Wealthsimple Lunch & Learn @ OneEleven - 20141104
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This document outlines 5 simple rules of smart investing according to Wealthsimple, an online investment manager. The rules are: 1) Start early to benefit from compounding returns. 2) Keep costs low as high fees can significantly reduce long-term returns. 3) Diversify across multiple asset classes to reduce risk. 4) Ignore short-term market noise and stick to a long-term plan. 5) Do not try to pick individual stocks yourself as most professional stock pickers do not beat the market. Wealthsimple aims to help investors follow these rules by building low-cost, diversified portfolios and rebalancing automatically.
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Wealthsimple Lunch & Learn @ OneEleven - 20141104
- 1. 5 SIMPLE RULES OF SMART INVESTING @getwealthsimple @mkatchen
- 2. Wealthsimple is Canada’s fastest growing online investment manager. We make smart investing easy, low-cost, and transparent.
- 3. “Focus on what you can control and think long term.” - Burton Malkiel, author
- 4. Rule #1: Start early
- 5. Albert Einstein called compounding "mankind's greatest discovery” 3 friends (ages 30, 35, 40) start investing $5,000 per year until they are 65. By that time, they will have invested: $125,000 $150,000 $175,000 40 35 30
- 6. 10 years can add $0.5MM+ to your long term savings $935,511 $399,772 30 Impact of start date on wealth* 35 65 Age 40 $616,729 *Assumes $5,000 annual contribution, 8% annual returns.
- 7. Rule #2: Keep costs low
- 8. Canadians pay the highest investment fees of any developed country in the world Average equity mutual fund fees by country (%) 2.42 0.82 Canada USA China India Italy Belgium Spain Norway Korea France Thailand Taiwan Singapore UK New Zealand Japan Germany Denmark South Africa Sweden Netherlands Switzerland Australia *Morningstar Global Fund Investor Experience Report, 2013
- 9. Would you pay $300K for financial advice? $800,594 $509,858 1.6% in additional fees can destroy 36% of 0 your long-term wealth 15 30 Years Growth at 2.42% fees Growth at 0.8% fees * Average Canadian equity mutual fund charges 2.42% vs USA average fee of 0.8% ** Assumes $100,000 initial deposit, 8% annual returns
- 11. Harry Markowitz won a Nobel Prize for discovering that diversification reduces risk without hurting returns Asset classes don’t always move in the same direction Source: Morningstar, annual performance by asset class
- 12. Here’s how it works Impact of diversification on risk and return 2 assets 6 assets 10 assets 2.26% returns 5.49% returns 9.72% returns 13.3% risk 8.49% risk 10.17% risk 0.17 return/risk 0.65 return/risk 0.96 return/risk Source: Bloomberg as of 3/31/14, 10 years from January 2004 - February 2014
- 13. Rule #4: Drown out the noise
- 14. Know your risk profile Risk survey Risk discussion • Online survey • Ability & willingness to take risk • Meet with an investment advisor • Investment goals
- 15. Have the discipline to stick to your plan In 2009, $150B flowed out of equity funds even as markets came roaring back 2002 2008 2013 Equity fund flows Market returns Notes: Cash flows represent net cash moving in or out of stock funds. Market returns are based on the S&P/TSX Composite Index. Sources: Morningstar for cash-flow data; Thomson Reuters Datastream for market returns.
- 16. Rule #5: Don’t pick stocks
- 17. Over 80% of professional stock pickers fail to beat the market Percent of funds that under perform CN Equity US Equity Int’l Equity CN Bonds 72 81 86 98 0 50 100 Source: Vanguard calculations using data from Morningstar. Fund classifications and benchmarks provided by Morningstar.
- 18. Personal anecdote: winning a stock picking contest at age 12…
- 19. … my winning pick lost 95% of its value between 1999 - 2001 MGI Software closing stock price Contest close 12/06/1999 Acquisition 12/04/2001 $24.40 $1.18 Source: CBC acquisition announcement, Canada Trust Investment Challenge contest details
- 20. HOW WE DO IT
- 22. We assess your risk profile and investment goals to help you create and stick to a long-term investment plan Risk survey Suitability call • Online survey • Ability & willingness to take risk • Phone call with your Wealth Concierge • Investment goals
- 23. We build you a fully-diversified portfolio across 8-10 asset classes, customized for your risk tolerance
- 24. We monitor your portfolio every day and automatically rebalance it to keep you on track Expected return Your asset allocation will drift from its target as markets move Risk
- 25. We automatically optimize your portfolio for tax efficiency on a daily basis $25 “harvestable” tax-loss benefit per share. Tax-loss harvesting example* $75 $100 Aug Sept Oct * Illustrative example
- 26. Transparent and intuitive reporting via web and mobile
- 27. We charge a lot less than everyone else
- 28. Michael Katchen, Founder & CEO • Head of Ancestry.ca, VP at 1000memories • McKinsey & Co. financial services practice • Named one of the “500 people that will define the next 12 months” by Askmen Brett Huneycutt, COO • Co-founder, 1000memories • Director of Product, Ancestry.com and Stripe • McKinsey & Co., financial services • Rhodes Scholar Dave Nugent, PM & CCO • Investment Advisor, RBC Dominion Securities with shared $300MM book • Canadian Investment Manager (CIM) • President of Student Council, Huron Peter Graham, Engineer • Engineering, 1000memories and Ancestry.com • Computer Science at Colby College • Mobile intern at AOI Pro in Tokyo Rudy Adler, Product Design • Co-founder, 1000memories • Wieden+Kennedy creative • Launched award winning campaigns for Apple, Levi’s, Focus Features Kate Murphy, Engineer • Hacker School and HackLab.TO • Ladies Learning Code • Engineer at Virgin mobile, Konrad Group Alex Rascanu, Marketing • Director or Marketing, Conversion Media and Powered by Search • Founder, Marketers without Borders and Marketers Unbound Kayla Wilson, Associate Wealth Concierge • Sales assistant at Raymond James • Business Marketing at George Brown • Canadian Securities Course Candidate Our team
- 29. Our advisors Joseph Canavan, Executive Chairman • Former CEO, Assante Wealth Management • Founder, Synergy and GT Global • “Person of Influence of the Decade” at the Canadian Investment Awards 2004 Prof. Eric Kirzner, Investment Committee Roger Martin • Former Dean, Rotman Business School • Former co-head of Monitor Company • Placed 3rd on the list of most influential global business thinkers in 2013 Brent Belzberg • Managing Partner, Torquest • Founder, Harrowston (acquired in 2001) • Director, CIBC and Mount Sinai David Ossip • CEO, Ceridian HCM • Founder of Dayforce and Workbrain • Ernst and Young Entrepreneur of the Year Award, Top 40 under 40 in 2004 Dan Debow • SVP at Salesforce.com • Co-Founder, Rypple (acquired in 2012) • Founding team, Workbrain Christian Lassonde • Managing Partner, Impression Ventures • Managing Director, Next36 Ventures • Founder, Millions of Us, Virtual Greats Andrew D’Souza • President, Bionym • Former COO, Top Hat, Top Prospect • McKinsey & Company • John H. Watson Chair in Value Investing at the Rotman School of Business • Author of 13 books on investment finance • Founder of the Easy Chair Portfolio
- 30. Disclosures Wealthsimple Financial Inc. is registered as a Portfolio Manager in Ontario and British Columbia. Securities in your account are protected up to $1,000,000 CDN. See www.cipf.ca for more details. ! Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in loss. We do not provide financial planning services to individual investors. Read our Full Disclosure at wealthsimple.com/legal/.disclosure. ! Copyright 2014 Wealthsimple Financial Inc.