Investing

Robo Advisor: Is there anything better than Wealthsimple's Growth portfolio in terms of performance?

  • Last Updated:
  • Feb 28th, 2021 8:50 pm
[OP]
Member
User avatar
Sep 5, 2018
236 posts
334 upvotes

Robo Advisor: Is there anything better than Wealthsimple's Growth portfolio in terms of performance?

I been with Wealthsimple's Growth portfolio and pretty happy with how it has grown and recovered from COVID-19 dip, but I am always looking to do better so I want to hear from others who has their portfolios with other companies and how it compares to Wealthsimple's Growth portfolio

I looked at Questwealth Agressive Portfolio and it does seem like it performed better in general and with lower fees, any comments?
10 replies
Deal Addict
User avatar
May 11, 2014
4599 posts
5431 upvotes
Iqaluit, NU
HI OP;

So it seems like you are following performance numbers without understanding why such numbers occur. For example, the Questrade Aggressive portfolio is 100% Equity, whereas the Wealthsimple Growth portfolio is 80% Equity and 20% Fixed Income. You need to be very careful when comparing portfolios especially with different assets classes and proportions. A 100% equity portfolio is much riskier than an 80% equity/20% fixed. So when you compare these over just 1 year, you are going to be skewed in your assessment because equities did outperform fixed income especially as prices recovered after the initial selloff due to COVID-19.

Before you switch, you need to consider two aspects: Is the management at a competitor fund/investment firm outperforming on equivalent portfolios and whether my asset allocation is appropriate for me.

Let's start with the first question. The problem with your OP is comparing a different portfolio to the one you are currently invested in. They are not equivalent. If one portfolio has 100% equity vs 80% equity, if one year equity outperforms, the portfolio with more will outperform. That isn't based on whether Questrade is better than Wealthsimple, rather just what they contain. So in order to make an equivalent comparison, you need to first compare the similar or equivalent portfolio. The problem here is that Wealthsimple does not have an aggressive portfolio or equivalent 100% equity portfolio. And even then, Wealthsimple growth suggests a range of equity from 75%-90%, whereas Questwealth growth suggests a fixed 80%equity 20% fixed income. So first, let's compare growth portfolios.

Wealthsimple Growth was
2017 15.4%
2018 -8.8%
2019 19.3%
2020 9.8%

Questwealth Growth
2017 11.17%
2018 -6.35%
2019 17.02%
2020 6.47%

So a couple things I can see here. Wealthsimple seems to outperform Questwealth on growth years. My guess here is that the range of equity proportion gives flexibility for the proportions of the portfolio to outperform,, whereas a fixed range means that Questwealth will sell immediately to make sure the fixed proportion is met. This can cause performance issues as trends take time to occur.

Let's take a ETF equivalent and see how well it performs. XGRO

2017 11.78%
2018 -6.24%
2019 17.96%
2020 11.96%

With XGRO being a pure index fund, I would say Wealthsimple management is better than QUestwealth as the somewhat equivalent index was beaten by the management at Wealthsimple in some cases.

Then comes the second portion. Is the portfolio proportions appropriate for you?

This is more difficult to answer, but you comparing just over 1 year of outperformance is inapppropriate and dangerous. You say that based on the last year, but what if say the economy tanked for longer with COVID-19. Sometimes economies and the stock market don't recover as quickly as you had seen. Would you be OK with a portfolio that underperformed for 4-5 years because you had 100% equity? Japan had underperforming equity markets for 10 in comparison to their bonds. Also, you should then compare an all equity portfolio like QUestwealth aggressive to other all equity portfolios from other providers. You can't fault the Wealthsimple portfolio because that was never their mandate. You should ask yourself whether the portfolio proportion is appropriate for your situation. If you are relatively young, and this money isn't needed for years or decades, then yes, a more aggressive portfolio might make sense. However, if you are going to utlize this money relatively soon or you cannot handle crashes, then perhaps it isn't appropriate.

