What an ETF actually is
An ETF (Exchange-Traded Fund) is a basket of investments (stocks, bonds, or other assets) that you can buy as a single unit. Instead of buying 500 individual stocks, an ETF like the iShares S&P/TSX Capped Composite holds all the major Canadian stocks in one purchase. When you invest in an ETF, you own a proportional slice of everything in that basket.
Why ETFs cost less than mutual funds
Most mutual funds are actively managed: a team of analysts decides which stocks to buy and sell, trying to beat the market. That expertise costs money, reflected in higher fees. ETFs are typically passive; they just track an index (like the S&P 500) automatically. There's no stock-picking team to pay, so the fees are far lower. For a typical balanced portfolio, the difference in investment costs is often 0.5–0.8% per year.
The asset classes in your LINK portfolio
Your portfolio is built from ETFs across several asset classes: cash (for stability), fixed income / bonds (for steady income and lower volatility), Canadian equities (stocks in Canadian companies), U.S. equities (U.S. stocks), international equities (Europe, Asia-Pacific), and emerging markets (faster-growing economies with higher risk). The mix depends on your risk profile.
What your risk profile means
When you enrolled with LINK, you answered questions about your age, investment timeline, and comfort with market swings. Your answers placed you on a spectrum from conservative (more bonds, less stocks, lower expected volatility) to aggressive (mostly stocks, higher expected long-term return, more short-term ups and downs). Neither is 'better.' The right profile matches your actual situation.
What happens to your portfolio over time
LINK Plan Management, LINK's registered portfolio manager, rebalances your portfolio automatically. If stocks outperform and your equity allocation drifts too high, your holdings will be trimmed and rebalanced to your target. You don't need to do anything. Your allocation may also gradually shift toward more conservative investments as you approach retirement, a process called a 'glide path.'