Category Investing Early

Saving & Investing for Kids

Investing Advice & Weather Forecasting

Paul - The Wry Eye Guy Leave a comment
Pick the Best Lounger!

I’m going to tell a story today, no numbers & stuff. Just light reading for a Friday afternoon. TGIF!

I was enjoying a nice lunch on an oceanside patio earlier this week. It was a beautiful sunny day in Nova Scotia. Everyone was basking in a summer heat that was perfectly tempered by the breezes coming across the bay. An Ontario couple at the neighbouring table were asking our server about the harsh winters in Nova Scotia. At the next table, a person in a group of Quebec visitors chimed in that they were interested in hearing about that too. To cut a long story short, the people from Ontario wanted to confirm that winter here was way harsher than winter in their neck of the woods. Our young server, a born & bred Nova Scotian, agreed that winter on the coast was absolutely awful. The Quebec group included a couple that were interested in moving to Nova Scotia, so they were more than a little disappointed to hear this news. They really wanted to move to a place with a milder winter than theirs. Another couple in the Quebec group lived in a apartment building in downtown Montreal. They were connected to the underground city complex there & could work & live a very full life in Montreal without ever having to go outside during the winter months. Though they did head outside to the ski slopes periodically. They didn’t care what Maritime winters were like, they thought Montreal’s winters were great!

What was happening here was quite incredible. Ontarians who had never been to the Maritimes in winter set the stage by claiming winters here were horrendous. Maybe the worst in Canada. Their opinion was confirmed by our server. A local who grew up with Maritime winters. But he had never been to Ontario in winter & couldn’t really make that comparison with any authority. We all have our blind spots, eh! On top of that, the disappointment of the Quebec couple simply reinforced the negative echoes that were bouncing around in this newly formed echo chamber. And the other Quebec couple couldn’t have cared less, they were totally happy with how they enjoyed their winters in Montreal.

What was going on here?

One uninformed opinion was reinforced by another uninformed comparison, & this developing feeling was augmented by an additional negative emotional reaction. While yet another emotional reaction, albeit from a totally different perspective, served to further confirm the groupthink conclusion. That Nova Scotian winters were just awful. Regardless of how true this might (or might not) be, this is how echo chambers work.

Fortunately, for all the people in this story, I was there to save the day. As it happens, I have lived through several winters in all three locations! It’s not often in life that we are presented with opportunities to strut our stuff from a position of 100% conviction. In I waded, pointing out how awesome that coastal winters are & how they compare very favourably to the truly horrible winters in Ontario & Quebec. I might even have gone overboard, just a little, extolling the almost tropical nature of winters in the Maritimes! By the time I was done, they were all moving to Nova Scotia.

Okay, I’m kidding, they were not all doing that. But the couple who wanted to move were a little relieved. And the rest were actually mildly surprised that coastal winters weren’t as bad as they’d imagined. But despite my obviously superior level of knowledge & experience (😜) relating to this specific question, this was still just my opinion on the matter. Yes, it does snow, but it usually melts pretty quickly. And then it’ll probably rain & do some other weird stuff. And we really don’t have that many hurricanes & sou’westers, eh! Or is it nor’easters? I don’t know. But I do prefer the frequent melts we get here, compared to Ontario & Quebec. And that makes east coast winters better … but only in my opinion. Those who prefer to ski in winter, for example, might not agree. In my mind, I might have been right, but my version of right might not suit everyone. So even with my supposedly strong level of knowledge, backed by experience, my right answer will not necessarily be right for everyone. In fact, it might not even be right for me going forward. What if I wanted to start skiing in winter!?! Okay, that’s unlikely, but never say never.
Of course, I was careful to warn my new found friends that past performance is no guarantee that things will be the same in future. Sorry, couldn’t help that one!

So what’s the point of the story? Echo chambers are easily created. And we enjoy spending time in them. That’s not surprising, since we like to hang out with people who share our likes & dislikes. Be it for weather or for investing. But it can be enlightening to pull back & consider alternative perspectives. I think it’s worth trying to keep an open mind. And to spend time trying to find our own blind spots. Sometimes, facts & evidence are elusive. We need to push back against our personal biases to ensure we are seeing things clearly. If only to see if we might enjoy a winter skiing holiday in Quebec. Now to be honest, I might not hit the slopes. But I do need to practice my French lessons. And I really enjoy the food in Quebec. Regardless of the season!