So first, look at your risk tolerance and situation. If a more risky portfolio makes sense, then look at other equivalent portfolios to compare Questwealth. The second thing to do irregardless of whether to ratchet your portfolio's risk higher or not is to compare your equivalent options with an equivalent portfolio. If you decide a full equity portfolio is not appropriate for you, you need to compare comparable Growth portfolios accordingly. Becareful though as names don't have a set definition. A growth fund can be different at other companies. Make sure to look at what is contained inside before comparing them.
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
Member
Mar 30, 2006
211 posts
221 upvotes
Edmonton
xgbsSS wrote: HI OP;

So it seems like you are following performance numbers without understanding why such numbers occur. For example, the Questrade Aggressive portfolio is 100% Equity, whereas the Wealthsimple Growth portfolio is 80% Equity and 20% Fixed Income. You need to be very careful when comparing portfolios especially with different assets classes and proportions. A 100% equity portfolio is much riskier than an 80% equity/20% fixed. So when you compare these over just 1 year, you are going to be skewed in your assessment because equities did outperform fixed income especially as prices recovered after the initial selloff due to COVID-19.

Before you switch, you need to consider two aspects: Is the management at a competitor fund/investment firm outperforming on equivalent portfolios and whether my asset allocation is appropriate for me.

Let's start with the first question. The problem with your OP is comparing a different portfolio to the one you are currently invested in. They are not equivalent. If one portfolio has 100% equity vs 80% equity, if one year equity outperforms, the portfolio with more will outperform. That isn't based on whether Questrade is better than Wealthsimple, rather just what they contain. So in order to make an equivalent comparison, you need to first compare the similar or equivalent portfolio. The problem here is that Wealthsimple does not have an aggressive portfolio or equivalent 100% equity portfolio. And even then, Wealthsimple growth suggests a range of equity from 75%-90%, whereas Questwealth growth suggests a fixed 80%equity 20% fixed income. So first, let's compare growth portfolios.

Wealthsimple Growth was
2017 15.4%
2018 -8.8%
2019 19.3%
2020 9.8%

Questwealth Growth
2017 11.17%
2018 -6.35%
2019 17.02%
2020 6.47%

So a couple things I can see here. Wealthsimple seems to outperform Questwealth on growth years. My guess here is that the range of equity proportion gives flexibility for the proportions of the portfolio to outperform,, whereas a fixed range means that Questwealth will sell immediately to make sure the fixed proportion is met. This can cause performance issues as trends take time to occur.

Let's take a ETF equivalent and see how well it performs. XGRO

2017 11.78%
2018 -6.24%
2019 17.96%
2020 11.96%

With XGRO being a pure index fund, I would say Wealthsimple management is better than QUestwealth as the somewhat equivalent index was beaten by the management at Wealthsimple in some cases.

Then comes the second portion. Is the portfolio proportions appropriate for you?

This is more difficult to answer, but you comparing just over 1 year of outperformance is inapppropriate and dangerous. You say that based on the last year, but what if say the economy tanked for longer with COVID-19. Sometimes economies and the stock market don't recover as quickly as you had seen. Would you be OK with a portfolio that underperformed for 4-5 years because you had 100% equity? Japan had underperforming equity markets for 10 in comparison to their bonds. Also, you should then compare an all equity portfolio like QUestwealth aggressive to other all equity portfolios from other providers. You can't fault the Wealthsimple portfolio because that was never their mandate. You should ask yourself whether the portfolio proportion is appropriate for your situation. If you are relatively young, and this money isn't needed for years or decades, then yes, a more aggressive portfolio might make sense. However, if you are going to utlize this money relatively soon or you cannot handle crashes, then perhaps it isn't appropriate.

So first, look at your risk tolerance and situation. If a more risky portfolio makes sense, then look at other equivalent portfolios to compare Questwealth. The second thing to do irregardless of whether to ratchet your portfolio's risk higher or not is to compare your equivalent options with an equivalent portfolio. If you decide a full equity portfolio is not appropriate for you, you need to compare comparable Growth portfolios accordingly. Becareful though as names don't have a set definition. A growth fund can be different at other companies. Make sure to look at what is contained inside before comparing them.
Great information here.

But you can't use XGRO prior to dec 11, 2018.

"Effective December 11, 2018, the fundamental investment objective, management fee and fee structure of the ETF changed".

You could use VGRO from 25 Jan 2018 and onward
Deal Addict
User avatar
May 11, 2014
4599 posts
5431 upvotes
Iqaluit, NU
neodenjin wrote:
Great information here.

But you can't use XGRO prior to dec 11, 2018.

"Effective December 11, 2018, the fundamental investment objective, management fee and fee structure of the ETF changed".

You could use VGRO from 25 Jan 2018 and onward
The MER fee changeis not really relevent here.

