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Discussion Starter #1
Hello everyone,

I am new here and relatively new to the world of ETFs. There is a lot I don't understand and I am hoping some of you can help me out.

I opened a Wealth Simple account and have decided to invest in their Clean Renewable Sector ETF bundle.

This bundle holds the following.

ZFM, CRBN, XEN, VIDI, and PZD.

The ETF MER fees are as follows:

ZFM 0.22%
CRBN 0.20%
XEN 0.55%
VIDI 0.68%
PZD 0.67.

The additional management fee for this bundle is 0.5% My money would not be evenly evenly distributed in the 5 ETFs in this bundle.

So I have a question I am debating with a friend of mine regarding how my overall fees would be calculated for this bundle.

I am thinking that you add up the individual ETF fees plus the Management fee for your overall fee percentage.
In this case it would be (0.22%+0.20%+0.55%+0.68%+0.67%+0.50%) = 2.82%

HOWEVER

My friend says that what you do is add up all the ETF fees and divide by the number of ETFs in the bundle and then add the 0.50% Management fee that Wealth Simple charge.
In this case (0.22%+0.20%+0.55%+0.68%+0.67%)= 2.32 divided by (5) = 0.464 + 0.50% = 0.964%

Can someone explain which one is right, or if they are both inaccurate and you need more information to provide a correct fee percentage please let me know.


Thanks again guys. Like I said big time noob small fish here trying not to get eaten by bigger fish.

Best,

Konrad
 

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Neither is correct. Calculate a weighted average of the ETF MERs, then add the extra WS management fee.

For a simple example, say you have 60% ABC (MER 0.15) and 40% DEF (MER .25). Your blended MER = (0.6 x 0.15) + (0.4 x 0.25) = 0.09 + 0.1 = 0.19%. Then add the 0.5% WS fee for a total of 0.69%.

Here are some good links on portfolio design and robo-advisors:

And this is a good link you could use to calculate the blended MER (but it does not have the ability to add in the extra WS fee). Portfolio MER Calculator - Squawkfox
 

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Discussion Starter #3
Neither is correct. Calculate a weighted average of the ETF MERs, then add the extra WS management fee.

For a simple example, say you have 60% ABC (MER 0.15) and 40% DEF (MER .25). Your blended MER = (0.6 x 0.15) + (0.4 x 0.25) = 0.09 + 0.1 = 0.19%. Then add the 0.5% WS fee for a total of 0.69%.

Here are some good links on portfolio design and robo-advisors:

And this is a good link you could use to calculate the blended MER (but it does not have the ability to add in the extra WS fee). Portfolio MER Calculator - Squawkfox

Wow this is great. Thank you!
 

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FYI. You should check the ETFs too because there can sometimes be a TER or trading expense ratio. Usually this is negligible if they are just index ETFs but for some ETFs that hold foreign stocks directly they can be .3 - .5%.

These maybe in the general ETF facts document but usually are in the prospectus
 

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How do I check that? OMG. Are they raping me secretly? Seriously I dont know what to do man
Sometimes there are various hidden costs (trading, foreign taxes, derivatives). The best way to figure this out is to look at performance versus a benchmark. At the end of the day, the best measure of hidden fees and inefficiencies is how well the thing performs versus a pure benchmark.

That only works if you have a good benchmark. If you're concerned about getting ripped off, I also strongly recommend you stick to the most basic index ETFs such as the S&P 500, TSX Composite, MSCI EAFE, that kind of thing. The ETFs you posted track some esoteric indexes nobody has ever heard of.

Basically, this whole "clean renewable" sector is opening you up to this danger of getting ripped off on fees and hidden expenses of various kinds. If you really want to invest in that area, you're going to have to be comfortable with the fact that you cannot accurately benchmark yourself, the fees are pretty high, and someone may be ripping you off.

In this game, if you can't compare to a good benchmark, you're probably going to get ripped off. Personally I would not invest in any of the things you listed.
 

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How do I check that? OMG. Are they raping me secretly? Seriously I dont know what to do man
There is no reason to get paranoid over minor internal cost items like TERs. MERs are the bulk of the costs for ETFs, mutual funds, closed end funds, etc, etc, along with advisory fees if you have an advisor such as WealthSimple, the latter of which can be eliminated by going completely DIY. That all said, most retail investors are better off with low cost financial advice, like that of a robo-advisor such as WealthSimple, so a total cost of 0.6-0.7% is exceptionally good. For a novice/young investor, having some financial guidance is good. You can always go 100% DIY at lower cost in 5 (or 10) years once you have some confidence and experience.

For example, I have 30 years (or more) of investment experience, including about 20 years of DIY investing. I am perfectly happy with MAW104 in one of my accounts that has an MER of 0.92% because this actively managed 60/40 balanced mutual fund has been performing every bit as good as Vanguard's index based 60/40 balanced ETF VBAL with an MER or 0.25%. Costs are important but they are not everything. They are situational.

Too many of these kinds of financial discussion forums are frequented by folk who have gained considerable knowledge and/or experience over time, and/or those with so much testosterone that they want stock trading bragging rights with their buddies. That is not how Rome was built. It is perfectly fine to take your time to learn to walk before flying solo, including participating in financial forums just like this one. You might be surprised how many CMF members actually have, and pay for, financial advice.
 