If you’re a regular reader here, watch out for my biases!

PS … I had the fish and chips. Again! LOL

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Declutter an Investment Portfolio

Paul - The Wry Eye Guy Leave a comment
A tidy portfolio can deliver growth or income with less work!

Managing a bag of stocks & ETFs is difficult. The fund companies have come up with products that have the potential to take away much of this pain. The all-equity ETFs & the all-in-one asset allocation ETFs offer a complete portfolio, wrapped in a single ticker symbol. Of course, no matter how good these products are, there might be some emotional investing needs too. Investing is both mathematical and psychological, eh? So maybe a little tweaking is okay!

Owning an ETF like BMO’s ZEQT (or iShares XEQT, VEQT from Vanguard Canada, etc.) is probably a good core choice for many investors. An ETF like this is already globally diversified. It’s geographically weighted according to market size & importance. It includes what many consider to be a reasonable home country bias. It holds large, mid, & small cap companies. It’s a really big haystack that I think Jack Bogle would approve of. According to Nobel Prize winning economist, Harry Markowitz, diversification is the only free lunch in investing. These funds meet that bar too. And finally, it’s a simple approach that is a lot less work for a DIY investor.

Do you spend your time figuring out if you should be dumping some of the tech ETF, so you can buy more of the gold one? Or trying to figure out when you should be selling the US market off, in order to buy Europe & Asia? Are you trying to work out what to do with this week’s hot & cold stocks? Worried about sector ETFs that might be going in, or out, of favour? Surging or failing markets? It’s all quite stressful & time consuming, eh? Life is too short. Especially as we get older! An ageing brain needs some challenge. But not torture. The globally diversified funds have everything in there. Some stuff will go up, some will go down. These funds are diversified & that’s how they work. And there’s one other important point to simplicity: if there’s a chance that the investing manager of a couple might depart first, a decluttered portfolio might be greatly appreciated by the surviving partner. The simpler the investing solution in place, the better it’s likely to be.

Want bonds? Choose one of the all-in-one ETFs (ZGRO, XBAL, VCNS, etc.) with a bond allocation that matches your needs. These are very simple solutions for highly diversified, asset-allocated portfolios, & they come with built-in rebalancing. Some investors might prefer an all-equity ETF that is complemented by separate bond & cash-like ETFs. There are some good arguments for breaking out the bond & cash allocations. It’s a little extra work, but it may make sense for some.

Now different investors have different approaches, so it’s not just about growth & accumulation. Fortunately, there is often a simple solution for many of the other investing styles too. For example, an income investor that favours high yield funds can choose something like the EQCL ETF, from Global X Canada, for the equity portion of their portfolio. It’s very similar in asset mix to the all-equity configuration of ZEQT. But instead of focusing on growth, this fund uses covered calls & leverage to drive a far higher distribution. People are different. Some are happy to go for maximum growth & sell off shares for income. Others prefer that the fund company delivers a bigger income stream for them. Rather than selling shares, these people are more comfortable figuring out how much of the big distribution they need to reinvest, in order to sustain & grow that income stream. Some investors like to mix & match such strategies. There are those who use different strategies in different accounts, so one style will be used in the TFSA & another in the RRSP. If you are new to these income funds, note that there are some total return & tax characteristics that are different to the regular type. Take the time to learn before diving in. Though that suggestion applies to everything. And it should have previously applied to the messy portfolios we sometimes find ourselves with! LOL

