The 5 Main Reasons Why I Invest With Wealthsimple

It’s a robo-advisor…. get it??

It’s a robo-advisor…. get it??

A few weeks ago, I promised that I would say a little bit about my own investing practice. I invest with Wealthsimple, which is one of a new kind of investing platform: robo-advisors.

Robo-advisors are automated financial planners that aim to manage your money in an easy and user-friendly way. They create a customized portfolio for you based on the information you give them.

Before I talk about why I chose Wealthsimple as my robo-advisor, let me make a disclaimer. This isn’t a comparative article about which robo-advisor is the best, or even which investment platform is best. Again, you have to determine this for yourself.

There are other robo-advisors that do pretty much the same things as Wealthsimple, but Wealthsimple is the only robo-advisor that I have an account with. That is why I feel like I can speak confidently and honestly about its features.

So now that that’s out there…

I’m going to talk about the 5 reasons why I chose Wealthsimple as my investing platform.

1. Wealthsimple Uses a Passive Strategy

I’ve discussed my preference for passive investing in a previous blog post. In case you missed it, here’s a quick recap.

Passive investing is buying stocks and holding on to them, even when they fluctuate, with the expectation that they’ll increase in value.

Passive investing is a great strategy for young investors because it relies on time. Time is the ingredient that allows the interest you make on your stocks to compound. And compound interest can see your money double several times over the years.

Of course, you can’t just buy any stock and sit tight, hoping that it will be worth more in the next twenty years. That’s why passive investing focuses on buying index funds or exchange-traded funds (ETFs), which are groupings of stocks.

Putting too much faith into one company is risky. With index funds and ETFs, you buy a slice of the top-performing companies in the market. This gives you a much better chance of seeing high returns — and the higher returns you get, the sooner your money will grow!

Wealthsimple’s portfolios are made up of ETFs that they buy and keep for you. To set this up, the platform creates a portfolio according to your age and goals.

So, for example, if you’re 25 and investing for retirement, Wealthsimple will suggest a higher risk portfolio than if you’re 45. When you’re young, you have more time to allow the market to recover in the event of a recession (like what happened in 2008).

The idea is that your portfolio is set and won’t be tampered with — unless you request to make a change.

So, what exactly does a Wealthsimple portfolio look like? This brings me to my next point.

2. Wealthsimple Invests With Diversified Portfolios

The stock market is affected by political factors, as well as businesses and investors themselves. This is why exact returns are so difficult to predict!

With politics involved, you can imagine the risk that could come with investing in stocks from only one country. What if that country has a political shift that dismantles its financial situation? What if that country faces a war? This is why investing in companies from different countries is so important.

Wealthsimple portfolios are globally diversified. My portfolio, as you can see from the screenshot, invests in stocks from the U.S., Canada, Europe, Asia, and Emerging Markets (the developing world).

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Usually, when we imagine the stock market, we picture Wall Street. And as you can see, almost a third of my stocks are in U.S. companies.

But this also means that two thirds of my stocks are not U.S. The majority of my stocks are still invested in companies from other parts of the world.

With global diversification, the hope is that if something were to happen to the U.S. economy, my stocks might take a hit, but they shouldn’t all be affected.

Of course, we could wander into catastrophic thinking about what might happen in the case of a major global war. But realistically, I don’t base my life decisions around the worst possible scenario, so I’m not going to buy my stocks that way.

Now, if you’re a math geek and have noticed that the numbers in my portfolio don’t add up, you’re right. And I’ll tell you why.

The other 10.3% of my portfolio is in bonds. Bonds are considered fixed income. They represent money that you have loaned to a large entity — usually the government. In the meantime, the government pays you interest for the privilege of having your money.

Bonds are a less risky option than investing in the stock market because it’s pretty much guaranteed that you’ll get your money back. But they usually don’t yield as much interest, so they don’t compound (or double) as quickly.

If I were ten or twenty years older, I might have more money invested in bonds to reduce the risk level of my portfolio, but because I have (hopefully) about forty years until retirement, only ten percent of my portfolio is in bonds.

So to recap, Wealthsimple diversifies your portfolio by investing across the globe and by investing in both stocks and bonds.

3. Wealthsimple is More Cost-Effective Than Traditional Brokers

There’s no free investment option. You’re either paying for a person or the technology to help you invest in the market.

Traditionally, people who invested used full-service brokers. Full-service brokers charge around 1-2% of your money for their services.

Today, there are online discount brokers, which charge less than that. The problem is that they don’t do much work for you.

