BMO Balanced ETF (ZBAL) Review
We have embarked on a journey to explore ‘all’ of the exchange-traded funds (ETFs) created by the BMO Global Asset Management group. They have around 149 ETFs at the moment and the list keeps on growing. So, at least we will try to cover the most popular and best-performing ETFs in their portfolio. In this article, we talk about the BMO Balanced ETF, ticker symbol; ZBAL.TO in the Toronto Stock Exchange (TSX).
BMO Global Asset Management (BMO GAM) is a family member of the Bank of Montreal, Canada’s first bank. The company holds a massive portfolio of exchange-traded funds (ETFs) that fit different investment goals of their customers. From low-risk funds to high-risks and from moderate incomes to high incomes, they have funds that fit all your investment needs. A smart investor will invest in a collection of these ETFs to manage risk and increase yield.
The BMO Balanced ETF (ZBAL) is, more or less, the best of both worlds. The fund is designed to give the investors low-risk and moderate returns over the long run. ZBAL invests in a diverse collection of other ETFs held by BMO which focus on different markets, equities, and risks. Thus, the fund is able to give the investors a steady source of income with minimal downturn risk.
According to BMO, BMO Balanced ETF is;
“designed to provide moderate long-term capital appreciation and income by investing in global equity and fixed income ETFs.”
| Quick Facts | ZBAL.TO |
|---|---|
| Fund inception date | February 15, 2019 |
| Net Assets (Oct 8, 2021) | $117 million |
| Exchange | Toronto Stock Exchange |
| Annualized distributions yield | 2.45% |
| Distribution frequency | Quarterly |
| Management expense ratio | 0.20% |
| Account eligibility | TSFA/RRSP/RESP/RRIF/DPSP |
Since ZBAL holds other ETFs of BMO, this fund has a very low management expense ratio. This is excellent news for investors who will be getting around a 2.45% yield per annum.
Some interesting features of ZBAL are that it focuses a lot on emerging markets, small-cap, and medium-cap companies. We can argue that these markets possess the greatest growth potential. However, they also possess significant risks as well. To counter this, ZBAL holds very steady investments such as government bonds and index funds such as S&P 500 index and TSX index. This balance is what essentially makes this ETF a relatively secure investment.
BMO rates ZBAL in the category of medium to low risk.
BMO Balanced ETF (ZBAL) Holdings
ZBAL currently has 10 holdings of different ETFs and some cash. Below is the breakdown of all its holdings and their respective weightage within the fun as of October 8, 2021.
| Holding Name | Weightage |
|---|---|
| BMO AGGREGATE BOND INDEX ETF | 27.47% |
| BMO S&P 500 INDEX ETF | 24.91% |
| BMO S&P/TSX CAPPED COMPOSITE INDEX ETF | 15.68% |
| BMO MSCI EAFE INDEX ETF | 12.72% |
| BMO GOVERNMENT BOND INDEX ETF | 7.55% |
| BMO MSCI EMERGING MARKETS INDEX ETF | 5.37% |
| BMO MID-TERM US IG CORPORATE BOND HEDGED TO CAD INDEX ETF | 4.05% |
| BMO S&P US MID CAP INDEX ETF | 1.57% |
| BMO S&P US SMALL CAP INDEX ETF | 0.69% |
| CASH | -0.02% |
Although 10 holdings might seem like less diversification, the ETFs it holds are well diversified.
The highest weightage is on BMO Aggregate Bond Index ETF (ZAG), which holds over 1,100 bonds issued by governments, government organizations, banks, and other companies. These bonds have a wide range of maturities and interest rates, thus reducing the downturn.
The second-highest weightage is on BMO S&P 500 Index ETF (ZSP) which tries to replicate the performance of the US S&P 500 Index. This index holds 500 of the biggest and best US companies. It is one of the most reputed and replicated indexes around the world. S&P 500 index has yielded about 10%-12% returns annually since inception. BMO tries to invest in the same companies S&P 500 index does in similar weightage to replicate the index.
BMO Balanced ETF (ZBAL) Performance
ZBAL ETF is relatively new (started in 2019). It has only had two full years to show performance and this is by no way enough time to measure its real potential, especially considering the fund dipped to -7.25% during the height of the pandemic in March 2020. However, throughout its two years, the fund has seen 28% returns.
An investment of $10,000 at the beginning of the ETF would have grown to $12,800 by October 8, 2021.
Is ZBAL ETF for You?
If you are looking for safer returns over a long-term period with exposure to US and Canada markets, this might be the ETF for you. This fund is built for resilience so your money will be relatively well-protected within this fund. However, this is not to say that the fund can accelerate the growth of your money from its investments in emerging markets. ZBAL is, indeed, quite well balanced which makes this a fan-favorite within the BMO portfolio.
Check out the latest information about the fund on BMO.
Disclosure: Any information given in this article is not to be construed as investment advice. You must do your own research before investing any money in the stock market. All investments carry inherent risks even with the possibility of losing all your money.