BMO offers yet another approach with their T6 Series ETFs. These funds dole out a targeted 6% distribution with funds like ZGRO.T & ZBAL.T. Here the fund manager is delivering the extra income, primarily via return of capital, but without the investor having to manage the sale of shares. This is cool for those who think that the 4% Rule isn’t allowing them to spend as much as they’d like. But it’s not as biased towards the far higher distributions that come from some of the high yield funds. This is more of a middle ground for income seekers. Don’t assume that this 6% distribution is a given for an inflation beating income stream for a full retirement lifecycle, by the way. Read this post on the Safe Withdrawal Rate in Retirement on why that might not work all the time. Nonetheless, the T6 funds will take care of automatically delivering a higher monthly yield, based on the value of the underlying fund at the end of the previous year. You still need to pay attention to the variability of the income stream over time. There may be a need to reinvest a little extra when income goes up after a great year, for example. That might safeguard against an income drop if the markets go down the following year. If the fund is subject to successive down years, the income stream will decline too. No solution is perfect when we try to predict the future, eh? But the bottom line is that simpler solutions exist for most investing styles & strategies. And for varying levels of distributions. Regardless of the investing strategy that is preferred, it shouldn’t stop an investor exploring ways to tidy up a messy & confusing portfolio. Especially if it reduces stress, while improving visibility & returns. Decluttering can be both refreshing & potentially rewarding.

If you can’t get your head around having so few holdings, how about putting the BMO one (ZEQT) in the RRSP, the iShares one (XEQT) in the TFSA, & Vanguard’s (VEQT) in the non-registered. Each one of these is globally diversified. They own a little piece of everything traded on the public markets. These are all essentially identical. But I get it. I totally feel the need to spread it around the different fund companies myself! There is also something to be said for making the single ticker solutions the core of a portfolio. While leaving a smaller allocation available for some gambling on the side. Sorry, I meant some intelligent macro investing on the side to boost alpha! If you know you can do it well, or if you can afford the greater uncertainty of return for a small part of the portfolio, then it might be fun, no it’s still crazy, okay! 😜

One other consideration. If the current messy portfolio performance is seriously lagging that of a single ticker solution, ask why. There may be good reasons why. And good reasons to justify staying the course with existing investments. But if we can’t come up with good answers (that aren’t guesswork or wishful thinking!), then consider this … if a portfolio is consistently underperforming the single ticker ETFs by an amount that is significantly more than 1%, it might be better off in the hands of an advisor who only charges 1% to manage the portfolio. Even if all the advisor does is invest it all into ZEQT or VBAL & manage the financial planning & cashflows for the investor thereafter!

There is also one big caution with all this. Decluttering a portfolio isn’t like spring cleaning at home. Do NOT rush into selling a bunch of stuff without getting some professional tax & investing advice. A long-term holding in a non-registered account, for example, may have significant capital gains tax liability if sold off. It might bump income up to a higher tax bracket. It might generate income that exceeds an OAS clawback limit, & so on. There are many potential issues, so seeking professional help is often the best course. There can be other challenges with balancing different fund types across the different account types. If you don’t know how to manage all this, get some help. Even if you’re just not sure if you know enough to manage all this, get some help first!

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Benchmark Your DIY Portfolio

Paul - The Wry Eye Guy 1 Comment
Measuring Portfolio Performance

How does your portfolio stack up against a simple, globally diversified, broad market index portfolio? Does it matter? It might. Most of us, short of placing some lucky bets, are unlikely to beat the markets over the course of our decades-long investing lifetime. But that doesn’t stop us trying. And that can get messy. Do you know what’s in your basket? And how well it’s working? If you find yourself wondering about this every now & then, it might be worth checking. How do we do that?

Plug your portfolio details into one of the online tools that provide portfolio comparison features. I like the Backtest Portfolio feature in Portfolio Visualizer for this. Once your portfolio is loaded, compare its total return performance to one of the all-equity ETFs like ZEQT, VEQT, or XEQT. If the equity side of your portfolio is crushing the returns of these all-equity funds, well done. Do you know why? Is it luck or skill? Can it continue? If you think it can, keep doing what you’re doing & get ready to enjoy your retirement!

If things are not going that well, it might be worth exploring why not. Of course, some investors may deliberately choose a portfolio mix that lags index funds. Not that the goal is to lag, but other attributes (low volatility, increased cash flow, whatever) may be favoured over maximising total return. It also doesn’t matter if you have a growth, dividend, or income investing approach, benchmarking total return performance can still be enlightening. And useful. Sticking with any strategy, even one that lags, is a decision best made when we know the cost.

