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Wealthsimple strategy

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Deal Addict
Jan 6, 2013
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WATERLOO

Wealthsimple strategy

So I’ve just signed up for Wealthsimple and was trying to see what the best way to diversify my portfolio would be taking into account risk/reward.

I’ve set up an RRSP and TFSA account. This is purely for long term investing and it is a 30 year horizon. All near term stuff I would keep in my main bank (ie. RESP, rainy day money, etc).

Each account is set up as a balanced portfolio with the TFSA being on the higher risk end for balanced and RRSP being the less risky balanced category.

I am contemplating to open up another TFSA portfolio as growth and put this at the highest risk level. I wouldn’t invest too much into this (maybe $1K initially with biweekly contribution or $25-$50).

Would this kind of “diversification” make sense?

Does it make sense opening up all these now or should I wait for a down time in the market (although over 30 years this should avg out if there is a market crash?)
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Feb 1, 2012
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ballashotcaller wrote: Each account is set up as a balanced portfolio with the TFSA being on the higher risk end for balanced and RRSP being the less risky balanced category.

I am contemplating to open up another TFSA portfolio as growth and put this at the highest risk level. I wouldn’t invest too much into this (maybe $1K initially with biweekly contribution or $25-$50).

Would this kind of “diversification” make sense?
Since you said all your funds at WS are for the same purpose (30 year horizon), then just look at all of your accounts as one portfolio that in aggregate meets your target asset allocation (based on your risk / volatility tolerance).

Having your TFSA more aggressive is a good way to do it. You will never pay any taxes on TFSA withdrawals, so it makes sense to have your highest expected investments (equities) there, so they can grow tax-free.

I don't see the purpose of having two TFSAs, one more aggressive than the other. Say you want your TFSA to be 75% equities overall. In terms of return, there is no difference between having one TFSA with 75% equities, or having two TFSAs, one with 100% equities and the other with 50% equities. The two TFSA technique still adds up to 75% equities with the same growth potential and the same tax implications.

This Finiki page discusses tax efficient asset allocation:
https://www.finiki.org/wiki/Tax-efficient_investing

Does it make sense opening up all these now or should I wait for a down time in the market (although over 30 years this should avg out if there is a market crash?)
Market timing, waiting for down markets to invest, is usually a losing technique. There is a 30 page thread on it here: Pooling money to buy on Index dips. The S&P500 is up more than 50% since that thread started, and that is price only, not including dividends. And there have scarcely been any market dips in that time (almost 3.5 years), certainly not enough to make holding cash to buy on market dips a profitable strategy. It would take a yuuuuuge crash now for that strategy to get back to market returns.

There is a great thread on simple index investing: Couch potato investing for the last 14 years - tracking my progress

Read both threads. Now who do you think did better: The poster that took a slow, steady, simple, long-term approach, or the poster that has sat on cash for 3+ years while the market went up >50%?

When you think about complex portfolios and strategies, consider the name of your Roboadvisor: Wealth = Simple.
When I was young, I was poor. Now, after years of hard work, I'm no longer young.
Deal Addict
Jan 6, 2013
1485 posts
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WATERLOO
Thanks for this.

I guess the reasoning for setting up 2 TFSAs is I would contribute more money in the less risky portfolio and and a fraction in the more risky portfolio.
With Wealthsimple the balanced portfolio is split 50/50 between equity and fixed income. For the highest risk it is a 90/10 split for equity/fixed income respectively. I’m willing to take on higher risk with a smaller investment
Deepwater wrote: Since you said all your funds at WS are for the same purpose (30 year horizon), then just look at all of your accounts as one portfolio that in aggregate meets your target asset allocation (based on your risk / volatility tolerance).

Having your TFSA more aggressive is a good way to do it. You will never pay any taxes on TFSA withdrawals, so it makes sense to have your highest expected investments (equities) there, so they can grow tax-free.

I don't see the purpose of having two TFSAs, one more aggressive than the other. Say you want your TFSA to be 75% equities overall. In terms of return, there is no difference between having one TFSA with 75% equities, or having two TFSAs, one with 100% equities and the other with 50% equities. The two TFSA technique still adds up to 75% equities with the same growth potential and the same tax implications.

