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Decide how much of your portfolio you want the “core” to be
Core holdings are typically stable, consistent investments that include a mix of equities and fixed income securities, weighted according to the investor’s risk tolerance. “The core is globally diversified across countries and regions – Canada, the US and international markets,” explains Himesh Patel, ETF strategist at Fidelity Investments Canada.
If you’re younger and have a longer time horizon, you likely have a portfolio that’s more stock-biased, Patel says. On the other hand, if you have a shorter time horizon, you might want more at the core than in “any satellite positioning,” he says.
Choose your explore assets
Once you’ve determined the “core” portion of your investment portfolio, you can add a range of “explore” investments – everything from initial public offerings (IPOs), special purpose acquisition companies (SPACs), thematic funds and venture capital funds to cryptocurrencies.
Sustainable investments are another popular exploration option. These are aimed at investors who want to play a role in environmental protection or want to make a social or governance impact. And two other choices — for those who want the potential for aggressive growth — are technology stocks and healthcare stocks, Patel says.
Outside the “core” of your portfolio, “you have to be willing to take on more risk,” he warns. “These funds are more volatile than the more stable, defensive stocks out there.” For example, many companies that are at the forefront of innovation “have a lot of upside potential, but it comes with a lot of volatility,” says Patel.
How all-in-one ETFs differ from Fidelity
For “core and explore” investors, Fidelity’s all-in-one ETFs offer one-ticket solutions diversified across regions, market caps and investment factors. “With these portfolios, we’re targeting well-established investment style factors on the equity side, such as value, momentum, quality and low volatility,” says Patel. The fixed income portions of the portfolios also have an active component – they seek to reduce risk, be diversified and seek the highest possible return – without being affected by short-term fluctuations such as interest rate increases.
In addition to professional management, strategic asset allocation and consistent portfolio rebalancing, these ETFs offer lower management fees: FBAL’s indirect management fee is estimated at 0.35%, FGRO at 0.37%, FCNS at 0.34% and FEQT at 0.38% , although their fees will vary from time to time depending on their portfolio composition, rebalancing events and performance. Less money you spend on fees means more money you can use towards your future goals.
For important information on Fidelity All-in-One ETFs, click here.