I’ve left out a bond or cash component. However, that’s easily added. Make sure it’s in the same ratio as in your own portfolio, for an apples-to-apples comparison. Or use one of the asset allocation ETFs, like XGRO, VBAL, ZCON, etc. as your benchmark. These are the all-equity ETFs with bond funds built in. Select one with a built-in bond percentage that matches your own portfolio. I prefer not to use an S&P 500 Index® fund as the benchmark, because it’s less geographically diversified than I prefer for my portfolio. For for those who invest only in the US market, it’s a valid choice.

Most of the comparison & performance tools will require a subscription if you want to take advantage of the full capabilities. But, despite the limits, the free access can still be very useful. For example, Portfolio Visualizer allows 15 holdings & 10 years of back testing under the free tier. While stock pickers will almost certainly be challenged here, most ETF investors are likely to have fewer holdings. But if you’ve got more, choose all the bigger ones & hopefully the top 15 holdings will make up the bulk of your portfolio value.

Another challenge with making comparisons is that the first of the all-equity ETFs only launched in 2019. That limits how far back we can look for direct comparison. But there are some tricks that we can employ. Like breaking down a fund into older constituent (or similar) ETFs. For example, we can use an all-equity ETF proxy made up of VUN (USA 45%), XIC (Canada 25%), XEF (International Developed 25%), & XEC (Emerging 5%). This gets us a comparison all the way back to September 2013. On the flip side, if your portfolio has a bunch of new funds, there won’t be much history to look at. And, in general, the shorter the timeline, the lower the value of the comparison.

This next proxy drifts further away from using a single all-equity ETF. A comparison portfolio of SPY (USA 45%), XIU (Canada 25%), & EFA (International 30%) is a rough approximation that allows benchmarking all the way back to September 2001. It would have been interesting to see the impact of the dot-com implosion in 2000, but EFA wasn’t old enough to catch that event. I guess we could use a 50:50 portfolio of SPY & XIU to get back to 2000. The problem with both these “created” benchmarks is that the funds are in different currencies. This further muddies the waters. Pretty significantly. That said, for rough comparisons, they look back about 25 years. But why are we bothering with all this history stuff anyway?

We all know that past performance does not predict what the future holds. But benchmarking against one of these all-equity ETFs, or against a proxy for longer timeline comparisons, can throw up some interesting insights. It’s good to know how an asset mix survives things like the dot-com meltdown & the great financial crisis. There is tremendous value in seeing how things worked while accumulating. And then how things can change, sometimes seriously, while decumulating in retirement. I know some people are shocked by the outcomes from these comparisons. If that’s you, I hope you are positively shocked. Because of how well your portfolio has performed. And if so, congratulations!

If you are negatively shocked, you might want to reconsider what you are invested in & why. If the equity portion of your portfolio is way behind the returns of the globally diversified fund, is that acceptable to you? Is your original investing hypothesis intact? Ah look, I’m trying to tiptoe around asking you if you know what you’re at here! And if you don’t, consider this …

Should an investor seriously trailing an ETF filled with globally diversified, total market index funds think about the potential for buying that ETF instead? Or maybe this investor should consider talking to an advisor. I know that is a heretical thing to say out loud amongst DIY investors. But if the results are likely to be better, after paying an advisor 1% to just buy the all-equity ETF for you, why would you not think about this? And if this advisor throws in some fancy financial planning, that’s an added bonus. Look, DIY investing is not a religion. And we didn’t take a vow. We don’t have to remain committed to underperformance. Particularly if we can’t figure out how to fix it on our own. Of course, it can be as challenging to choose a good advisor, as it is to build a good portfolio! Seems like there is no escaping the need to invest in learning when it comes to making enlightened decisions about our money.

I guess this is all a bit simplistic, eh? But if you’ve been doing your own thing for a bit, it can be insightful to benchmark your performance against a simple off-the-shelf portfolio, like the all-equity ETF we used for benchmarking. And it’s an EFT that some academics & professionals argue might be the best long term investment choice for many DIY investors anyway. Only you can decide what to do once you see the results of a benchmarking exercise. Just don’t jump from the frying pan into the fire!

