In the last five years we’ve seen the rise of robo-advisors offering low cost online portfolio management to investors large and small. Investors pay a management fee of around 0.50 percent plus another 0.20 percent or so for the robo-advisor to hold the underlying ETFs.

This is a massive improvement from a traditional mutual fund portfolio that investors get from their bank salesperson advisor, where clients pay between 2 and 3 percent MER. But has the investment industry come up with something even better? I think so.

The proliferation of one-ticket ETF solutions like those offered by Vanguard, iShares, and BMO has put major pressure on robo-advisors and their value proposition for investors.

I’ve recommended robo-advisors to fee-conscious investors who might not have the time or inclination to set up their own portfolio of ETFs, which involves opening a discount brokerage, setting up contributions, constructing a diversified portfolio, making trades, and rebalancing periodically.

Investors can get hung up selecting appropriate ETFs for their portfolio, and once they do, it can be endless tinkering (or paralysis by analysis) to set up the right allocation. Once in place, allocations get thrown out of alignment immediately after a new contribution or with normal market fluctuations.

A one-ticket ETF takes away these pain points because it’s one diversified product that constantly rebalances itself. Best of all, the fees on these one-ticket ETF portfolios hover between 0.17 and 0.22 percent.

Paying a robo-advisor 0.50 percent annually for portfolio management is less compelling now that the DIY option is so much more simple with a one-ticket ETF solution. An investor can open a discount brokerage account, set up automatic contributions, and then simply buy one ticker symbol. The one-ticket ETF will take care of the rest.

One-Ticket ETF solutions:

Vanguard

• Vanguard Conservative Income ETF Portfolio (VCIP)
• Vanguard Conservative ETF Portfolio (VCNS)
• Vanguard Balanced ETF Portfolio (VBAL)
• Vanguard Growth ETF Portfolio (VGRO)
• Vanguard All-Equity ETF Portfolio (VEQT)

iShares

• iShares Core Balanced ETF Portfolio (XBAL)
• iShares Core Growth ETF Portfolio

BMO

• BMO Conservative ETF (ZCON)
• BMO Balanced ETF (ZBAL)
• BMO Growth ETF (ZGRO)

Horizons

• Horizons Conservative TRI ETF Portfolio (HCON)
• Horizons Balanced TRI ETF Portfolio (HBAL)

One caveat to mention is that with most robo-advisor services your trades are included, whereas you’ll pay $10 a trade at most discount brokerages. That could be a deal breaker for a new investor who’s making small contributions on a bi-weekly or monthly basis.

I should also point out that the robo-advisor Nest Wealth still offers exceptional value for affluent investors due to its subscription fee model that’s capped at $960 per year. That puts the annual fee on a million dollar portfolio at less than 0.10 percent.

This Week’s Recap:

On Monday I wrote an epic post called how to save money on everything that matters.

Then I got travel fever (or was delirious from shovelling snow in -30C temperatures) and booked a family trip to Maui next February, and an anniversary getaway to Vancouver in the fall. Now we’re looking ahead to the summer of 2020 with visions of exploring Italy.

I’ll come back to reality next week with a post on a potential change to my own portfolio, plus some ideas on what to do with your tax refund.

Promo of the Week:

I like the idea of luxury travel but I don’t want to pay luxury prices on accommodations. That’s why I’ve zeroed-in on the Marriott Rewards program, which was recently rebranded to Marriott Bonvoy (for some reason).

With the rebrand the SPG Card from American Express now becomes the Marriott Bonvoy American Express Card. It comes with a welcome bonus of 61,000 hotel points (with a referral link) when you charge $3,000 to your card in the first three months. The annual fee is $120, but you also receive an annual free night award each year on your card anniversary.

Weekend Reading:

Morgan Housel from the Collaborative Fund blog explains why the subtle art of not caring what others think is a unique and powerful skill.

Planning jointly for retirement with a spouse pays off. Why your biggest tax asset in retirement may be sleeping right beside you.

RRSPs or TFSAs? The usual choice is to contribute to an RRSP but the TFSA might be better for enhanced flexibility. Here’s how to decide between the two.

Liz has just retired and wonders if she should use her investments to pay off her mortgage, despite her advisor’s advice to the contrary.

Successful and miserable. The upper echelon is hoarding money and privilege to a degree not seen in decades. But that doesn’t make them happy at work.

Ben Carlson takes to LinkedIn to ask why are people miserable at work?

Now we compare can ourselves to every humblebragger from around the globe and it’s making many of us miserable because everyone’s life is perfect on the Internet and our real life is flawed. This is a game you’ll never win because the other side is always cheating.

