Weekend Reading: Create Your Own Robo-Advisor Edition

Create Your Own Robo-Advisor Edition

Robo-advisors have been around for a decade and, while its promise to disrupt the traditional financial services model has so far fallen flat, the concept of an automatically rebalanced, low-cost portfolio of index funds is still incredibly sound.

The investing landscape continues to evolve and when Vanguard introduced its suite of asset allocation ETFs in 2018, the robo-advisor model suddenly looked less appealing.

Indeed, for a fee of only 0.24%, DIY investors could build their own globally diversified and automatically rebalancing portfolio with just a single fund.

There was just one problem. For many investors, the idea of opening their own discount brokerage account, transferring existing accounts over to the new platform, and buying their own ETFs (even just one ETF) on a regular basis is quite daunting.

Wealthsimple Trade has elegantly solved that problem with a neat feature to automate contributions AND investment purchases.

Log-in to the Wealthsimple mobile app, tap your profile in the upper right, tap the settings gear in the upper right, and tap “automations”.

Tap “recurring investments”, tap “set up a recurring investment”, enter your chosen asset allocation ETF ticker symbol in the search field, and then tap the appropriate ETF.

Tap “buy”, tap the order type drop down in the upper right (should say “market” or “limit”), and tap “Recurring” at the bottom of the list.

Now set up the amount you want to contribute, your start date, the frequency of contributions, your funding source (i.e. chequing account), and which account type you’re contributing to.

Tap “Review”, and the tap “confirm recurring investment”.

This process will even buy fractional shares of your ETF, meaning every single dollar of your contribution will go towards your ETF purchase.

There you have it – you’ve just created your own DIY robo-advisor – a completely hands-off and automated investing experience!

Wealthsimple Trade also has an impressive promotion on right now where you can get a 1% match (no limit) when you deposit or transfer more than $15,000 into your account. The more you fund, the more you earn.

Use my referral code – FWWPDW – and we’ll both get $25 when you open and fund your account.

This Week’s Recap:

When looking at your financial projections over time, your numbers tell a story about what’s possible (or not).

No new posts from me for a few weeks as the kids’ school and activities wind down and we furiously scramble to get our work done before our upcoming trip to Europe.

From the archives: Build if/then statements into your financial plan.

I’ll have our bi-annual net worth update at the end of the month, and then we’re heading to Europe for three weeks so expect posts to be more sporadic.

Weekend Reading:

First up, I was absolutely gutted to find out that one of my favourite financial writers, Jonathan Clements, was diagnosed with cancer and only expects to live another year. Truly heartbreaking. All the best to you and your family, Jonathan.

From the Jonathan’s Humble Dollar blog – should we worry about markets being overvalued?

A professional retirement coach shares the three biggest mistakes that retirees make.

Tennis legend Roger Federer won 80% of his matches, but just 54% of all the points played. This is analogous to investing, where markets go up on slightly more days than they go down. The trick to getting legendary results with your portfolio is to stay invested and contribute regularly.

How do social media comparisons impact regular investors? Paging Roaring Kitty.

Marc at Loonies and Sense shares a really neat way to visualize the global markets.

Here’s Robin Powell on why picking the next Google or Amazon is extremely difficult:

“Why spend effort, time and money looking for needles when you can easily and cheaply buy the haystack?”

How Canada’s broken account transfer system led Wealthsimple to automatically reimburse transfer fees.

Morningstar’s Christine Benz took a six-week break from work and came back with some insights on retirement and life.

Many Canadians underspend in retirement for no good reason. Here’s what they can do (subscribers):

“They found retirees consistently spend approximately 75 per cent of what they could afford to based on available assets, with underspending increasing as retirees get older. Yet, they also found that after controlling for different levels of wealth, retirees with a larger proportion of guaranteed income spent more each year than retirees with a larger proportion of investments.”

Baby Boomers face a retirement like no generation before them, and rather than being the ‘beginning of the end,’ it’s the beginning of a new life phase.

A Wealth of Common Sense blogger Ben Carlson shares why his savings rate hit an all-time high in 2021, and why he feels that was more of a mistake than an accomplishment. I’ve had a similar experience.

Borrowers leaving money on the table by not negotiating their mortgage renewal rates.

Finally, is flying in Canada getting more expensive? It certainly seems that way.

Have a great weekend, everyone!

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  1. Kevin on June 23, 2024 at 10:44 pm

    With wealthsimple offering a recurring investment option, you have to wonder if questrade will (eventually) follow suit? And maybe even drop their ECN charge for ETF purchases? One can hope competition will force their hand.

    • Robb Engen on June 24, 2024 at 6:05 pm

      Hi Kevin, I hope Questrade does something (anything) as they risk falling behind. The ECN fees have to go – not only does WS Trade offer completely commission-free trades, but so does National Bank. BMO IL and Scotia iTrade also have commission-free ETFs (limited).

      I think the recurring contribution and investment purchase of a single asset allocation ETF with WS Trade is a complete game changer. Their platform is also way easier to use. I have a hard time recommending Questrade to new investors when there are better / easier / cheaper alternatives.

  2. Bill on June 24, 2024 at 12:40 pm

    Just wondering how well the DIY approach might work for a RRIF or LIF, where you need to pull money out, not put it in.

    My wife and I, both retired, have our LIFs and my RRIF, along with her RRSP and our TFSAs, with Wealthsimple in managed accounts, We pay at least 75 per cent less in fees than we did with our former advisor at one of the big name wealth management firms associated with a major bank.

    Because we’re Generation clients—more than $500,000 invested with them—we pay Wealthsimple a 0.4 per cent management fee plus the MERs in the ETFs we hold, for a total around 0.55 per cent.

    We used to fork out more than two percent in fees, although we could never figure out exactly how much. As Generation clients, we also get some nice perks, and have been very content with performance and service.

    I’m not sure the fuss and bother of DIY management would be worth my while at this point, but I can see a real advantage when you’re still contributing.

    • Robb Engen on June 24, 2024 at 6:12 pm

      Hi Bill, I think you’re right. I love the robo-advisor option for retirees for exactly the reasons you describe. It’s a “good enough” solution where you know your portfolio is taken care of and automated so you can go enjoy retirement.

      A DIY approach – even with a single ETF – does involve selling and withdrawing regularly, which is a pain for many people and not something I’d recommend for anyone but the most hands-on investors in retirement.

      The robo-advisor approach is also a good solution for eventual cognitive decline or the early demise of the chief financial officer of the household.

      Finally, a nice “hybrid” solution is if you’re still contributing to or at least maintaining a TFSA balance, to open that account in WS Trade and hold a risk appropriate asset allocation ETF. Add new money every January, buy more of the ETF, and enjoy the low fees and automatic rebalancing.

      Meanwhile, the more complicated accounts that you’re withdrawing from stay on the robo-advisor side.

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