Fees make up a difference to a point, but the comparison here is to get a general portfolio comparison equivalent DIY index portfolios. Besides you'd have to go deeper because many of the constituent ETF's MERs in these portfolios have also dropped, so at what point do we say we can compare? Do you then have to ask what broker you utilize, what commissions you pay? How about the fact that the portfolios are never going to exactly match? Should the comparison have included if you bought individual ETFs into a portfolio?

The idea with the comparison here is to highlight what can I get with a similar asset proportion that is accessible similarly to the individual investor. In this case, the OP probably electing for a portfolio that is more or less self-managed without the OP's effort. Accounting for changes in portfolios only is required if this is a huge change. Frankly, the change in MER isnt that big of change for our purposes here.
Besides, the outperformace in 2017 in Wealthsimple's performance greatly exceeds the extra fees paid on XGRO prior to the change. How would we explain for this?
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
Sr. Member
Jul 1, 2006
716 posts
518 upvotes
xgbsSS wrote: The idea with the comparison here is to highlight what can I get with a similar asset proportion that is accessible similarly to the individual investor. In this case, the OP probably electing for a portfolio that is more or less self-managed without the OP's effort. Accounting for changes in portfolios only is required if this is a huge change. Frankly, the change in MER isnt that big of change for our purposes here.
Besides, the outperformace in 2017 in Wealthsimple's performance greatly exceeds the extra fees paid on XGRO prior to the change. How would we explain for this?
I think the point being made here is that XGRO was a completely different ETF prior to Dec 11, 2018. It wasn't just MER.

From: https://www.savvynewcanadians.com/xgro-etf-review/
XGRO has been around in a different format since 2007, and was formerly known as the iShares Balanced Growth CorePortfolio Index ETF (CBN).
The investment objective and management fee of the fund changed when it was converted in December 2018, so you probably shouldn’t pay too much attention to the returns prior to the change.
Deal Addict
User avatar
May 11, 2014
4599 posts
5431 upvotes
Iqaluit, NU
sckor wrote:
I think the point being made here is that XGRO was a completely different ETF prior to Dec 11, 2018. It wasn't just MER.

From: https://www.savvynewcanadians.com/xgro-etf-review/
But it really wasn't. How it was ran and managed changed, but the portfolio wasn't really that different. I looked into Sedar to do this and took a management report for 2013
Screenshot_20210228-101515.png
It adds to about 80% equity and 20% bonds.

Again, the point is to take equivalent-ish choices and make a relative comparison to the options I or OP would choose. Now if the fund components were a complete change (eg going from 40-60% equity to 80%) then yes, I would have agreed.

This blog website took the random news release to mean complete change unless they believe the MER change alone is huge (For our comparison here, I think it makes very little difference). Granted, sedar.com is a clunky website that reminds you of 90s internet :P The only fundamental change really was an MER change and management change which didnt really effect the proportions.
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
Deal Expert
User avatar
Dec 12, 2009
20265 posts
8331 upvotes
Toronto
This statement might be an oversimplification, all in one ETFs have rendered robo advisor generated portfolios pretty much obsolete. For comparable returns, I would go for lower MER choices.
̶K̶o̶o̶d̶o̶ ̶$̶4̶0̶/̶6̶G̶B̶
Public Mobile 2016 fall promo, $23/1GB, $38/5GB
Fido $0.00/4GB+tablet
Tangerine Bank, Simplii
Deal Addict
User avatar
May 11, 2014
4599 posts
5431 upvotes
Iqaluit, NU
will888 wrote: This statement might be an oversimplification, all in one ETFs have rendered robo advisor generated portfolios pretty much obsolete. For comparable returns, I would go for lower MER choices.
We could start seeing some more innovation in the roboadvisor space. For instance, more estate planning, packaged purchasing of insurance or perks as given by Wealthsimple. Another area I think we will start seeing is some "active" management with the portfolio.

One problem with All-in-Ones is the asset resetting that can occur. For instance, trends in outperformance usually occur over a longer time frame. If say an equity bull market occurs over a 2 year period, an all-in-one that rebalance/resets monthly or quarterly might not allow the equities "to run." This could lead to underperformance because too much focus is placed on getting the exact proportion set by the fund, but had it allowed the equities to run, they could capture the bull market.

