The Smart (and Lazy) Millennial’s Approach to Investing

couch potato investing

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Taking the couch potato approach to investing has its rewards, experts say

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Since the COVID crisis nearly two years ago, millennials are leaping into the investing world in droves.

Some are jumping into DIY investing big time, opening two million new trading accounts across the country. Others prefer joyriding with crypto, short selling stock, IPOs, and other speculative investments.

But these days, the smartest investors aren’t trying to grow their portfolios by picking hot stocks or timing the market. And they aren’t paying attention to the market’s many mood swings. Instead, they’re using low-cost ETFs to passively track global stock and bond indexes to capture market returns.

These “couch potato” investors understand that, by actively trying to beat the market by buying individual stocks, they’re statistically more likely to trail the total market’s returns after fees. Why play a game where the odds are overwhelmingly stacked against you? The smart move is to not play at all – just own the entire market for a small fee.

All-in-one ETFs have made investing even easier, combining a bunch of ETFs that represent different geographic regions and asset classes into one simple, automatically rebalancing, set-it-and-forget-it portfolio.

DIY investors can now access all-in-one ETFs from most of the major ETF providers in Canada and sensibly invest in the total market without worrying about monitoring or rebalancing their portfolios.

But just because investing in this way has been solved doesn’t mean there aren’t ways to improve upon a passive portfolio of global stocks and bonds. That’s where factors come into play.

Fidelity offers a set of all-in-one ETFs that takes a similar globally diversified approach but also targets known risk factors like value, momentum, low volatility, and quality to enhance the risk and return profile of the portfolio.

Factors Explained

Before we go under the hood of Fidelity’s all-in-one ETFs, let’s quickly explain what factors are and why smart investors should target them.

We start with stocks, which have a higher expected return than cash or bonds because stocks are riskier assets. Investors expect higher returns when they take more risk. The difference between the expected return of a market portfolio versus the ‘risk-free’ rate (T-bills) is what’s known as the market risk premium.

But what’s interesting is that the market risk factor only explains about 70% of the returns of a diversified portfolio. In 1992, professors Eugene Fama and Kenneth French came up with a three-factor model that explained more than 90% of returns. These added factors included market risk, of course, but also size and value.

What the professors found was that small stocks (by market capitalization) tended to outperform large stocks. They also found that value stocks (measured by a high book-to-market ratio) outperformed growth stocks.


A few decades later, Fama and French expanded on their three-factor model, adding two more factors – profitability and investment. Stocks of companies with high profitability beat stocks of companies with low profitability, while stocks of firms that invest conservatively beat firms that invest aggressively. These five factors now explained up to 98% of a portfolio’s returns.

Since then, other factors have emerged on the scene, like momentum (stocks that have gone up recently tend to keep going up) and low volatility (stocks with lower risk than the broader market tend to produce higher risk-adjusted returns).

What does all of this mean for you as a smart Millennial investor?

We can take a total market portfolio to the next level by tilting towards known risk factors like value and quality. According to a Fidelity white paper on combining factors to target specific investment outcomes, factors have historically enhanced the risk and return profiles of equity portfolios over time.

However, adding factor tilts isn’t just about a higher expected return. It should also increase the reliability of the investment outcome by adding multiple sources of return. Combining factors gives you a diversification benefit — different factors do well at different times, building in a buffer for your portfolio.

The bottom line? Combining different factors beyond just market beta (the total market) means you aren’t relying on just one source of return.

Factor in Fidelity’s All-In-One ETFs

Okay, so we know that investing in a low-cost, globally diversified, and risk-appropriate portfolio should lead to a successful outcome over the long term. Bonus points if we can automatically rebalance the portfolio by holding an all-in-one ETF.

But we also know there’s robust evidence supporting multiple risk factors or risk premiums. That means if we tilt our portfolio to target these risk factors we can diversify across different factors and potentially enhance our risk and return profile – leading to a better outcome than even a total market indexer over the long term.

Enter the Fidelity All-In-One ETFs — a portfolio that invests your money in a mix of factor index and active ETFs designed to deliver enhanced risk-adjusted returns. It’s a “one-stop” fund with a built-in strategic asset allocation and regular portfolio rebalancing, but without any additional fees. All you need to do is fund it and forget it!

