5 things I learned after ringing the bell at the Toronto Stock Exchange

I’ve always dreamed of ringing the opening bell on a stock exchange — ideally the NYSE. But fate had better plans. It happened in Canada, the birthplace of ETFs, and it was awesome.

Thanks to BMO Global Asset Management, I had the chance to attend their DIY ETF Investor Day at the Toronto Stock Exchange, surrounded by some of the country's sharpest minds in ETFs and investing.

Canada not only invented ETFs, it’s also the wellspring of many trends that have since swept through the U.S. and Australia. There’s plenty that we can learn from what’s happening up north.

Here are five insights I took away. Where ETF ideas were discussed, I’ve included comparable options available on the ASX.

1. Forget 60/40 - it's now time for 60/20/20

In Australia, asset allocation still revolves around the traditional 60% growth/40% defensive split. But in Canada, investors are starting to shift towards a 60%/20%/20% model —replacing a portion of bonds with alternatives like gold, infrastructure, and long/short strategies.

Tony Dong, founder of ETF Portfolio Blueprint, explained:

“The 60/40 portfolio isn't broken, but it’s outdated. Investors need to rethink how they diversify - because if everything sells off together [like it did in 2022], are you really diversified?”

Why it matters:

Australian investors often overlook alternatives, partly due to access and familiarity. But that's quickly changing, with nearly every ASX ETF issuer offering liquid alternatives solutions.

At the TSX, experts pointed to gold, infrastructure and long/short strategies as potential inclusions for the alternatives bucket. Several ASX options in this regard include Global X Physical Gold (ASX:GOLD), VanEck FTSE Global Infrastructure (Hedged) ETF (ASX: IFRA) and Plato Global Alpha Complex ETF (ASX: PGA1).

2. Low volatility ETFs - a growth investor's new best friend?

Let’s face it, we all want maximum growth. But in chasing it, we often fall victim to our own hubris, only to hit the panic button when high-beta stocks, those with bigger upside and greater volatility, start tanking.

That’s where investors need to get smarter about how to pursue growth without losing sleep, and that's where low volatility ETFs are becoming useful. As Dong described:

“If you think about the market as the ocean and it’s got waves, a low-volatility stock is like a very reliable tugboat that doesn’t really move a lot when the market’s going up and down.”

Why it matters:

Low-volatility strategies offer a way to generate growth without as much of a sting when markets fall. They're designed to invest in stocks that exhibit lower volatility than the broader index.

The ASX has a number of options including the iShares Edge MSCI Australia Minimum Volatility ETF (ASX: MVOL), Global X S&P 500 High Yield Low Volatility ETF (ASX: ZYUS), and Vanguard Global Minimum Volatility Active ETF (ASX: VMIN).

3. ETFs are getting smarter — and retail investors are too

Max Nicholson, CEO of Blossom, a social investing app with over 250,000 users, said that the majority of young investors are moving away from meme stocks and towards sensible long-term wealth-building strategies.

In particular, he’s seen growing interest in all-in-one or diversified ETFs, which offer ready-made portfolios of equities and bonds tailored to different risk profiles.

“The new wave of retail investors isn’t about chasing GameStop. They’re using ETFs to learn, diversify, and build portfolios that actually match their goals.”

Why it matters:

In Australia, asset allocation ETFs are also booming in popularity, with the Vanguard Diversified High Growth Index ETF (ASX: VDHG) and Betashares Diversified All-Growth ETF (ASX: DHHF) the most popular ASX options.

Nicholson and Dong often encounter a common question: “Which one is best?” — a tricky one to answer, as each provider takes a different approach to asset allocation. The key for investors is to choose a fund that aligns with their risk tolerance and stick to a regular investing plan.

4. Dividend traps are lurking - even in ETFs

Experienced income investors know the dangers of yield traps. Think NAB and Telstra in the 2010s — companies that paid unsustainably high dividends, only for stagnant revenues to catch up with them and wipe out years of income through capital losses.

A similar risk is emerging in the ETF world with the rapid rise of covered call strategies. While some are run with care, others promise eye-popping yields of 15%, even 30%. It’s the classic case of too good to be true.

Jimmy Xu, Head of Liquid Alternatives & Non-linear solutions, BMO ETFs, cautioned that some high-yield ETFs return capital to manufacture income:

“It's about taking money from the left pocket, putting it in your right pocket, and saying you’re better off. That’s certainly not what’s going to make you richer.” 

Why it matters:

Covered call ETFs such as Betashares Australian Top 20 Equity Yield Maximiser (ASX: YMAX) and Global X Global X S&P/ASX 200 Covered Call Complex ETF (ASX: AYLD) are piquing investors' interest, and no doubt more will hit our shores.

If you're looking to invest in covered call strategies, be sure to do your due diligence and understand how the manager is generating income.

5. Free ETF trading!? That’s something Australia could learn from

What if you never had to pay brokerage fees to invest in popular ETFs? In Canada, that’s already the norm.

Major brokers - many of which are owned by banks that also issue ETFs - offer commission-free trading on a wide range of funds, including those tracking the S&P 500, MSCI World, emerging markets, core government bonds, and asset allocation strategies.

Why it matters:

For investors with smaller balances, trading fees can eat into returns and discourage regular investing. Commission-free ETF trading makes dollar-cost averaging far more accessible. It’s a model that fosters participation, and one that Australia could adopt to help bring more investors into the fold.

Fun facts

• While Wall Street often steals the spotlight, it was Canada’s Bay Street that launched the world’s first ETF. 

• In 1990, the TSX introduced the Toronto Index Participation Units (TIPs), which tracked the 35 largest Canadian companies. This pioneering product laid the foundation for what has become the ETF industry, which manages ~$15 trillion globally.

• Only in Canada! The market open is a full production that's televised every morning, complete with canapés, mimosas, and confetti. Honestly, I wouldn’t mind if we stole the idea! See the ceremony in action below.
• Canada’s S&P/TSX Composite Index and Germany’s DAX are the only major developed market indices to have fully recovered their 2024 losses and reached record highs.