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The low-cost Freedom 0.15 portfolio just got even cheaper

So much for the low-cost, super-simple Freedom 0.15 Portfolio.

Events have overtaken this thoroughly diversified collection of three exchange-traded funds and the name must change. Introducing the new and improved Freedom 0.12 Portfolio.

It's a small change, but highly symbolic. In the fiercely competitive ETF business, fees are under severe downward pressure. For investors, this means they may be paying less than they imagined. This never happens. Virtually all fee surprises in the Canadian investment industry are negative. There are account administration fees you never saw coming, account inactivity fees, low balance fees and withdrawal fees that you only become aware of after you've been dinged.

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The newly renamed Freedom 0.12 Portfolio is an exception. To review, the portfolio includes:

- The Vanguard Canadian Short Term Bond Index ETF (VSB), with a management expense ratio of 0.11 per cent. That's down from 0.15 per cent last spring.

- The BMO S&P/TSX Capped Composite Index ETF (ZCN), with an MER of 0.06 per cent. That's down from 0.09 per cent last spring and 0.17 per cent in 2013.

- The iShares Core MSCI All Country World ex Canada Index ETF (XAW), with an MER of 0.21 per cent. That's down from an estimate of 0.25 per cent last spring.

With a mix of 35 per cent VSB, 40 per cent ZCN and 25 per cent XAW, you get a weighted average MER of 0.115 per cent. I've rounded it up to 0.12 per cent.

The Freedom 0.12 Portfolio is more of a lesson about how cheap ETF investing is than a definitive blueprint. Aggressive investors might want to swap out some Canadian content in favour of global exposure and maybe replace the short-term bond fund with a less conservative aggregate bond ETF. This will cost a little more, but not enough to matter much.

Let's not put too big a halo over the ETF business, fee-wise. The cost of owning core funds that track the biggest stock indexes is low, but there are many other funds that aren't a bargain. I'll highlight some in upcoming columns.

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About the Author
Personal Finance Columnist

Rob Carrick has been writing about personal finance, business and economics for close to 20 years. He joined The Globe and Mail in late 1996 as an investment reporter and has been personal finance columnist since November 1998. Rob's personal finance columns appear in The Globe on Tuesday and Thursday, and his Portfolio Strategy column for investors appears on Saturday. More

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