There’s the Fidelity All-in-One Growth ETF (FGRO), which targets 85% global equities and 15% global fixed income. The MER for FGRO is 0.39%* as of October 20, 2021.

As of October 20, 2021, FGRO holds 14 different ETFs, with the top 10 holdings looking like this:

  • Fidelity U.S. High Quality Index ETF
  • Fidelity U.S. Value Index ETF
  • Fidelity Systematic Canadian Bond Index ETF
  • Fidelity U.S. Low Volatility Index ETF
  • Fidelity U.S. Momentum Index ETF
  • Fidelity Canadian Value Index ETF
  • Fidelity Canadian Low Volatility Index ETF
  • Fidelity Canadian High Quality Index ETF
  • Fidelity International High Quality Index ETF
  • Fidelity International Momentum Index ETF

The Fidelity All-in-One Balanced ETF (FBAL) targets 60% global stocks and 40% global fixed income. It holds 14 different ETFs, including all the above. The MER for FBAL is 0.37%* as of October 20, 2021.

You can see the clear target of factors such as quality, value, momentum, and low volatility. The funds launched in January 2021, so we’ll soon see how it holds up against other all-in-one ETF portfolios after a year of data.

Final Thoughts

All-in-one ETFs have absolutely changed the game for DIY investors. No more holding, rebalancing, and fussing over a multi-ETF portfolio. Smart investors are following the evidence that setting up a low-cost, globally diversified, and risk-appropriate portfolio can potentially lead to better outcomes. Bonus points if that can be done with a single diversified product.

Fidelity takes this one step further by designing an all-in-one ETF portfolio around different risk factors, like quality, value, low volatility and momentum. Again, no need to hold multiple ETFs or tinker with various investing strategies that target different factors. Growth-oriented investors looking to hold a diversified factor-based portfolio can choose FGRO with its 85% equity allocation. Balanced investors who are more comfortable holding the classic portfolio of 60% stocks and 40% bonds can choose FBAL.

It’s evidence-based investing that enhances the risk and return profile of your portfolio. And it’s done with a single all-in-one ETF – no tinkering required. That’s the smart approach to investing your money.


Commissions, trailing commissions, management fees, brokerage fees and expenses may be associated with investments in ETFs. Fidelity’s All-in-One ETFs pay indirect management fees through their investments in underlying Fidelity ETFs that pay management fees and incur trading expenses. Please read the ETF’s prospectus, which contains detailed investment information, before investing. ETFs are not guaranteed. Their values change frequently, and investors may experience a gain or a loss. Past performance may not be repeated.

Regulatory restrictions prohibit the presentation of performance data for funds with a history of less than one year.

While the ETFs are typically managed to the neutral mix constraints indicated, the funds may deviate from it.

Please read the ETF’s prospectus, which contains detailed investment information.

The investment risk level indicated is required to be determined in accordance with the Canadian Securities Administrators standardized risk classification methodology, which is based on the historical volatility of a fund, as measured by the ten-year annualized standard deviation of the returns of a fund or those of a reference index, in the case of a new fund.

The statements contained herein are based on information believed to be reliable and are provided for information purposes only. Where such information is based in whole or in part on information provided by third parties, Fidelity cannot guarantee that it is accurate, complete or current at all times. It does not provide investment, tax or legal advice, and is not an offer or solicitation to buy. Particular investment strategies should be evaluated according to an investor’s investment objectives and tolerance for risk. Fidelity Investments Canada ULC and its affiliates and related entities are not liable for any errors or omissions in the information or for any loss or damage suffered.

Certain statements in this commentary may contain forward-looking statements (“FLS”) that are predictive in nature and may include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar forward-looking expressions or negative versions thereof. FLS are based on current expectations and projections about future general economic, political and relevant market factors, such as interest, and assuming no changes to applicable tax or other laws or government regulation. Expectations and projections about future events are inherently subject to, among other things, risks and uncertainties, some of which may be unforeseeable and, accordingly, may prove to be incorrect at a future date. FLS are not guarantees of future performance, and actual events could differ materially from those expressed or implied in any FLS. A number of important factors can contribute to these digressions, including, but not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition and catastrophic events. You should avoid placing any undue reliance on FLS. Further, there is no specific intention of updating any FLS, whether as a result of new information, future events or otherwise.


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