Here’s Dale Roberts to remind us that the biggest stock market collapse in our lifetime is now a distant memory.

Retirement is the hardest, nastiest problem in finance. Nick Magguilli explains why asset allocation is the easiest retirement choice you can make.

One of the oldest questions in investing is whether you should own individual bonds, GICs, or bond funds to get your fixed income exposure. PWL Capital’s Ben Felix does an excellent job explaining the pros and cons of each:

Michael James channels his inner Warren Buffett when it comes to his views on debt.

Rob Carrick explains how new “round-up” features can help save money in much the same way as the old-fashioned change jar.

Finally, a highly enjoyable read from VICE blogger Hayden Vernon, who tested the savings technique that promises retirement at 40. (Hint: It did not go well.)

Have a great weekend, everyone!

Regular readers will know that I haven’t had a salary increase at my public sector job in five years. Meanwhile our family is growing, with two kids coming up on seven and 10 years old. Stagnant wages plus rising household expenses meant our family was losing purchasing power every year. What’s a personal finance blogger to do?

We had to get creative with our finances and figure out how to save money on everything. Along the way I learned it wasn’t necessary to optimize every single aspect of our finances – the return on time invested has to be a net positive. But I did find easy ways to put literally thousands of dollars a year back into our budget through a combination of ingenuity and frugality.

Here’s my best tips to save money on everything that matters:

Switch your banking

Hey, if you still bank at the same institution where your parents first opened you a savings account as a child it’s time to wake up and survey the market. There’s a plethora of online banks that don’t charge transaction fees or have minimum balance requirements to park your money fee-free.

Years ago we opened a no-fee account with Tangerine, but there are other options today including Simplii Financial (formerly PC Financial) and EQ Bank, whose no-fee EQ Bank Savings Plus Account pays a 2.3 percent everyday interest rate* and comes with some chequing account functionality.
*Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.

Then there’s KOHO, the no-fee, prepaid, reloadable Visa card that’s useful for the budget-conscious spender. (If you do sign up, use the referral code BOOMECHO and get $20 when you make your first purchase.) Read my comprehensive KOHO review here.

I estimate that my wife and I have easily saved $300 per year in bank fees by combining our finances and being savvy about where we keep our cash.

Save on Spending (Credit Card Rewards)

The easiest way to save money is not to spend it. But we all have monthly bills to pay, groceries to purchase, and the odd indulgence to consume from time-to-time. Finding ways to save money on the things we’re going to buy anyway has been a game changer for our finances.

Let’s start with a favourite of mine – credit card rewards. When I first switched from using a debit card to a rewards credit card for my every day spending, I chose a simple cash back card that paid 1-2 percent back in groceries or cash rewards. Now I have a slightly crazier system that uses multiple credit cards and maximizes every transaction to earn the most cash or travel points on each purchase.

I don’t recommend anyone go that far in pursuit of credit card rewards but everyone should be looking to put an extra percent or two back into their wallets.

Start with one or two cards for every day spending. I recommend getting a MasterCard, as it seems to be the most widely accepted, and an American Express card, as they tend to have the most lucrative rewards.

A good pairing, then, would be something like the Rogers World Elite MasterCard paired with the American Express Cobalt Card.

Then I’m always on the lookout for a new sign-up offer to earn more points for free (or nearly free). My rule of thumb for a great offer is that I want the annual fee waived in the first year, a welcome bonus worth a minimum of $200 in cash or travel, and the points must be easily attainable (i.e. spend $1,000 in three months).

One offer that checks all the boxes is for the TD Aeroplan Visa Infinite Card. New applicants get a first year annual fee rebate, plus a welcome bonus of 30,000 miles (15,000 upon first purchase and another 15,000 once you spend $1,000 in the first three months).

Taking advantage of credit card rewards has proven to be lucrative. This summer we’re embarking on a 32-day trip to the U.K. The flights and hotels are fuelled primarily by Aeroplan miles and Marriott rewards points.

Cash Back websites

I’ve been using Great Canadian Rebates for years to earn cash back on my online purchases. All you need to do is sign up for an account and then make sure to visit Great Canadian Rebates first before passing through to your favourite online retailer.

A more recent discovery of mine is Ebates.ca, which works in much the same way as Great Canadian Rebates (check out my cash back comparison site review). Ebates has a greater selection of retailers but between the two of them you should be able to find what you’re looking for.

You’ll earn anywhere from 1 to 10 percent cash back on your purchases. When stacked with a rewards credit card, cash back websites can help you save some serious dough on your online purchases.