This is part of the reason why I think Wealthsimple was right to set a range rather than a fixed asset allocation percentage because it allows their portfolio to rebalance only when it is needed to correct overly skewed proportions.

Additionally we are starting to see more active-managed ETFs Active management had been demonized for many years especially as index funds have become so much cheaper that it became difficult to find active management that actually met or exceeded their benchmarks after fees. If active management became as cheap or much cheaper than it traditionally was, then you can start to see some active management showing potential promise. I think traditional asset managers are starting to go this route.

So while I agree that roboadvisors as of right now are not demonstrating as much value as previous, they do have potential to develop a product that addresses the bigger financial picture which is financial and estate planning aspect. Even the best investors on this board admittedly state that their strategy of accumulating assets and investments does not prepare them for divestment and spending.

I think it would be great for this board to have a larger discussion about divestment, spending and planning around this. We tend to focus too much on the accumulation and investing portion.
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
[OP]
Member
User avatar
Sep 5, 2018
236 posts
334 upvotes
xgbsSS wrote: HI OP;

So it seems like you are following performance numbers without understanding why such numbers occur. For example, the Questrade Aggressive portfolio is 100% Equity, whereas the Wealthsimple Growth portfolio is 80% Equity and 20% Fixed Income. You need to be very careful when comparing portfolios especially with different assets classes and proportions. A 100% equity portfolio is much riskier than an 80% equity/20% fixed. So when you compare these over just 1 year, you are going to be skewed in your assessment because equities did outperform fixed income especially as prices recovered after the initial selloff due to COVID-19.

Before you switch, you need to consider two aspects: Is the management at a competitor fund/investment firm outperforming on equivalent portfolios and whether my asset allocation is appropriate for me.

Let's start with the first question. The problem with your OP is comparing a different portfolio to the one you are currently invested in. They are not equivalent. If one portfolio has 100% equity vs 80% equity, if one year equity outperforms, the portfolio with more will outperform. That isn't based on whether Questrade is better than Wealthsimple, rather just what they contain. So in order to make an equivalent comparison, you need to first compare the similar or equivalent portfolio. The problem here is that Wealthsimple does not have an aggressive portfolio or equivalent 100% equity portfolio. And even then, Wealthsimple growth suggests a range of equity from 75%-90%, whereas Questwealth growth suggests a fixed 80%equity 20% fixed income. So first, let's compare growth portfolios.

Wealthsimple Growth was
2017 15.4%
2018 -8.8%
2019 19.3%
2020 9.8%

Questwealth Growth
2017 11.17%
2018 -6.35%
2019 17.02%
2020 6.47%

So a couple things I can see here. Wealthsimple seems to outperform Questwealth on growth years. My guess here is that the range of equity proportion gives flexibility for the proportions of the portfolio to outperform,, whereas a fixed range means that Questwealth will sell immediately to make sure the fixed proportion is met. This can cause performance issues as trends take time to occur.

Let's take a ETF equivalent and see how well it performs. XGRO

2017 11.78%
2018 -6.24%
2019 17.96%
2020 11.96%

With XGRO being a pure index fund, I would say Wealthsimple management is better than QUestwealth as the somewhat equivalent index was beaten by the management at Wealthsimple in some cases.

Then comes the second portion. Is the portfolio proportions appropriate for you?

This is more difficult to answer, but you comparing just over 1 year of outperformance is inapppropriate and dangerous. You say that based on the last year, but what if say the economy tanked for longer with COVID-19. Sometimes economies and the stock market don't recover as quickly as you had seen. Would you be OK with a portfolio that underperformed for 4-5 years because you had 100% equity? Japan had underperforming equity markets for 10 in comparison to their bonds. Also, you should then compare an all equity portfolio like QUestwealth aggressive to other all equity portfolios from other providers. You can't fault the Wealthsimple portfolio because that was never their mandate. You should ask yourself whether the portfolio proportion is appropriate for your situation. If you are relatively young, and this money isn't needed for years or decades, then yes, a more aggressive portfolio might make sense. However, if you are going to utlize this money relatively soon or you cannot handle crashes, then perhaps it isn't appropriate.

