How are robo-advisers any different from global balanced mutual funds?

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Depositphotos_6444034_xsBy Jonathan Chevreau

I’ve long been baffled about why the plain-vanilla global balanced mutual fund has not done better in the marketplace.

As I note in my monthly online ETF column at the Financial Post (link below), a global balanced fund (or Global Tactical Allocation Fund) or their ETF equivalents give you exposure to all major asset classes, geographies and industries. You probably have at least two professional managers fretting on your behalf about the underlying stocks and bonds, rebalancing the asset classes, etc.

In short, a global balanced fund should in theory be the mythical “only fund you’ll ever need.” But in practice, and as I note in the column, show me even one investor who has 100% of their portfolio in just one of these funds. Talk about a black swan!

Taking it further, for all the media coverage that robo-advisers have garnered over the past year (and I’ve written a lot about them, both here at the Hub and elsewhere: put robo adviser in the search engine to the right to retrieve them), how exactly is an ETF-based robo adviser different than a global balanced fund?

Just asking! (And if you have the answers, feel free to post comments below.) The first person who can prove to me that 100% of their investment portfolio is in a single global balanced fund will receive a free signed copy of Findependence Day. I’m pretty confident no one will take me up on this offer!

You can find the full FP piece here under the headline (hey, it starts with my name!) Jonathan Chevreau: Where are the ‘robo-like’ Global Balanced ETFs in the Canadian market?

Earlier ETF columns

Links to the two earlier instalments of this new monthly column are highlighted below:

February 17, 2015: Low-volatility ETFs

February 10, 2015: How to use ETFs to hedge against interest-rate hikes

And finally, if you missed the third annual edition of MoneySense’s ETF All-Stars, written by me and featuring the ETF All-Star panel, you can find it here.

To readers and the industry, I’m just gearing up for the fourth instalment. If there are topics you’d like to see covered in the near future, drop me a line at jonathan@findependencehub.com. I’ll also be speaking at an ETF conference in Chicago early in April and will no doubt do a few blogs about it right here at the Hub.

One thought on “How are robo-advisers any different from global balanced mutual funds?

  1. Hi Jonathan,

    I have a few clients who have their whole RRSP and TSFA is the same DFA Global Portfolio. Sometimes sophistication and simplicity go hand in hand.

    cheers,

    Mike

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