With a discount broker, you’re expected to be hands-on in creating your portfolio, so you have to be aware of different stock options and strategies. You’re also responsible for making sure you diversify sufficiently.

When you design your own portfolio, if you make a mistake, you’ll be paying extra to make the trade. It can be a lot of pressure, and it definitely requires a good knowledge base.

For its part, Wealthsimple charges 0.5% to manage accounts that have under $100 000 in them. Wealthsimple also includes a 0.2% fee in the ETFs that they purchase for you. But with those small percentages comes a customized, strategic portfolio and the peace of mind that you can set it and forget it.

The thing is, with technology advancing so quickly, fees and options are changing. More regular banks will probably start offering robo-advisors soon. In fact, the Bank of Montreal already has its own version of a robo-advisor, called BMO SmartFolio.

The landscape of investment brokers I’m writing about now might be totally different in five years. But currently, Wealthsimple is both cheaper than a full-service broker, and it does the work for you. From my perspective, it includes the best of both worlds.

And I don’t know about you, but I’m willing to give up 0.5% of my money for an effortlessly customized portfolio.

4. WealthSimple is Easy to Use and Customize

Those of us who grew up alongside online banking and Interac e-Transfer expect to be able to bank from our devices. As technology has become more sophisticated, we also expect that our apps are clean and easy to navigate. Wealthsimple’s interface checks all those boxes.

Wealthsimple securely connects to your bank account, so that you can deposit money into it whenever you please. Plus, if you know how much you want to toss into it on a monthly basis, you can set up automated deposits.

One cool feature that Wealthsimple has is a projection of how your money will grow. I can see how much money I’ll have in forty years if I do nothing else, but I can also see how much money I’ll have if I keep depositing a certain amount of money every month.

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The blue shows how much my money would increase if I never made another deposit. The yellow shows how much my money would grow if I was also depositing $300 a month. I’m not going to share the exact amounts for privacy reasons, but I can tell you there’s several hundreds of thousands of dollars between the yellow and blue — and most of it is not the money I deposited, but the potential growth from compound interest.

A visual like that is definitely a boost of encouragement in my long haul investment journey.

5. Wealthsimple Perks

There are more specific reasons that I love Wealthsimple, so for my final point, here are a few of the extra perks.

Automatic Rebalancing

As the value of your stocks changes, the percentage of money you have invested in them changes. For example, if one fund doubles its value, you suddenly have a higher percentage of your money invested in that fund. Over time, all the fluctuations can really mess with your original diversification.

Luckily, this is another thing that Wealthsimple takes care of for you. Your account is constantly rebalanced, so that if you start with 70% stocks and 30% bonds, you’ll still have 70% stocks and 30% bonds, no matter how your money grows.

Options for an Ethical Portfolio

One unique feature that Wealthsimple offers is its Socially Responsible portfolio. This portfolio invests in companies that are working in positive ways for the environment and human rights.

This is a great feature, if socially responsible investing is a top priority for you. It’s true that what we put our money towards is an expression of what we value.

Admittedly, I’m not invested in the socially responsible portfolio. My issue is that it’s not as diverse as the regular portfolios because, of course, there’s a smaller number of ethical companies.

I’m hoping that the Socially Responsible option grows in the future, and I’m definitely keeping the goal of having more ethical investments in the future. In the meantime, I try to use my non-invested money in more ethical ways.

If you’ve been debating about investing for a long time because you worry about the harm that corporations cause the environment and society, the Socially Responsible portfolio could be the perfect option for you.

Clear, Helpful FAQ Pages

Even though you’re not usually dealing with a real, live person on the Wealthsimple website, you’re not being left in the dark either. The platform is really transparent about how it works and about general investment information.

The Wealthsimple website has fantastic, readable FAQ pages (no overly-technical language) that make it easy to answer any questions or confusion you might have. I’ve actually used some of them for reference in this post!

However, if you are looking for a real person to speak to on this largely automated platform, Wealthsimple does have a help number to call. So if you’re a little weirded out by the fact that everything is online, you can feel relief knowing that there are real people who can help you with your technical and portfolio questions.

In Conclusion…

There you have it — the reasons I chose Wealthsimple. Now, I’m not an investment professional, so don’t take my advice as a rule to follow. As I’ve said before, you have to figure out what’s best for you and do your own research.

My hope is that I’ve given you some things to consider for crafting your own investment portfolio — especially if you haven’t started yet.

And if you’re still not convinced to start investing, stay tuned for next week, when I will be demonstrating how investing for retirement in your twenties can save you $50 000+.

Comment below if you have any questions about robo-advisors or investing for me to address in the future.

As always, happy money-making!