So first, look at your risk tolerance and situation. If a more risky portfolio makes sense, then look at other equivalent portfolios to compare Questwealth. The second thing to do irregardless of whether to ratchet your portfolio's risk higher or not is to compare your equivalent options with an equivalent portfolio. If you decide a full equity portfolio is not appropriate for you, you need to compare comparable Growth portfolios accordingly. Becareful though as names don't have a set definition. A growth fund can be different at other companies. Make sure to look at what is contained inside before comparing them.
Thank you for explaining, that was helpful, yes my risk tolerance is high and I am in it for the long-term without touching it

That being said, I am looking for the most aggressive investment (that is not stocks) so it can sit and grow with the most returns

with what you posted, I guess the growth portfolio with wealthsimple performed better then queswealth and a popular etf

I wonder if there is any etf that performed the same or better than WS growth portfolio now
Deal Addict
User avatar
May 11, 2014
4599 posts
5431 upvotes
Iqaluit, NU
MiNuNDeCoMpUtEr wrote: Thank you for explaining, that was helpful, yes my risk tolerance is high and I am in it for the long-term without touching it

That being said, I am looking for the most aggressive investment (that is not stocks) so it can sit and grow with the most returns

with what you posted, I guess the growth portfolio with wealthsimple performed better then queswealth and a popular etf

I wonder if there is any etf that performed the same or better than WS growth portfolio now
Wealthsimple did better when we looked at the equivalent portfolio. But as you saw, you got higher returns with the higher equity. If you feel that you tolerate higher risk, then going with a full equity portfolio like Questwealth may be better for you. But again, you need to compare portfolios that would replicate that. Look at other roboadvisors such as CI Direct, Modern, Virtualweath, RBC Investease etc. You can also look at ETFs like XEQT etc.

What is "better" really depends on what is appropriate for you. Dont just look at short term performance.
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
Deal Expert
User avatar
Dec 12, 2009
20265 posts
8331 upvotes
Toronto
xgbsSS wrote: We could start seeing some more innovation in the roboadvisor space. For instance, more estate planning, packaged purchasing of insurance or perks as given by Wealthsimple. Another area I think we will start seeing is some "active" management with the portfolio.

One problem with All-in-Ones is the asset resetting that can occur. For instance, trends in outperformance usually occur over a longer time frame. If say an equity bull market occurs over a 2 year period, an all-in-one that rebalance/resets monthly or quarterly might not allow the equities "to run." This could lead to underperformance because too much focus is placed on getting the exact proportion set by the fund, but had it allowed the equities to run, they could capture the bull market.

This is part of the reason why I think Wealthsimple was right to set a range rather than a fixed asset allocation percentage because it allows their portfolio to rebalance only when it is needed to correct overly skewed proportions.

Additionally we are starting to see more active-managed ETFs Active management had been demonized for many years especially as index funds have become so much cheaper that it became difficult to find active management that actually met or exceeded their benchmarks after fees. If active management became as cheap or much cheaper than it traditionally was, then you can start to see some active management showing potential promise. I think traditional asset managers are starting to go this route.

So while I agree that roboadvisors as of right now are not demonstrating as much value as previous, they do have potential to develop a product that addresses the bigger financial picture which is financial and estate planning aspect. Even the best investors on this board admittedly state that their strategy of accumulating assets and investments does not prepare them for divestment and spending.

I think it would be great for this board to have a larger discussion about divestment, spending and planning around this. We tend to focus too much on the accumulation and investing portion.
As always you provide excellent points with detail! I would agree that rebalancing all in one funds amounts to market mistiming if I can call it that. If these funds were to rebalance based on expected market performance, we are going to see huge variability in all in one fund performance across the industry. It would be up to the fund manager to decide when to balance which could be a year or two in long secular bull or bear markets. I can see the industry players thinking why should I take the risk of being the underperformer when I can use a transparent prescribed timetable for rebalancing. If everyone fall into line, there is little to choose between the products, no benchmark for good vs bad and everyone shares in the profits.

I would love to see more discussion on decumulation, estate planning, etc., the less glamorous side of financial planning. I tried seeking information on tax efficient decumulation strategies and come up with virtually nothing. The conspiracy theorist side of me thinks that the investment industry is not interested in showing a customer how to leave when assets under management is the ultimate measurement of performance. Even this sub-forum is named investing.
̶K̶o̶o̶d̶o̶ ̶$̶4̶0̶/̶6̶G̶B̶
Public Mobile 2016 fall promo, $23/1GB, $38/5GB
Fido $0.00/4GB+tablet
Tangerine Bank, Simplii

Top