Say you need to book a hotel. Go to Great Canadian Rebates, search for Expedia and note that it pays 3.25 percent back on your booking. Use a travel rewards card that also pays 2 percent back on your spending and you’ll earn 5.25 percent on that purchase. Then, if your rewards program allows it, use your travel points to “erase” that purchase from your credit card statement. It’s the circle of savings!

Household Utilities and Insurance

Canadians are caught in an oligopoly for most of our household utilities but that doesn’t mean there isn’t fierce competition for your business. Don’t be complacent just because you’ve had the same phone, television, and internet bundle for the last 10 years. Keep an eye out for new promotions offered by competitors and use that to your advantage.

I’ve long advocated for consumers to take a day off work and make it a “bill haggling day” to call up all their service providers and ask for a better deal. Doing this once every year or two can save hundreds of dollars a year.

Get over the perceived pain-in-the-ass factor and be prepared to toggle between the big three telecom providers to get steep discounts and other rewards like a new TV, iPad, or pre-paid credit card.

Don’t treat your car and house insurance any different. When you get your letter of renewal in the mail, don’t shrug and accept an exorbitant increase in premiums. Shop around. While it’s true you can save money on insurance by bundling your house and car policies, increasing deductibles, and dropping unnecessary coverage, you’ll save the most money by shopping around and comparing quotes.

Related: Want a better deal? Just ask

When I noticed my house insurance premiums increased by $400 last summer I called up my insurance broker to raise hell. It turned out the letter was “a mistake” and a new offer of renewal was sent that closely matched last year’s bill. Do you think they would’ve caught that “mistake” if I hadn’t called them on it? Not a chance.

Are you required to stay connected to your job outside of normal work hours? Why not ask your employer to pay for your cell phone bill? I haven’t paid a cell phone bill since smart phones were invented and I made sure to negotiate for that when I applied for my current position.

Housing

Saving money on housing is tricky because everyone’s situation is different, and every market is different. I will say in general that being a homeowner is expensive. Property taxes, house insurance, appliances, furniture, maintenance, it all adds up.

Shop around for mortgage rates and terms, don’t just accept your bank’s renewal offer. Comparison sites like Rate Spy will show you the best variable and fixed mortgage rates on the market. Print off the results or take a screenshot and show them to your bank – ask them to match or you’ll go to a competitor.

I’ve found the best way to save money on a mortgage is to choose the cheaper of the 5-year variable rate and the 1 or 2-year fixed rate. I’ve avoided the 5-year fixed rate as it tends to be the most expensive option. You truly pay for what I consider to be false peace of mind.

My advice to young people is to rent as long as possible. There’s no shame in renting, in fact there’s a certain freedom that comes from not owning a home and being tied to one location. Money that you’d sink into a down payment or into maintaining the property can be saved, invested, or spent on things that are important to you such as travel.

For retirees, too, renting can be appealing. You always need a place to live. Why not unlock years of home equity and create an income stream from that nest egg?

To the rest of us homeowners I’d say try to stay in the same place for 10 years or more. Moving is expensive and so is trading up every few years to a bigger and better house. Don’t neglect home maintenance, but don’t go overboard on home improvements – the former will give you peace of mind while the latter rarely pays off when it’s time to sell.

Finally, avoid accumulating too much stuff in your home. Garages are a place for your vehicles to sleep, not a place to store excess junk. same goes for spare rooms and basements. Keep them clutter free and you’ll be thankful when you do eventually move one day.

When we find the clutter starting to pile up we try to sell used items on Kijiji or Facebook, both to purge our home of junk and to make a little money. It’s been very successful.

Transportation

Two of our big secrets to save money are related to transportation. First, we chose to live close to where I work. While it’s not quite walkable from my house I park in a free lot off-campus and walk seven minutes to work each day.

Second, we drive two paid-for vehicles and plan to do so for the foreseeable future. Having no car payment has literally been the difference between making maximum TFSA contributions the past two years and making zero TFSA contributions the previous four years.

I’m not here to tell you to buy a 15-year-old beater, although that might work great for you. We bought our cars brand new. But, unlike the recent trend to finance over seven or eight years, we paid ours off in four and can now enjoy many payment free years before they start to give us trouble.

The short commute helps on that end, too, because we put less than 15,000 kilometres a year on one vehicle and less than 7,500 kilometres a year on the other one.

One thing I will recommend for new car buyers is to use a broker to negotiate the deal for you. Sites like Unhaggle and CurGurus can turn what is a painful negotiating dance into a simple and worry free car buying experience.