This Finiki page discusses tax efficient asset allocation:
https://www.finiki.org/wiki/Tax-efficient_investing



Market timing, waiting for down markets to invest, is usually a losing technique. There is a 30 page thread on it here: Pooling money to buy on Index dips. The S&P500 is up more than 50% since that thread started, and that is price only, not including dividends. And there have scarcely been any market dips in that time (almost 3.5 years), certainly not enough to make holding cash to buy on market dips a profitable strategy. It would take a yuuuuuge crash now for that strategy to get back to market returns.

There is a great thread on simple index investing: Couch potato investing for the last 14 years - tracking my progress

Read both threads. Now who do you think did better: The poster that took a slow, steady, simple, long-term approach, or the poster that has sat on cash for 3+ years while the market went up >50%?

When you think about complex portfolios and strategies, consider the name of your Roboadvisor: Wealth = Simple.
Sr. Member
Oct 21, 2016
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Forget wealth simple, their fees and allocations suck . Open a direct investing account and keep buying VOO and VGT index ETFs for 30 years you will do much better then Wealthsimple or the couch potato portfolio imo. You just need to have a high risk tolerance and long time frame.
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Mar 7, 2015
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Montr
Shaun80 wrote: Forget wealth simple, their fees and allocations suck . Open a direct investing account and keep buying VOO and VGT index ETFs for 30 years you will do much better then Wealthsimple or the couch potato portfolio imo. You just need to have a high risk tolerance and long time frame.
Any suggestions for Canadian ETFs? Thanks!
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Jan 16, 2007
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You can also opt for iShares through Scotia iTRADE. Commission is free to buy/sell some of theirs, including XGRO and XBAL. It's a decent balance between fees and effort.
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Mar 7, 2015
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joshnet wrote: You can also opt for iShares through Scotia iTRADE. Commission is free to buy/sell some of theirs, including XGRO and XBAL. It's a decent balance between fees and effort.
Thanks!
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Oct 26, 2003
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Shaun80 wrote: Forget wealth simple, their fees and allocations suck . Open a direct investing account and keep buying VOO and VGT index ETFs for 30 years you will do much better then Wealthsimple or the couch potato portfolio imo. You just need to have a high risk tolerance and long time frame.
VOO is priced in USD, you want to do currency exchange through investment platform? Then exchange it back to CDN when you exit the position?
Sr. Member
Oct 21, 2016
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divx wrote:
VOO is priced in USD, you want to do currency exchange through investment platform? Then exchange it back to CDN when you exit the position?
I have all my USD ETFs (Vgt and voo) in my USD RRSP account self directed. I convert my money via norberts gambit which minimizes conversion fees drastically
Newbie
Mar 7, 2015
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Montr
Shaun80 wrote: I have all my USD ETFs (Vgt and voo) in my USD RRSP account self directed. I convert my money via norberts gambit which minimizes conversion fees drastically
I am thinking to use Wealthsimple Trade to buy Canadian ETFs to avoid the currency exchange fee. Otherwise 2.5% is a bit high. Any Canadian ETFs for long term to recommend? Thanks!
Deal Fanatic
Jul 1, 2007
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ballashotcaller wrote: So I’ve just signed up for Wealthsimple and was trying to see what the best way to diversify my portfolio would be taking into account risk/reward.

I’ve set up an RRSP and TFSA account. This is purely for long term investing and it is a 30 year horizon. All near term stuff I would keep in my main bank (ie. RESP, rainy day money, etc).

Each account is set up as a balanced portfolio with the TFSA being on the higher risk end for balanced and RRSP being the less risky balanced category.

I am contemplating to open up another TFSA portfolio as growth and put this at the highest risk level. I wouldn’t invest too much into this (maybe $1K initially with biweekly contribution or $25-$50).

Would this kind of “diversification” make sense?

Does it make sense opening up all these now or should I wait for a down time in the market (although over 30 years this should avg out if there is a market crash?)
Emphasis mine: this is exactly what's wrong with all the robo advisors and why it will ultimately cost young investors a lot more in long-term returns than what it will save them in fees.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
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Jan 6, 2013
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WATERLOO
Mind elaborating and what would be a better alternative? How much would it truly cost in the long run?

