For this reason, it’s sad to report that the favourite exchange-traded funds in the asset allocation category are all-stock portfolios. This surprising trend was pointed out in a recent note from Craig Basinger, chief market strategist at Purpose Investments.
All-equity funds in the asset allocation category do offer diversification. But it’s focused on dividing money between Canadian, U.S. and international stock markets, without exposure to bonds. Mr. Basinger links the popularity of all-equity asset allocation funds to a 22-per-cent annualized global stock market return since the start of 2023.) made 31.9 per cent on a total return basis for the 12 months to Oct. 31, the iShares Core Growth ETF Portfolio made 23.2 per cent.
The popularity of all-equity ETFs suggests investors see the hot stock trend continuing. But Mr. Basinger noted that the stock markets have lately moved into a particularly speculative phase, which suggests heightened risk for all-equity investors. Bonds offset that risk, even if the outlook for fixed income isn’t stellar right now.