Many people know they should invest for the future but for one reason or another the investing can gets kicked down the road. Maybe they’re living paycheque to paycheque and can’t free up enough cash to invest, or they simply don’t have time to make an appointment with an advisor to draw up an investment plan, or maybe they think they are investing in high interest savings and GICs, but avoid the stock market because it’s scary, too risky, and only for the financially savvy.
Time to put the excuses to rest. You need to start investing now so that your future self won’t have to work until age 75 or move in with his or her children in retirement. Savings accounts or GICs won’t cut it either, because the ravages of inflation will eat away at your savings and leave you poorer every year.
Sure, you can start investing the traditional way – by visiting a bank branch where a salesperson disguised as an advisor will undoubtedly set you up with a portfolio of expensive mutual funds that make the bank richer but won’t do much for you.
But, hey, at least you started the process, right? (Seriously, though, starting up automatic monthly contributions is a great first step. Even if you’re invested in mutual funds with a high MER, it’s better than doing nothing.)
The Easy Way To Start Investing Today
The good news is that you no longer have to go down that path to start investing. The investment landscape has changed for the better in the last few years thanks to online portfolio managers called robo-advisors.
That’s right. There’s a brain-dead easy way to start investing today. You can open an account with a robo-advisor online in literally five to 10 minutes.
Just fill out a risk questionnaire that asks about your financial goals, time horizon, risk tolerance, past investment experience and level of investment knowledge. From this, you will be assigned a risk score and portfolio.
There are no account minimums and generally your first $5,000 or $10,000 is managed for free. At $25,000 invested you’d pay somewhere around $125 (or 0.50 percent).
Robo-advisors use something called Modern Portfolio Theory to construct a low-cost portfolio of index ETFs that track the stock market as a whole.
What’s the brain-dead easy part? Everything is automated, from rebalancing to dividend reinvestment, even tax efficiency.
Wealthsimple, Canada’s leading robo-advisor, calls it investing on autopilot. That’s exactly what most investors should be doing – focusing on what really matters, making regular contributions and increasing those contributions over time as your budget allows.
Here’s the thing. A robo-advisor is a smart solution not just for young Canadians, but also for investors at any age and stage that can benefit from a low-cost and hands-off approach to investing.
I know the DIY investing crowd is sceptical of the robo-advisor movement because it adds another layer of costs to something that “anyone can figure out on their own”.
But my years of experience working with clients across Canada suggest that most people aren’t cut out for do-it-yourself investing. They’re nervous about managing their own portfolio and want some guidance, however they’re also savvy enough to be aware of the pitfalls of going to a bank advisor and getting sold a basket of crappy mutual funds that isn’t in their best interest.
Let me tell you that paying somewhere around 0.75 percent all-in for an automated and managed portfolio is so worth it – especially when compared to what you’d get at the bank or from firms like Edward Jones and Investors Group.
So, for the Boomers out there who want their kids to start investing, but watch as their eyes glaze over when they hear you talk about P/E ratios and ex-dividend dates; I have a brain-dead easy solution for them – a robo-advisor.
You’ll thank me 10 minutes later after they’ve opened up and funded their account right from their smart-phone.
The alternative is a generation of investors that either continue to get fleeced by the big banks and their expensive mutual funds, or one that keeps their money in low-interest savings accounts and GICs while inflation slowly eats away at its future buying power.
Robo-advisors are a blessing for this generation of investors – a triple threat that:
- Saves investors money by avoiding high-priced mutual funds and sticks with low-cost, broadly diversified ETFs;
- Removes human error and judgement by sticking to a pre-determined asset allocation and automatically rebalancing the portfolio whenever it drifts away from that allocation;
- Uses passive investing strategies to capture market returns minus a very small fee, rather than relying on active strategies that attempt to beat the market (but rarely do).
Investing doesn’t have to be scary or complicated. You can start investing today with a brain-dead easy solution. These three robo-advisors have even sweetened their offer for Boomer & Echo readers:
- Wealthsimple is offering Boomer & Echo readers their first $10,000 of investments with no management fees for one year. Sign-up by September 30, 2017 to add this offer to your account.
- Modern Advisor let’s you use $1,000 of their money for a 30-days risk-free trial to test out its platform. Get a $50 bonus if you decide to open an account.
- JustWealth is offering Boomer & Echo readers 50% off of the Justwealth Investment Management Fee for a period of 6 months when they open a new account.
Finally, check out the Auto Invest calculator to compare the cost of all the robo-advisors for your particular situation to see which is the best fit for you.
Time to start investing!