Investing simplified part 1: How I got my investment life back on track
Some friends of mine recently asked about my experiences investing, specifically why I was switching from one robo advisor to another. After my stream of consciousness response, and their request for me to adult for them more often, I realized that I had more than enough for a blog post.
Some background: I’m not an expert by any means, but I’ve been experimenting with investments for a long time. I’ve had investments (RRSPs) with my bank since entering the workforce in 2002. I’ve dabbled with stocks and failed at cryptocurrencies. In 2016 I moved my investments over to WealthBar (a robo investor based out of Vancouver). I’ve had a lot of success there, but after having done a lot of research recently I’ve decided to move all of my investments over to WealthSimple.
Note: These posts are my own experience based on my personal situation, life plan, and overarching goals. Yours will be different so do your research!
The following is a succinct TL;DR of my investment learnings. If you want to learn more about the differences between mutual funds and ETFs or between fund advisors and robo advisors, I’ve detailed both out in the appendix.
Both WealthBar and WealthSimple invest in ETFs (Exchange-Traded Funds). ETFs which don’t try to beat the market like mutual funds, they try and match it. They also have extremely low MER (Management Expense Ratio) fees (some as low as 0.06%, but the average is 0.44% vs 2.20% for mutual funds).
Both have minimal management fees between 0.35–0.60% which includes the MER. Whereas any mutual fund you get through a bank or other institution charge a large management fee usually between 3.5–6% including the MER.
The fees are what kills you. In almost any given year I was losing money with my investments at my bank.
This saving scenario I found online illustrates my point more succinctly: If you have a modest portfolio with $20,000 these are the annual fees you’ll receive at each institution:
- WealthBar: $90/year
- WealthSimple: $100/year
- Typical Bank Mutual Fund: $440/year*
I’ve seen different WealthBar vs WealthSimple fee structure stats, but either way it’s still >4X better savings than a typical mutual fund.
Since moving to WealthBar in March 2016 I’ve seen some phenomenal gains (the market’s also been great overall which helps). Overall I’m up 6.32% including fees even after that massive dip in the market last year — I’m investing for my retirement so I’m fine with more volatility and therefore invest in a higher growth fund. This year to date I’m up 9.03%.
I’m also far more cognizant how my investments are doing as well as been implementing better savings habits since the technology is so much better. It was a little scary at the end of the year before last seeing all my gains disappear, but that happened to everyone so it takes some trust that things will recover (they always do!)
The market will experience ups and downs, but investing is a marathon not a sprint. Overall the market goes up over time and so will your investments.
Now that you’ve got the overview, why not go read Part 2: Why I switched teams from WealthBar to WealthSimple.
