You expected a big complicated page with lots of graphs and charts, right? Well, you might be surprised to learn that this is definitely the least complicated part of how I manage my money!
Contrary to what you might expect, tonnes of research has shown that "active" (picking and choosing stocks, or having someone do that for you) investment management (on average) fails to match the entire stock market in terms of growth. That's also the most intimidating part of investing, am I right? Fortunately there's this concept called "passive investing," and it involves buying and holding on to a small set of things called "Exchange Traded Funds" or ETF's. The goal of an ETF is to match the average performance of one area of the stock market, or even the entire thing.
Here are the benefits I see in this approach:
- Super low fees, like <1%. Most active managers or mutual funds are as high as 3%! The fees are low because nobody is sitting there making decisions about when to buy or sell. As you put money in you just buy.
- Diversification. This is a fancy word for buying a bunch of different things so if one fails, you aren't screwed. It makes sense, right? See, ETF's are actually a collection of thousands of stocks - the same stocks that are averaged out when you see how the stock market is doing on the nightly news.
- I get my time back. I don't need to spend hours of my time every week figuring out what the best strategy is, or meeting with an adviser regularly to talk about something I know nothing about. A passive approach, on the other does best with a short annual review. Otherwise, just set and forget it.
- Respectable returns. Since I started with this approach I've had a 5.3% return on my investments. Not bad for 2016/2017. You might get more with stocks, but you also take on more risk.
How to get started...
- My roboadvisor of choice is Wealthsimple.
- Send your savings every paycheque, they'll invest it for you in 10 ETF's.
- They automatically rebalance it as the market changes.
- First 10k managed free, after than pay <1%.
- Once you've got 100k saved, you and your significant other get free airport lounge access around the world!
So if I've convinced you, and you're ready to start you can do it a couple different ways. You can buy these ETF's yourself, or you can do as I do, and leave it to a computer.
I use a service called Wealthsimple (if you click and sign up, you'll get $10,000 managed free, instead of the regular $5,000, and I also get an extra $5,000 managed free). There are a few competitors out there, and you might have heard of them as "robo advisors." Nest Wealth and BMO Smartfolio are a few of them.
Wealthsimple charges me 0.5% to manage my money and buy an assortment of different ETF's across different countries and industries, stocks and bonds to give me a balanced portfolio that manages my risk even more so than just buying ETF's in the first place. Each of the 10 funds also charges between 0.1-0.4%, so all in all, less than 1% fee.
I'm currently aspiring to reach the Wealthsimple Black level so I can get free airport lounge access for me and my partner!