There are other considerations, of course. Some favour lower volatility portfolios. Others treat & handle risk differently. Retirement cashflow or income can be a big influence on portfolio choices for those nearing retirement. Worries about sequence risk in early retirement can factor into portfolio selection. And on & on it goes. But, regardless of these many influences, measuring & comparing performance can provide insight. And the insight may help guide us towards better solutions going forward. And if you do decide to have a discovery chat with an advisor, why not benchmark the advisor’s proposed portfolio against one of the all-equity ETFs as part of that process. After going through all this, I’m now questioning my own portfolio. Think I’ll head off & do a little benchmarking of my own. Catch up with you later! 😜

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

US or Canadian – VOO or VFV?

Paul - The Wry Eye Guy Leave a comment
The Currency Balance

Which currency should we invest in, Canadian or US dollars?

In this example, we’ll compare Vanguard’s US listed & US dollar denominated ETF (VOO), against the Canadian listed & Canadian dollar denominated equivalent (VFV) from Vanguard Canada. Imagine investing $10k back in 2012 in each of these ETFs. Conveniently, the Loonie & the greenback were approximately equal back then. One Canadian dollar was worth one US dollar. That means the $10k investment was of equal value, regardless of the currency.

With all dividends reinvested, here’s what the performance has looked like since then …

VOO vs VFV 2012 to 2025

By March 2025, VOO grew from $10k to $52k, in American dollars. While VFV soared to about $73k, in Canadian dollars. VFV looks like the big winner. But it’s not.
Back then the currencies were at par. By the end of this chart, it costs $1.44 Canadian to buy one US dollar. If we sold off VFV at the end & converted the proceeds to US dollars, we’d have a bit less than $51k American. pretty close to the US dollar value of VOO. Similarly, if we sold all our VOO holdings & converted those US dollars to loonies, we’d have almost $75k Canadian. Bottom line is that they’re about the same. We’re only looking at about a fifteen hundred dollar (Canadian) difference in total return, with the American listed VOO coming out slightly ahead.

VOO should come out slightly ahead. There a few reasons for that, including the following …

1. It has the lower fund fee of 0.03%, compared to the 0.09% fee of VFV in Canada.
2. While it all happens inside the ETF, VFV loses a little of the dividend payout due to the 15% dividend withholding tax that the IRS (the US equivalent to the CRA) collects. This happens regardless of the account the Canadian listed ETF is held inside.
3. Though ETFs can do currency exchange at better rates than the typical DIY investor, there might be some additional currency exchange drag on VFV too.

If the fund fees were the same, if currency exchange didn’t have any fees, & if there were no dividend withholding taxes, the performance of the two ETFs would be practically identical. The apparent outperformance of VFV in the chart above is mainly due to the declining value of the Canadian dollar against the US dollar over that 12 year period. Both funds grew similarly in real value (as they should, since they both hold the same stocks). But VFV grew “extra” Canadian dollars over that time, in line with the increasing real value of the stocks inside the EFT. This compensated for the Canadian dollar falling in value against the US dollar. If the reverse had happened, & the Canadian dollar had gained strength against the US dollar over this time, VFV’s numbers would have lagged VOO on the chart. It would have “looked” worse. But, once you convert the currency in either direction, both would have looked pretty much the same again.
That said, there are some pros & cons with either choice.

If you have a bunch of US dollars already & you want to invest these greenbacks inside an RRSP account, VOO would be the better choice. It may not always be this way going forward but, under the current agreement between Canada & the US (& as it was over this timeline), the RRSP account shelters the investor from the dividend withholding tax that would otherwise apply to US based ETFs. On the flip side, if you don’t already have US dollars, you’ll have to pay currency conversion fees. Or learn the Norbert’s Gambit technique to minimise the currency conversion costs. If you want to avoid that currency conversion work, the outcome resulting from sticking with VFV is still pretty good. Particularly when investing outside a registered retirement account, where neither fund can avoid the withholding tax. That would bring the results a little closer together. It is worth noting that the bigger the investment, & the longer the time invested, the greater the potential impact. The $1,500 difference on this $10k investment example, would have been $15,000 on a 100k investment. You can do the math for a million dollar investment as your portfolio grows! And, for a more precise comparison, you’ll need to figure out the impact of currency exchange costs, back & forth, on the end result too.

