An easy way to diversify: balanced ETFs

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Single-ticket exchange traded funds (ETFs) can be a relatively simple way to diversify.

Retirement isn’t something to gamble on. Diversifying your portfolio can create a hedge against the riskier assets it contains, while providing dependable returns.

One simple way to do that is to invest in an exchange-traded fund (ETF).

“If you’re going to be a do-it-yourselfer, there are plenty of single-ticket ETF portfolios,” says Jason Pereira, partner and senior financial consultant at Woodgate Financial in Toronto. “You buy one fund and it gives you a balanced portfolio that’s at different risk levels.”

A single-ticket, or balanced, ETF provides a combination of both equity and fixed-income investments, allowing you to profit from gains in both the stock and bond markets.

Choosing the right balanced ETFs out of the almost 900 available in Canada isn’t an easy decision, though. If you’re committed to going the DIY route at this stage of your retirement planning, Pereira says the robo-advisor option can simplify the process.

Multi-family and commercial real estate

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Investing in real estate that produces income through rents can be done directly, or by using real estate investment trusts (REITs).

Surging home prices have many would-be investors eyeing real estate investments.

But if you’re hoping to generate monthly income from a home you purchased at the peak of the market, keep in mind that rents in Canada are not on the same face-melting upward trajectory as the properties that can generate them.

That’s why David Christianson, senior investment advisor at Christianson Wealth Advisors in Winnipeg, Man., says now is a good time to investigate other real estate opportunities, particularly multi-family, industrial and commercial properties.

Multi-family will remain attractive so long as renters cannot afford home ownership. Plus, industrial, shipping logistics and warehouse spaces are benefiting from the tremendous — potentially permanent — boost that online retail received during the pandemic.

Rather than purchasing actual properties, Christianson says an easier route is to buy shares in a real estate investment trust, or REIT.

“It’s the most practical way for people to invest because you can invest a small amount and diversify that way,” he says.

Emergency and dream funds

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Even your emergency fund can be invested — provided you keep it in an account that ensures easy access should you need the cash.

While not an investment strategy per se, Christianson urges people sitting on pandemic savings to build two separate funds: an emergency fund and a dream fund.

The former requires setting aside a sum equal to three months’ worth of net expenses in the event of sudden financial need.

Christianson says emergency funds should be placed in a vehicle that “doesn’t fluctuate in value and is liquid,” like a savings account or 30-day term deposit.

A dream fund is more fun and, if you don't need it for several years, Christianson says you can be a little more aggressive in how you fund it.

“If you’ve got five years, an ETF or equity mutual fund or some individual stocks could be used,” he says. “If your time horizon is three years, then maybe it’s more of a blend of equity-type investments and fixed income.”

Don’t build without a blueprint

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Before deciding on how you'll invest your money, think about what you'll need your money to do for you after you retire.

Pereira reminds Canadians there is no shortcut to a well-funded retirement.

“Do not just try to find solutions,” he says. “When you do that, you’re looking for the components of building something, but you don’t even have a blueprint of how you’re going to build that thing. That’s the fatal flaw.”

Retirement is more than just a period of your life where you stop generating income, Pereira insists. Rather than focusing solely on dollars and cents, he says retirement planning should be holistic and reflect the kind of life you want to have once you retire.

“The right approach is, ‘Given my situation, where should I be placing my investments? How much risk am I able, and how much risk am I willing, to take?’” Christianson says. “Only then do you start looking at the individual vehicles. Most people do it the other way around.”

About the Author

Clayton Jarvis

Clayton Jarvis


Clayton Jarvis is a mortgage reporter at MoneyWise. Prior to joining the MoneyWise team, Clay wrote for and edited a variety of real estate publications, including Canadian Real Estate Wealth, Real Estate Professional, Mortgage Broker News, Canadian Mortgage Professional, and Mortgage Professional America.

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