Thalo wrote: Emphasis mine: this is exactly what's wrong with all the robo advisors and why it will ultimately cost young investors a lot more in long-term returns than what it will save them in fees.
Deal Fanatic
Jul 1, 2007
8569 posts
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ballashotcaller wrote: Mind elaborating and what would be a better alternative? How much would it truly cost in the long run?
A fee only advisor and a discount brokerage account.

The cost can be a lot, if you consider that a proper advisor would put you into a 100% equity portfolio which is appropriate for your time horizon and counsel you through the volatility of the markets, preventing you from making errors. You end up with the market return minus fees (hourly, or however you pay them) to the advisor. With a robo, you will out a stupid questionnaire which usually (because of how the questionnaire is worded and because you aren't being properly counselled as you fill out the questionnaire) puts you into a balanced account. You end up with 60% of the return of the markets diluted by 40% bonds, which over the next 2-3 decades will at best return slightly over 0%. That means if the markets do 8% annually over the next 30 years, a proper equity portfolio does 8%, a balanced portfolio does 5%. The cost of using a robo can be HUGE!
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Newbie
Jul 11, 2015
65 posts
2 upvotes
Brampton
Guys, if not wealthsimple, would you advice a regular tfsa account with questrade and just keep buying vfv and xuu (blackrock s&p 500 index) for 20 + years?
Does that sound like a good strategy?
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May 11, 2014
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NishantG246436 wrote: Guys, if not wealthsimple, would you advice a regular tfsa account with questrade and just keep buying vfv and xuu (blackrock s&p 500 index) for 20 + years?
Does that sound like a good strategy?
Why would you buy two US index ETFs? A Total Market ETF would contain S&P500 stocks so buying both is redundant.

While some people will buy only S&P500, to me that is an unwise strategy especially if you are planning a passive portfoio.

One thing I would tell you is If you are comfortable making your own purchases with Questrade, there is no point of using Wealthsimple unless you lack discipline.

If you are planning a 100% equity portfolio, something like for example
30% VCN
70%XAW

or

100%VEQT or XEQT
would be more equivalent to WealthsImple.
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Jul 11, 2015
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Brampton
Thanks, as of why did i buy 2 us etf's, answer to that would be VFV is holding 508 us companies while XUU is holding 3600 Us companies, hence got some diversification there.
How does a portfolio having one s&p 500 etf and one Nasdaq etf(Horizon HXQ) sound?

xgbsSS wrote: Why would you buy two US index ETFs? A Total Market ETF would contain S&P500 stocks so buying both is redundant.

While some people will buy only S&P500, to me that is an unwise strategy especially if you are planning a passive portfoio.

One thing I would tell you is If you are comfortable making your own purchases with Questrade, there is no point of using Wealthsimple unless you lack discipline.

If you are planning a 100% equity portfolio, something like for example
30% VCN
70%XAW

or

100%VEQT or XEQT
would be more equivalent to WealthsImple.
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May 11, 2014
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NishantG246436 wrote: Thanks, as of why did i buy 2 us etf's, answer to that would be VFV is holding 508 us companies while XUU is holding 3600 Us companies, hence got some diversification there.
How does a portfolio having one s&p 500 etf and one Nasdaq etf(Horizon HXQ) sound?

That is not effective diversification. The total market encompasses both the S&P500 and Nasdaq100. Buying both is pointless.

Why US only?
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Jun 17, 2018
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NishantG246436 wrote: Total market as in vcn ?
XUU is a total market ETF. The stocks included in S&P 500 are included in the total market ETF. Same for the 100 stocks in NASDAQ.

If you hold XUU and want to diversify your holdings by adding VFV or HXQ, it's a bit a like eating a Caesar salad and thinking you'll have a more diversified nutrition by adding more romaine lettuce to your salad.
Newbie
Jul 11, 2015
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Brampton
Thank you so much for detailed response.
If you have option to buy one of either vfv, xuu or hxq what would you buy considering all of them benchmarks the same index ?

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