January is one of those months when savvy Canadian investors tend to circle the calendar, especially since you also get $7,000 in new Tax Free Savings Account (TFSA) contribution room. If your cash flow allows it, putting that TFSA space to work as early as possible gives your money more time to multiply.
The bigger question is what to actually do with that $7,000. While I can’t give financial advice, I can share what I would personally consider if I wanted a simple, one-ticket solution. My preference is for an all-in-one Exchange Traded Fund (ETF).
But instead of defaulting to the usual Vanguard or iShares options, there’s one fund that stands out for me: the Fidelity All-in-One shares ETF (NEOE:FEQT). Here’s why it’s different and worth watching.
What is FEQT?
FEQT is a global equity-focused strategy. Like most ETFs with a lot of equity allocation, it gives you exposure to Canadian stocks, U.S. stocks and international developed markets in one holding.
Where it differs from regular options is in the way those stocks are selected. FEQT is built using a factor-based approach. Factors are characteristics of stocks that academic research has shown can influence long-term return and risk.
In this ETF, Fidelity tilts the portfolio toward value stocks, which trade at lower prices relative to fundamentals; momentum stocks, which have performed well lately; 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 shifts are applied to US, Canadian and international stocks. FEQT also includes a modest allocation to global small-cap stocks, which increases exposure to the size factor. Historically, smaller companies have delivered higher long-term returns, albeit with more volatility, which can complement large-cap portfolios.
On the surface, FEQT looks like a standard global equity ETF. Under the hood, it does something more nuanced than simply passively owning the market.
The crypto frog
One of FEQT’s most distinguishing features is its cryptocurrency exposure. Unlike most asset allocation ETFs, Fidelity includes an allocation of approximately 3% to Bitcoin through its own proprietary Bitcoin ETF.
Fidelity has been one of the pioneers among major asset managers in building digital asset infrastructure, including self-custody capabilities. In FEQT, that shows up as a small but meaningful allocation to Bitcoin, increasing both risk and potential returns.
Bitcoin is volatile, but even a modest allocation can have a material impact on performance over time. Over the past three years, FEQT has benefited from this exposure, contributing to an annualized return of 21% over that period, surpassing many traditional asset allocation ETFs.
The trade-off is cost. FEQT has a management expense ratio of 0.43%, compared to about 0.20% for more traditional all-in-one ETFs. You pay extra for factor tilts and cryptocurrency exposure. So far, that higher fee has been justified by performance, but investors should get comfortable with the added volatility.
#invest #January