How To Simplify Your Investment Portfolio

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When I mention index investing a lot of people just give me bewildered looks. “What are you talking about?” “Are you even speaking English?” Hey! Were it not for the fact that I know most people don’t know anything about investing, I’d take that as a racist comment. But I’ll let that pass for now.

The current generation of workers, Millennials and Generation Y (or whatever they call themselves), have never even dared to invest in stocks because of what happened over the last two decades. Those Gen Y folks suffered the tech crash in 2000. The Millennials saw the devastation in 2008 with the US credit crisis bringing down the markets by 50%. Mom told you “never mess with stocks!”

Though mom’s always know best, when it came to personal finance, my mom never taught me anything other than to save my money. Investing wasn’t something that was encourage. Though her conservative ways will mean you’ll build it nest egg, it’s not a way to achieve financial independence. You need your money to work for you rather than worrying whether you’re going to run out.

Robot Investing

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If investing on your own feels too complicated, heck, there are these new robo services out there that will do everything for you. These are great alternatives for those are just starting out. You don’t even have to do anything other than open an account and throw money into it. The robots will do everything for you. Yes, the robots! They are starting to take over your investing too!

Wealthsimple is one of such companies. So is WealthBar. Heck, even BMO has its own robo investing service called Smartfolio. Who doesn’t like robots?

Similar do-it-yourself index investing, robo advisory services determine your risk tolerance and then builds a balanced portfolio using low cost ETFs. This is exactly what you would do for yourself using a Couch Potato portfolio. You just have to ask yourself how much is a robot worth to you?

All these robo services offers no-fee accounts up to $5000 or $10000 invested, but once you surpass that amount, you will be charged a fee. For Wealthsimple it’s a 0.5% annual fee. At Wealthbar you’ll end up paying $10/month. The Smartfolio will charge 1.25% annually and slowly decreases as the value invested goes up. All of this is on top of regular fees that the ETFs in the portfolio hold.

So given those fees, how much are you willing to pay that robot?

Single Balanced Funds

So you hate robots. They’re cold. Offer no emotion. Or you just don’t like the fact that our society is turning into the Matrix so you take the red pill. If you still want to be hands on with your investments, but don’t want to deal with the mess of building a balanced portfolio, then there are options out there to just buy a single fund.

Tangerine offers a single mutual fund that represents a well balanced investment portfolio. Surprisingly these funds only carry a management fee of around 1.07%. So rather than paying over 2% for other mutual funds, Tangerine has priced these balanced investment funds at a competitive rate similar to low cost index funds like the TD eSeries.

What you get from these single balanced funds are a diversified investment portfolio that is constantly balanced for you. You don’t have commission fees when buying or selling. You don’t have to calculate how much of each fund to buy because there is only one. There is no re-balancing to do. These funds do all that for you. All you need to do is deposit money.

Currently Tangerine carries 3 different balanced portfolios:

Balanced Income: This is your super conservative portfolio of 70% bonds and 30% equities
Balanced: This is a standard 40% bonds and 60% equities portfolio
Balanced Growth: For those that have a little more risk tolerance with 25% bonds and 75% equities

Using Tangerine funds is as easy as it gets. There’s a higher management fee, but that’s the price to pay if you don’t want to do all the other things required to maintain your own investment portfolio.

Pay Someone

It seems strange to have to pay someone to use your own money to invest, but that’s what’s required to get good professional advice. Although not a popular choice in Canada, fee based advisors will provide fiduciary advice to ensure that your investments work for you the way you want it.

A trusted advisor will be someone that can manage your entire portfolio and even make the purchases for you. She will also ensure that as your financial goals change throughout your life, she will also adjust your portfolio to match those expectations.

Fee based advisors are not cheap. They may require thousands or even tens of thousands of dollars depending on your investment portfolio size. They will, however, work on your behalf. It’s like hiring your own employee, only she manages your army of money.

This route might require some interviews and some upfront time, but once you find someone good, they can help manage your portfolio for you without worry.

Now it’s not to say that mothers can’t do this for you, but sometimes mothers are better for other things. Happy Mother’s Day!

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