This post is sponsored by Evermore. All views and opinions expressed represent my own.
One of the most common things I hear from Canadians who want to start investing in index funds (like I talk about on my podcast and in my investing course) is the idea of doing self-directed investing and building, managing, and rebalancing your own portfolio sounds like too much work and responsibility. And it kind of is if you’re new to investing.
It was something that intimidated me when I was a new investor and was honestly the reason why I didn’t go fully self-directed with my investments until last year. Luckily, it doesn’t have to be that hard anymore as a new series of target date ETFs from Evermore have popped up to change the game for Canadians for the better, helping Canadians invest sensibly for their retirement.
Evermore Retirement ETFs: First Target Date ETF in Canada
Evermore Retirement ETFs launched on Feb. 23, 2022, and they are the first target date ETFs in Canada. Not only do they have low fees, but what makes them a good fit for self-directed investors who want more automation is that they are rebalanced for you using a glide path to alter their asset allocation in conjunction with your investment goal’s target date. In other words, you don’t have to worry about rebalancing and it will automatically change the ratio of stocks to bonds in your portfolio as you move from the wealth-building stage of your life into your retirement years when you need a steady income to live on.
Similar to an asset allocation ETF, Evermore’s target date ETFs are index-based and built as a one-fund solution. These types of ETFs are also called balanced funds, but I personally like to call them what they really are — an ETF of ETFs. But what’s significantly different than the current asset allocation ETFs available from other providers is Evermore doesn’t use its own in-house ETFs inside the fund. Instead, it uses a variety of ETFs created by Vanguard, Blackrock, and BMO.
How Target Date ETFs Work
To put this into context and to show you how these target date ETFs work, let’s use the example of the Evermore Retirement 2050 ETF (ERFO). As you can deduce from its name, this fund is suitable for someone whose target date for retirement is around the year 2050. That’s 28 years from now. So, using my age of 35, if I invested in this ETF it’s because I plan to retire by 63.
To get started, I would simply log into my discount brokerage, decide what account to house the ETFs inside (i.e. TFSA, RRSP, unregistered account), then I’d simply buy shares of ERFO. For example, if I had $10,000 to invest at $19.97/share, I’d be able to buy 500 shares.
After that, my only job would be to continue to buy more shares to grow my portfolio over time and reinvest any interest or dividend payouts.
How the Glide Path Works
Now, the really cool part about Evermore’s Retirement ETFs is the glide path. If I were to buy into ERFO right now, my asset mix would be fairly aggressive since the timeline allows it with 93% stocks and 7% bonds.
Here’s a more detailed breakdown of the fund for your reference. As you can see, it’s 27.9% Canadian stocks, 41.8% U.S. stocks, 18% international stocks, 4.4% emerging markets stocks, 4.2% Canadian bonds, 2.1% U.S. bonds, 0.7% international bonds, and 0.9% cash.
But as time goes on and I get closer to my retirement date of 2050, the asset mix of the ETF will become more conservative with a higher proportion of bonds. As you can see from this chart, by 2040, when I am 10 years away from retirement, the asset mix in the fund should be around 55% stocks and 45% bonds. Then 5 years into retirement and thereafter the asset mix stays at about 45% stocks and 55% bonds.
Different Target Date ETFs to Choose From
Now, that was just one example using one of Evermore’s ETFs, but they actually have a pretty good selection of funds to choose from, 8 to be specific, and undoubtedly will make more as time goes on.
For your reference, here are all the different ETFs you can choose from, from target dates that are only 3 few years into the future all the way to 40 years into the future.
Frequently Asked Questions
Since I have an inkling of what some of your questions about these types of funds may be, let me save us both some time and answer some of your questions right now.
Weren’t Target Date Funds Already Available in Canada?
Yes, they were, but not like this. Before Evermore Retirement ETFs became accessible to retail investors like you and me, the only way you could access target date funds in Canada was through your employer’s defined-contribution pension plan or Group RRSP, or in the form of high-fee mutual funds offered by some of the banks or investment firms.
What Are the Fees and How Do They Compare?
Evermore Retirement ETFs have a management fee of 0.35% and an expected overall MER of 0.45%. In other words, if you had $100,000 invested in one of their ETFs, your annual cost in fees would be $450.
This is a bit higher than the asset allocation ETFs available as their MERs sit at about 0.25%. However, these target date ETFs are a true one-fund solution. Unless your target date changes for some reason, you never need to get out of the fund. Whereas with an asset allocation ETF, if you ever want to change your asset allocation (which you will at some point), you’ll need to sell your shares then buy into a different asset allocation ETF, which could cost you money in trading commissions depending on your discount brokerage.
Compared to the average cost of using a robo-advisor which is 0.65%, Evermore’s Retirement ETFs are 0.20% lower and compared to the average mutual fund MER of 2.05%, they are 1.6% lower. All in all, these funds have very low fees.
Who Is Evermore Capital?
Evermore Capital is the asset management company and portfolio manager behind these ETFs. Co-founder Myron Genyk, a CFA chaterholder, has worked in the financial industry for 15 years at institutions like National Bank of Canada, RBC Capital Markets, and most recently oversaw ETF markets at BlackRock Canada before starting Evermore, whereas Greg White, a CFA charterholder, has worked in the finance and real estate industry since the late 90s. Myron and Greg co-created Evermore to bring accessibility and peace of mind to retirement investing for Canadians.