Tag Archives: robo-advisers

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: Continue Reading…

Robo Advisors, A Personal Experience Part 1: Getting Started

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Aman Raina, Sage Investors

By Aman Raina, Sage Investors.com

Special to the Financial Independence Hub 

We’ve been hearing a lot of a new type of investing management model. A “Robo-Advisor”  is an online-oriented service that automatically selects and manages a portfolio that is conducive to an investor’s risk tolerance.

There has  been a lot of commentary about the prospects of this type of service gaining traction,  especially with younger people or those with minimal assets but who want to get exposure to the overall stock market without doing all the legwork.

Much of this revolves around offering investors more transparency as it pertains to costs as well as back-office efficiencies and back-office savings that investors can leverage. The robo-advisor investment ideology revolves around a passive investment strategy by utilizing low commission Exchange Traded Funds (ETFs) allocated across various asset classes and that are held for long periods of time. Periodically, the asset mix is automatically adjusted if certain percentage makeups become too high or too low. A wealth of research has shown that a passively managed portfolio of ETTs can outperform a portfolio of actively managed assets.

This is all well and good. Ultimately, what will drive this service is the performance of these algorithm-managed portfolios. Instead of writing about these services in theory, I thought I would put my money where my mouth is and actually invest some money with a Robo-Advisor service and blog about the whole experience. More importantly, I will track the performance and costs these services generate. Continue Reading…

The Hub’s Weekly wrap: Bag lady fears, fast-casual dining stocks & more

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Woman in povertyLaunched last week, the Hub’s Weekly Wrap aims to be a weekend read with brief commentary and links to some of the more interesting items touching on Financial Independence that appeared in North American cyberspace in the past week or two.

We aim to split these roughly half from American blogs and online media and half from Canadian. (That roughly corresponds to current traffic levels at the Hub.)

We’ll begin with this piece from Next Avenue: Unemployed, 55 and Faking Normal. This blog about the common fear of becoming a bag lady (financially speaking) was widely tweeted, including by a few women I suspect were in similar circumstances. No doubt about it, a combination of divorce and job loss can add up to a tough go, especially if you’re still not old enough to qualify for Social Security or the Canadian triad of CPP/OAS/GIS.

Fast-casual dining

Moving on to the more fortunate comes this piece from the Washington Post, mentioned on the Motley Fool’s Market Foolery podcast on Tuesday. The Chipotle effect: Why America is obsessed with fast casual food is an analysis of the trend to “Fast Casual” dining and the stocks of the major players capitalizing on this change (Chipotle and Panera to name two.) This is a threat to the old-time fast food joints like McDonald’s: ironically, McDonald’s incubated Chipotle in its early days.

4 reasons to pay your credit card bill early Continue Reading…

The Robo Generation: Robo-Advisers now Magazine Cover Stories

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teanicola
Tea Nicola, WealthBar

By Jonathan Chevreau

Interesting cover story on robo-advisers  in the current issue of Financial Post Magazine, delivered with Tuesday’s National Post.

As an ex magazine guy myself, I find it fascinating that robo-advisers have made it to magazine cover status so quickly. A year ago they were barely known in Canada, although they’ve been a rising force in the U.S. for a few years now (chiefly via WealthFront).

In the FP feature story, deputy editor Andy Holloway describes veteran financial planner John Nicola, founder of Vancouver-based Nicola Wealth Management, which targets the 1% of investors with at least $1 million in investible assets.

Then the article moves on to the next generation: WealthBar Financial Services Inc., a (so-called) robo-adviser service headed by John Nicola’s eldest son, Christopher, and daughter-in-law Tea (pictured). Continue Reading…

“Robo Advisers” — Rise of the machines

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dougdahmer
Doug Dahmer

By Doug Dahmer, Emeritus Retirement Income Specialists

Special to the Financial Independence Hub 

I know Isaac Asimov’s Three Laws of Robotics, I read Arthur C. Clarke’s 2001: A Space Odyssey and I love the Terminator movies (I’ll be back!).

From all this I know three things: Robots are very smart. Robots always start off to help you. Robots have a tendency to turn on you.

One of the newest crazes and buzzwords in personal finance is: “Robo-Adviser.” If you’re not familiar with the term, it refers to investment management by algorithm in the absence of human input.

With a “Robo” you are asked to complete an on-line risk assessment questionnaire. Your responses determines the prescribed portfolio of ETFs (Exchange-Traded Funds) with a built-in asset allocation best suited to your needs. Once a year the portfolio is rebalanced to this prescribed asset allocation recipe.

Dynamics change as shift from Saving to Spending

Continue Reading…