Investing

Fans of this site know that I’m a believer in low cost, globally diversified index investing. You can build a portfolio of ETFs like my four-minute portfolio with about a 0.25 percent MER. To put in a dollar perspective a portfolio worth $100,000 would cost just $250 per year in fees.

Compare that to the typical Canadian investor who has a portfolio of mutual funds sold by their bank or investment advisor averaging 2 percent MER or more. That portfolio at $100,000 would cost the investor $2,000 per year in fees.

As your portfolio grows, so do the fees. It’s a rising scale. Imagine earning an annual return of six percent on your investments before fees. Not bad, right? The index investor keeps 5.75 percent of that while the mutual fund investor keeps 4 percent. That’s one-third of his returns swallowed up by fees.

There’s two options I recommend to save big on investing fees and keep things simple and easy to manage. They depend on how comfortable you are with investing on your own.

One is to invest with a robo-advisor. Try Wealthsimple (for portfolios under $250k) or Nest Wealth (for larger portfolios). They’ll design an ETF portfolio for you and charge around 0.5 to 0.7 percent to manage it. As simple as it gets.

The second option is to use one of the new asset allocation ETFs offered by Vanguard, iShares, Horizons, or BMO. All come with a fee of around 0.2 percent and outside of setting up a brokerage account and buying the fund you don’t have to do any work to manage it or rebalance your portfolio.

Taxes

Contributing to your RRSP is the single biggest way for most individual filers to save on taxes. An RRSP contribution reduces taxable income and can help generate a big refund at tax time. Reducing net income also helps in other ways, such as allowing families to receive more Canada Child Benefit.

RRSPs work great if contributed to in your higher income years and invested to take advantage of tax-sheltered growth. Ideally you’ll be in a lower tax bracket at retirement age when it comes time to withdraw from your nest egg.

Related: A Sensible RRSP vs. TFSA Comparison

Lower income workers might opt instead to fill their TFSA instead of their RRSP. While you won’t get a deduction for any TFSA contributions your gains are still sheltered from tax and free to withdraw at any time. TFSA withdrawals don’t count as income; great for retirees and especially those who are impacted by means-tested programs such as GIS and OAS.

Don’t overlook the value of a good accountant. If your finances are more complicated than a simple T4 and some modest deductions, an accountant’s advice can be well worth the fee.

Final thoughts

If you’ve made it this far I’m happy to let you know that I actually got a raise this month! It’s only a 4 percent increase, but it includes some retro-pay back to last summer. It also puts me into another salary “grade” (I was maxed out in the previous bracket). Woohoo!

The thing is I’m so used to trying to save money on everything that there’s little chance this salary increase will be used for lifestyle inflation. It’ll simply go towards accelerating our financial goals.

Saving money is a habit. I’m obsessed with finding (and sharing) the methods, tips, and tricks to optimize my finances as painlessly as possible. Notice I didn’t mention clipping coupons, dumpster diving, cutting your own hair, making your own soap, or buying soon-to-expire meat.

Most, if not all of my tips can easily be researched online and implemented from the comfort of your living room.

Now go out and save some money!

It never gets old. I’m talking about Warren Buffett’s annual letter to Berkshire Hathaway shareholders. The famous Oracle of Omaha beat the market again, increasing the market value of Berkshire by 2.8 percent versus the 4.4 percent loss suffered by the S&P 500 in 2018.

Buffett’s letter always includes a good dose of wisdom and humour, and this year’s letter is no exception. I’ll share some quotes below, but you can read the full letter here:

On stock buybacks: “It is likely that – over time – Berkshire will be a significant repurchaser of its shares, transactions that will take place at prices above book value but below our estimate of intrinsic value.”

On holding cash: “Berkshire will forever remain a financial fortress. In managing, I will make expensive mistakes of commission and will also miss many opportunities, some of which should have been obvious to me. At times, our stock will tumble as investors flee from equities. But I will never risk getting caught short of cash.”

On acquisition prospects: “In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own. The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects.

That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities. We continue, nevertheless, to hope for an elephant-sized acquisition. Even at our ages of 88 and 95 – I’m the young one – that prospect is what causes my heart and Charlie’s to beat faster. (Just writing about the possibility of a huge purchase has caused my pulse rate to soar.)”

On buying gold: “Those who regularly preach doom because of government budget deficits (as I regularly did myself for many years) might note that our country’s national debt has increased roughly 400-fold during the last of my 77-year periods. That’s 40,000%! Suppose you had foreseen this increase and panicked at the prospect of runaway deficits and a worthless currency.

