Why the Sasquatch Family moved their Savings to Wealthsimple
Over the past few months, readers of my Economics of: posts have been asking how we are investing our money. I am not super comfortable telling people how to save or invest their money because I'm not an expert and everyone's needs are different. I am however comfortable telling people that we have been investing with Wealthsimple for 8 months now and they have blown me away with their service, convenience, and most importantly their investment returns. As of this month, all the Sasquatch personal investments have been moved to WS. So let me tell you how I went from 3.7% returns to 8.7% by switching our investments to Wealthsimple.
Over the last year or so I have become increasing interested in investing and saving money. Most of my leisure reading has been focused on books on Warren Buffett and several other stock-picking books (nerd alert!). Before this time I hadn't paid much attention to my investments. I had an RRSP that was set up at an old office job from 8 years ago that I was contributing to almost blindly. I also had a TSFA my parents started as a Christmas gift that I was also naively contributing to without reviewing the fees or returns.
The first investing book that I read last year was The Wealthy Barber Returns by the Canadian money guru, David Chilton. In the book, he describes the advantages of Exchange Traded Funds (ETFs) over mutual funds. An ETF is a fund that tries to mirror a Stock index. This has 2 big advantages. The first advantage is nearly 90% of fund managers fail to beat the market and secondly, the fees on ETF are very low at an average of 0.44%. This book encouraged me to look at the performance of my RRSPs at one of the big banks. I saw that in the past 8 years my RRSP had returned 3.7% and had fees of 2.3%. WTF!!! This is no good, no good at all!
After this, I started researching more on investing hoping I could do better on my own. At the same time many of the podcasts I was listening to started to become sponsored by companies like Wealthfront and Betterment. I found out that these companies use something called robo-advisors which Wikipedia defines as "a class of financial adviser that provides financial advice or portfolio management online with minimal human intervention." However, at the time these companies weren't available in Canada. I started looking into buying stocks and ETFs, but I found this overwhelming and scary so I just didn't do anything... I am sure many of you have had this issue!
A few months down the road, a friend of mine posted a link to the company Wealthsimple on Facebook. I was intrigued and began to research the ins and outs of this company and I found that they were the first robo-advisor in Canada. Hooray! Before moving any money over to them I had to read everything I could on them to make sure it was wasn't a scam. Articles in the Financial post and the Globe and Mail had me convinced to give this company a shot.
I transferred my smallest investment account over, which was extremely easy, WS streamlines all transfer process and it's all online. It was way easier than I thought. After answering a few risk questions and waiting about a week for my funds to transfer I was ready to rock. Wealthsimple setup a well-balanced aggressive portfolio with a mix of low-cost ETFs, Bonds, and REITs. For the first few months, I was averaging about a 4% return which was much better than most funds at the end of 2015. Since then my returns of more than double up to 9% returns. As of this week, I have moved all my personal investments to Wealthsimple.
When investing I am looking for 3 main things: High Returns, Low fees, and Simplicity. Wealthsimple checks all those boxes.
Over the past 15 years, Canadian equity funds have a rate of return of 6.2%. This is very good and ranks among the top of the world. If we graph out average Canadian yearly savings rates of around $10,000 a year for Wealthsimple returns of 8.7% versus the Canadian Fund fund average returns of 6.2% over 40 years we get a difference of $1,661,253.94!
WS vs. Mutual Funds
I hope this demonstrates just how important good returns are. I understand that we have only been with Wealthsimple for 9 months versus a 15-year range for Canadian Mutual funds. This is true, however, that 15-year range was a period of great growth for the Canadian economy and the 9 months I have been with WS have been terrible for the Canadian economy with the massive drop in Oil & Gas prices. If you are still skeptical I hope the next section on Fees will also help demonstrate the amount of money you are missing out on.
The average Canadian fund fees or Management Expense Ratio (MER) is 2.42%. The MER is calculated by multiplying the MER by the average market value of your chosen fund for the year. So if you have a fund with a yearly average of $100,000 you will pay $2,420 in fees based on the Canadian Average MER fee. At Wealthsimple the fee is only 0.50%, meaning for the example above your would only pay fees of $500 a year. Let us see how these fees will affect your savings over a 40 year period using the economic of: standard returns of 5%. The graph will have 3 lines: 1 line is the growth without any fees, the second is the growth with average Canadian MER rates, and the third line is the Wealthsimple rates.
How Fees Affect Your Investments
Return vs MER Fees
Return vs. WS Fees
These graphs amaze me, you can really see just how much small fees add up over time, it's really incredible to see the savings once you reduce your fees. Basically, you are losing out on over $500,000 in investment returns by investing in a mutual fund even if the fees only total up to just under $300,000 the half a million comes from the fact that, that money wasn't invested over the same time period. Investing with the low fee Wealthsimple saves you over $200,000 in fees and potential returns of over $400,000. Now, isn't that worth taking an hour to switch over your investments?
The Third thing I was looking for was simplicity and ease of investing. I stated above just how easy it was to switch my investment accounts to WS, but I also wanted to show you how amazing their interface is. In fact, they won the Webby Award for the best financial services website...so you know it's awesome. I set up an automatic monthly withdrawal from my bank for my investment account and forget about it... OK, I don't forget able it, I check it all the time to see how my investments are doing... it's so damn fun and addicting! It totally motivates me to invest more. Here are some screen shots!
Did I mention they have a great mobile app?
Lets review, Wealthsimple's better than average returns can net you an extra 1.6 million dollars over a 40 year period, and their low fees will save you an extra $400,000. Basically switching to Wealthsimple will make you an extra 2 MILLION DOLLARS. As the Sasquatch Pups would say KABOOOOOOM!!!!
I have been very impressed with Wealthsimple over the past 9 months. I feel I have made the right choice switching to their investing solution. Most importantly I don't worry about my retirement or my investments. I have a plan and I am happy.
If you want to sign up for Wealthsimple click the button below to get $5000 managed for FREE!