January is one of those months savvy Canadian investors tend to circle on the calendar, mainly because you’re also getting another $7,000 of new Tax-Free Savings Account (TFSA) contribution room. If your cash flow allows it, putting that TFSA room to work as early as possible gives your money more time to compound.
The bigger question is what to actually do with that $7,000. While I can’t provide financial advice, I can share what I would personally consider if I wanted a simple, one-ticket solution. My preference would be an all-in-one asset allocation exchange-traded fund (ETF).
But instead of defaulting to the usual options from Vanguard or iShares, one fund that stands out to me is the Fidelity All-in-One Equity ETF (NEOE:FEQT). Here’s why it’s different and worth taking a look at.
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What is FEQT?
FEQT is a global equity-focused strategy. Like most equity-heavy asset allocation ETFs, it gives you exposure to Canadian stocks, U.S. stocks, and international developed markets in a single holding.
Where it differs from plain-vanilla options is in how those stocks are selected. FEQT is built using a factor-based approach. Factors are characteristics of stocks that academic research has shown may influence long-term returns and risk.
In this ETF, Fidelity tilts the portfolio toward value stocks, which trade at lower prices relative to fundamentals; momentum stocks, which have been performing well recently; quality stocks, which tend to have strong balance sheets and stable earnings; and low-volatility stocks, which historically fluctuate less than the broader market.
These factor tilts are applied across U.S., Canadian, and international equities. FEQT also includes a modest allocation to global small-cap stocks, which adds exposure to the size factor. Historically, smaller companies have delivered higher long-term returns, albeit with more volatility, which can complement large-cap-heavy portfolios.
On the surface, FEQT looks like a standard global equity ETF. Under the hood, it’s doing something more nuanced than simply owning the market passively.
The crypto kicker
One of the most distinctive features of FEQT is its cryptocurrency exposure. Unlike most asset allocation ETFs, Fidelity includes a roughly 3% allocation to Bitcoin through its own proprietary Bitcoin ETF.
Fidelity has been an early mover among large asset managers in building digital asset infrastructure, including self-custody capabilities. In FEQT, that shows up as a small but meaningful allocation to Bitcoin, which increases both risk and potential return.
Bitcoin is volatile, but even a modest allocation can materially impact performance over time. Over the past three years, FEQT has benefited from this exposure, contributing to an annualized return of 21% over that period, which has outpaced many traditional asset allocation ETFs.
The tradeoff is cost. FEQT has a management expense ratio of 0.43%, compared to about 0.20% for more traditional all-in-one ETFs. You’re paying extra for factor tilts and crypto exposure. So far, that higher fee has been justified by performance, but investors need to be comfortable with the added volatility.