To “protect” yourself, you might have eschewed stocks and opted instead to buy 31⁄4 ounces of gold with your $114.75. And what would that supposed protection have delivered? You would now have an asset worth about $4,200, less than 1% of what would have been realized from a simple unmanaged investment in American business. The magical metal was no match for the American mettle.”

On debt: “We use debt sparingly. Many managers, it should be noted, will disagree with this policy, arguing that significant debt juices the returns for equity owners. And these more venturesome CEOs will be right most of the time. At rare and unpredictable intervals, however, credit vanishes and debt becomes financially fatal.

A Russian roulette equation – usually win, occasionally die – may make financial sense for someone who gets a piece of a company’s upside but does not share in its downside. But that strategy would be madness for Berkshire. Rational people don’t risk what they have and need for what they don’t have and don’t need.”

This Week’s Recap:

Just a single post this week and it was a controversial one with many readers weighing in on why you should take CPP at age 70.

It’s always an honour to be included in Rob Carrick’s weekly newsletter. This week’s Carrick on Money linked to two of my recent posts; the one about giving away your possessions with a modern day potlatch ceremony, and the one that gave reasons why you should (and shouldn’t) get an RRSP loan.

Promo of the Week:

Earlier this year I signed up for KOHO. Basically it’s a no-fee, prepaid, reloadable Visa card that comes with some unique features that act like a full-service bank account. It’s ideal for those on a budget who want to limit their discretionary spending to a pre-set limit. Simply transfer an amount to your KOHO account and then use the pre-paid Visa card for those purchases.

You get instant 0.5 percent cash back on every purchase, which is a nice bonus over using your debit card. With its “RoundUps” feature you can round-up every purchase to the nearest $1, $2, $5, or $10 and save the difference.

Join KOHO and use the referral code BOOMECHO to get up to $60 ($20 when you make your first purchase, and an additional $40 when you add a direct deposit (payroll, government cheque, etc.).

Weekend Reading:

Critics of the overhauled Canada Pension Plan say it’s a bad deal. Rob Carrick explains why they’re wrong.

Michael Batnick of the Irrelevant Investor shares how to un-complicate your investment portfolio:

“Look, I tried for years to beat the market, couldn’t do it. Then over time I came around to the idea that trying to beat the market, in the words of Charlie Ellis, is a loser’s game. Then I came to realize that just getting market returns is no walk in the park.”

Where did investors put their money in 2018? Check out this cool infographic by Visual Capitalist.

Brent Esplin at the Micawber Principle shares why behaviour is more important than brilliance.

Here are 29 short money rules from Morgan Housel of Collaborative Fund.

How to invest a lump sum? Nick Magguilli does a deep dive into investing large amounts of money:

“I hope you come to the conclusion that you should just invest your cash now and move on with your life, because you are very likely to lose more money (in missed growth) if you don’t.”

Let’s talk about one decision asset-allocation ETFs. Vanguard was first to launch these all-in-one balanced ETFs with a suite of products (VCNS, VBAL, and VGRO). Now investors can find similar one-ticket products through iShares, BMO, and Horizons.

Here’s PWL Capital’s Ben Felix explaining why these new ETFs are even more simple than my easy four-minute investing solution:

Meanwhile, Dan Bortolotti of Canadian Couch Potato fame shares his take on the new all-in-one diversified portfolios from Vanguard, BMO, and iShares with a side-by-side comparison.

Not to be outdone, My Own Advisor Mark Seed also weighs-in on the best all-in-one exchange traded funds.

I liked what Dale Roberts from Cut The Crap Investing had to say about how to create a retirement portfolio with ETFs. It’s one of the most frequently asked questions on this blog.

Upstarts in the banking space, like KOHO and EQ Bank, are pushing for the concept of “open banking” where consumers would have access to all of their banking data across multiple institutions. In the current environment, budgeting apps like Mint can access your data, but using it actually violates your banking terms of service.

Michael James shares a detailed review of Larry Swedroe’s new book, Your Complete Guide to a Successful and Secure Retirement.

Jason Heath shares the RRSP strategies every investor in their 60s should know to help reduce tax, increase retirement income and maximize their estate.

Global News shared the best and cheapest cellphone plans in Canada for 2019.

A scathing take on why Canadians need to smarten up when buying new cars:

“If I told you, with a straight face, that my kid was 96-months-old instead of saying he was eight, you’d think I was nuts — and you’d be right. But this is the swirling weasel-speak of car sales regarding loan terms.”

Finally, it’s no secret that many professional athletes run into financial trouble after retiring from their short playing careers. Here’s a look at the challenges athletes face.

Have a great weekend, everyone!