Fidelity's All-In-One ETFs Sprinkle of Bitcoin Gives Them an Edge

The ultimate test for every investor is whether they or their adviser can meet or exceed the returns of an asset allocation ETF. If not, why bother with advice?

Investors or their advisers should be able to meet or exceed the returns of an asset allocation ETF.

If they can't, it might not be worth paying for advice. Instead, investors could simply buy one of these exchange-traded funds, which are designed to give investors a fully diversified portfolio in a single purchase. All the big ETF companies offer asset allocation ETFs and, with one notable exception, the portfolios look similar.

The exception is Fidelity's lineup of All-In-One ETFs, which include a sprinkling of bitcoin.

Given that bitcoin prices have surged by 155 per cent this year, even a modest exposure in a portfolio has a significant impact. The Fidelity All-In-One Growth ETF (FGRO-NE), with a 4.6-per-cent weighting to bitcoin as of early December, made 33.1 per cent on a total return basis for the 12 months to Nov. 30.

The Vanguard Growth ETF Portfolio (VGRO-T) made 25.7 per cent, the iShares Growth ETF Portfolio made 25.3 per cent and the Global X Growth Asset Allocation ETF (HGRW-T) made a tick less than 24 per cent. The TD Growth ETF Portfolio (TGRO-T) made 28.3 per cent, but it has a little more in stocks than the others. The typical mix for growth asset allocation ETFs is along the lines of 80 per cent stocks, 20 per cent bonds. FGRO tamps bonds down to 13.5 per cent to make room for bitcoin and spreads the remainder between U.S., Canadian and international stocks.

Fidelity's decision to use crypto was bold, given that the company is a venerable presence in the mutual fund and ETF fund business. But it also adds some risk. If you're in the market for an asset allocation ETF and are drawn to Fidelity because of the crypto exposure, remember to check the latest portfolio breakdowns for the company's All-In-One ETFs, which show bitcoin weightings of 1.6 per cent in the conservative portfolio, 3.2 per cent in the balanced product and 4.5 per cent in the all-equity version.

Bitcoin and other cryptocurrencies have been having a moment in late 2024 based on speculation that U.S. president-elect Donald Trump is pro-crypto. But bitcoin in particular has been on a longer 12-month tear that followed big declines in 2022, a bad year for investing all around. There's an undeniable feeling of speculative frenzy around crypto right now. The financial writer for The New Yorker, John Cassidy, recently noted some parallels between what's happening with crypto and the dot-com boom of the late 1990s. The subsequent tech crash was epic.

Fidelity's bitcoin weightings are sensibly kept below 5 per cent, so the risk of major portfolio damage in a crypto route is contained. But when an asset like bitcoin rises by 155 per cent in 12 months, it's advisable to consider potential downside ahead as much as any gains to come.