I’ve ignored some other critically important tax wrinkles (there are some potentially significant exposures here) that come with foreign investing during the course of this comparison, so be sure to consult a tax specialist if you want to invest on exchanges outside of Canada. There are tax reporting requirements with the CRA above a certain value of foreign owned investments, for example. There are also potential IRS tax reporting requirements. And perhaps even US tax liabilities along the way. There’s a lot to learn. And if you don’t know, you’d be well advised to check with a professional advisor to help you figure out your US & foreign investing strategy. In addition, the outcomes may require the inclusion of more than just stocks, bonds, & ETFs. Any additional foreign property, like a holiday home outside Canada, for example, will impact your tax situation. Talk to an expert!

On the other hand, there is nothing wrong with investing in Canadian listed ETFs while you learn more about investing on foreign exchanges & in other currencies. It is a little less work to stick with the loonie. And the end result here was not too far behind the American equivalent. Many investors stick with Canadian listed ETFs, while still getting the necessary foreign exposure. There are also currency hedged ETFs that can help offset those currency fluctuations. But that’s a conversation for a another day.

Just remember that things would begin to reverse in the above chart, if the loonie were to gain in value against the US dollar going forward. In other words, VOO would then start looking better when charted against VFV. In the first 6 months of 2025, for example, VOO is up about 5%. While VFV is essentially flat. The real value of both is still close to the same. But the numbers are different due to a weakening US dollar this year, making VOO look better over this different timeline. This is more about how the numbers look, it’s not that the value is substantially different. Looks can be deceiving, eh!

If you want to learn more about saving & investing from the ground up, I’d like to suggest that you check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

DIY Investing or Work With a Financial Advisor?

Paul - The Wry Eye Guy Leave a comment
Good old-fashioned financial advice.
But at what price?

DIY investing can drive you a little crazy. Do you like the crazy? Are you enjoying the work that comes with portfolio management? Some of us do! But it gets a little more challenging when we need to withdraw money during retirement. And will a surviving spouse be able to carry on with the crazy portfolio in the event the “money manager” departs first? Are you a good DIY investor? Or would you do better with an advisor?

There is an easy way to figure out if you should consider paying a fee to have a professional manage your portfolio & the retirement cashflow stream for you.
And it’s this …

Compare your DIY portfolio performance against an equivalent ETF. We all need a “benchmark” to check our portfolio against. If you’re 100% in globally diversified stocks, for example, compare your portfolio performance to that of one of the XEQT, ZEQT, VEQT all-equity ETFs. If you’re in a 60/40 stock & fixed income mix, compare your DIY portfolio performance against XBAL, ZBAL, or VBAL. Are you buying a mix of Canadian & US large-cap stocks? Then compare that to an appropriately allocated portfolio of VFV & XIU ETFs. A portfolio filled with way too many stocks & ETFs might also be usefully compared against one of the all-in-ones. If your portfolio performance lags its benchmark by 1% or more, you might want to consider handing it over to a financial manager.

As an aside, since some of these all-in-one funds are so new, you may need to break them down into their constituent ETFs to usefully use them for benchmarking over longer time periods. The longer the history, the more useful the insights.

I’m using 1% here because many financial advisors charge an annual 1% of portfolio value as a fee for managing a portfolio. Is that fee worth it? Get the advisor’s performance history & compare that to an equivalent benchmark ETF too. Their recommended portfolio should only lag the return performance of those ETFs by the 1% fee. If they meet that requirement and if your self-managed portfolio was lagging by more than 1%, you could be getting better results by paying the advisor the 1% fee. As a bonus, you’ll have less work & an advisor who will tell you that everything will be okay when the markets are imploding. Hand-holding is included in their fee! For retirees, the advisor may also plan the income strategy & tax-efficiently manage the cashflow for you, across all accounts. You might even get some estate planning advice along the way. If you have a good advisor, they can deliver a lot of value. Even if they underperform the market average by the amount of the fee they charge.

Can you find an advisor that will consistently beat, after fees, the market or benchmark returns? I don’t know, but be sure to review their data supporting this opinion very carefully. And not necessarily against the benchmark provided by the advisor.

