.S., Canadian, and international developed and emerging market stocks. Around 70% of the portfolio is invested in equities, with the largest chunk allocated to U.S. large caps, followed by Canadian equities, developed international markets, and emerging markets. To help smooth out the ride, it also includes about 20% in investment-grade Canadian and U.S. bonds. The remaining allocation is split between mid- and small-cap U.S. stocks, which adds a bit of extra growth potential.
The entire portfolio is rebalanced periodically, which means you’re automatically buying low and selling high without lifting a finger. In effect, ZGRO gives you the kind of diversified, actively monitored portfolio that used to require a professional money manager, except here, it’s done with just one ticker and a much lower fee.
Is ZGRO all I really need?
Within the confines of a retirement account like a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP), ZGRO is about as good as it gets.
It gives you instant exposure to thousands of stocks and bonds from around the world, with an 80/20 split between equities and fixed income. That’s a mix generally suited for investors in their 20s to 40s—aggressive enough to grow your money over decades but still with a small bond buffer to reduce volatility.
Of course, diversification doesn’t stop at investing. If you want to round things out, think about what’s happening outside your portfolio. Owning some real estate, setting aside cash in an emergency fund, or even adding a little exposure to physical assets like gold could help you sleep better at night. But inside your TFSA or RRSP? ZGRO gets the job done.