Unfortunately, it can be pretty challenging to tell if an advisor is any good. And those investors who are most challenged by DIY investing will also be challenged by the process of choosing a good advisor. We all like to believe we have the best doctor taking care of our health. In reality, most of them will be closer to average than exceptional. Fortunately, there are minimum standards & qualifications that we hope will ensure an adequate level of service from these professionals. The same is only variably true for financial advisors. Because the qualifications for calling yourself a financial advisor in Canada are variable. Some advisors are closer to being a product salesperson. And while some feel or profess a fiduciary responsibility, it is not a legal duty or obligation for many. They cannot just take your money & head off to a beach somewhere, but they may be putting their own, or their company’s, interests just slightly ahead of yours when it comes to investment choices. Even if only subconsciously.

Of course, a good salesperson will make you feel better about the relationship you are getting into. And that’s not a bad thing. But you also need an advisor who can at least deliver average market returns for a broadly diversified portfolio. Minus the fees. And you do need to know exactly how much you’re paying for whatever services & products are being recommended! There may be advisory fees and product fees, check carefully.

If you are a balanced 60/40 style investor, what would you think of paying an advisor to put all your money into ZBAL? Or maybe 60% into XEQT, with the other 40% into a couple of bond & HISA-type ETFs? We sometimes resent paying for simplicity. Advisors know this & are less likely to present you with such a simple portfolio solution. After all, if things are that simple, why would we need an advisor!
Yet, in DIY mode, we sometimes struggle to follow the simple path ourselves. Instead, we prefer to work hard creating a portfolio that underperforms!

Of course, that simple solution might not be the ideal path for everyone. There may well be good reasons for some investors to pursue a lower volatility strategy, a higher income strategy, or whatever. But it is still useful to compare the total return on our own portfolios against those of low-cost, market index ETFs.

Robo-advisors are trying to bridge the gap between the advisory space & DIY, typically for about a 0.5% fee premium, in addition to ETF fees. I love the idea but it feels like you’re paying the added fee for the robo to pick the same ETFs that are in the all-in-one ETFs. Like some human services, they can fancy it up with one or two more esoteric picks. So you feel like you’re getting something extra for your money. But you generally won’t get the more valuable hand-holding that comes with the more expensive advisory services. Maybe AI will help with this down the road. But AI has been around for a lot longer than current market noise suggests & it hasn’t happened yet. Some robo-services do include human phone support. That might develop & grow into something more valuable going forward.

Isn’t there scope for fee reduction on the human advisory side too? Or for a service with a far more rapidly declining tiered fee-structure for larger portfolios? Are there any low-cost advisors out there? Shouldn’t there be more advisors competing with the 0.5% fees of the robo-advisors. Simpler portfolio advice & management should come with lower fees, no? I’m okay with portfolios constructed with low cost index funds. For some investors, the greater value may be more in managing asset location (what ETF goes in which account) & retirement cashflow. Some advisors include financial planning, a valuable service too. But can it be done for a 0.5% fee? Or less?

I realise that someone else’s job always looks easier than it really is from the outside. But I think financial advisory (& real estate) fees are very expensive in Canada. Particularly for the cookie-cutter portfolios offered by some companies. I’m totally okay with the right cookie-cutter portfolio, I just don’t want to pay through the nose for it. High fees are an ignorance premium being levied on a population that didn’t get this kind of knowledge coming through our educational system. And our schools still don’t prepare kids for the digital environment that now makes it far easier for the DIY investor to learn things the hard way. Fees will likely drop over time, as education & AI combine to work at improving the competitive landscape. Though in traditional Canadian fashion, it’ll probably drag out for a long time yet. And some of us older folk might not live long enough to benefit! 🤪

Regardless of the path we choose, it’s worth occasionally benchmarking our portfolio performance against a low-cost, well-diversified, ETF portfolio. One that approximately matches our portfolio’s asset allocation. Benchmarking can provide insight on how decent a job we’re doing with our investing strategy. And if we’re not doing such a good job ourselves, it may be worth talking to a financial advisor. But if you still find the idea of paying an advisor distasteful, then you’d better figure out how to learn to do it better on your own. Or maybe just use the benchmark ETFs instead!

If you want to learn more about saving & investing from the ground up, I’d like to suggest that you check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.