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There is no reason to get paranoid over minor internal cost items like TERs. MERs are the bulk of the costs for ETFs, mutual funds, closed end funds, etc, etc, along with advisory fees if you have an advisor such as WealthSimple, the latter of which can be eliminated by going completely DIY.
This is true in most cases if you are just looking at passive index funds. For active managed ETFs though TERs can be quite high. I have seen some up around .3%
 

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Discussion Starter #10
Wow. You guys are so smart. I wish I had friends or relatives who knew about this stuff. I'm thinking of doing some general online courses on Lumovest. Have any of you heard of them?
 

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I'm thinking of doing some general online courses on Lumovest. Have any of you heard of them?
Given your professed lack of lack of knowledge and experience I would start with some easier learning resources like the Finiki links I gave above:


I had not heard of Lumovest but the investing course looks US focused, very detailed and more aimed at stock picking than newbies.

Here is a great introductory free ebook for investing. The author says more in 16 pages than many do in hundreds. It is US based but the same principles apply in Canada, just substitute Canadian investment products.

You did not include a lot of information in your post like your age, risk tolerance, timeline and how much of your savings this is. Based on what you have said I would have huge reservations about putting a large amount your money in WealthSimple's SRI portfolio. A lot of the companies in those funds are small new businesses in complex fast changing industries. In any nascent industry or segment there are a lot of losers and a very few winners. It happens in every industry from railroads, cars and airlines a hundred years ago to dotcom, cannabis and biotech more recently. As you move to more concentrated portfolios your chance of getting great returns goes up slightly, but the chance of loss increases a lot, and you might need a lot of tenacity to stay invested during rough markets. And the fee is about 4x that of asset allocation ETFs.

Have you thought through why you want to use SRI investing? Have you looked in detail at the holdings and prospectus for all the funds you listed in your original post? Have you looked at the companies those funds hold enough to understand them and expect them to outperform? Have you considered the impact of the additional cost of SRI investing and robo advisors compared to more basic ETFs. Do you have a theory for why SRI investing would be able to outperform given its cost is roughly 4x that of an asset allocation ETF?

My suggestion is to stick to a more balanced broadly based portfolio like Wealthsimple Growth or Balanced, or an asset allocation ETF like Vanguard VGRO or VBAL, or equivalent funds from iShares or BMO. Once you get some investing experience you may wish to take on more risk or move to direct stock investing with a dividend or value focus. Whether you choose robo or ETFs depends on whether you want a little bit of handholding or more of a DIY approach.

Here a couple more good investing resources:

You are unlikely to go wrong if you start with a simple basic low-cost portfolio, then wait until you get some experience to decide if you want to change your strategy.
 

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Very good info from GreatLaker there and I'll echo the cautions against WealthSimple's SRI / clean renewable bundle.

I also think you would be better off in the Wealthsimple generic portfolio such as their standard "balanced" portfolio.
 

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Very good info from GreatLaker there and I'll echo the cautions against WealthSimple's SRI / clean renewable bundle.

I also think you would be better off in the Wealthsimple generic portfolio such as their standard "balanced" portfolio.
I tend to agree being in one of their generic portfolios is lower risk. SRI is trendy and fashionable with a variety of portfolio managers to attract Gen-Yers but SRI has not proven itself yet. I put SRI in the same bucket as financially engineered products. Some add alpha, others miss the fork in the road.
 

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Given your professed lack of lack of knowledge and experience I would start with some easier learning resources like the Finiki links I gave above:


I had not heard of Lumovest but the investing course looks US focused, very detailed and more aimed at stock picking than newbies.

Here is a great introductory free ebook for investing. The author says more in 16 pages than many do in hundreds. It is US based but the same principles apply in Canada, just substitute Canadian investment products.

You did not include a lot of information in your post like your age, risk tolerance, timeline and how much of your savings this is. Based on what you have said I would have huge reservations about putting a large amount your money in WealthSimple's SRI portfolio. A lot of the companies in those funds are small new businesses in complex fast changing industries. In any nascent industry or segment there are a lot of losers and a very few winners. It happens in every industry from railroads, cars and airlines a hundred years ago to dotcom, cannabis and biotech more recently. As you move to more concentrated portfolios your chance of getting great returns goes up slightly, but the chance of loss increases a lot, and you might need a lot of tenacity to stay invested during rough markets. And the fee is about 4x that of asset allocation ETFs.

Have you thought through why you want to use SRI investing? Have you looked in detail at the holdings and prospectus for all the funds you listed in your original post? Have you looked at the companies those funds hold enough to understand them and expect them to outperform? Have you considered the impact of the additional cost of SRI investing and robo advisors compared to more basic ETFs. Do you have a theory for why SRI investing would be able to outperform given its cost is roughly 4x that of an asset allocation ETF?

My suggestion is to stick to a more balanced broadly based portfolio like Wealthsimple Growth or Balanced, or an asset allocation ETF like Vanguard VGRO or VBAL, or equivalent funds from iShares or BMO. Once you get some investing experience you may wish to take on more risk or move to direct stock investing with a dividend or value focus. Whether you choose robo or ETFs depends on whether you want a little bit of handholding or more of a DIY approach.

Here a couple more good investing resources:

You are unlikely to go wrong if you start with a simple basic low-cost portfolio, then wait until you get some experience to decide if you want to change your strategy.
Wow!! Thanks for all the information and the free resources. These are great. It's actually a friend of mine who is into the Wealth Simple SIR and as in the first post we were uncertain on how to calculate the various fees for the SIR plan my friend has. After showing him these replies he is going to switch over to a basic plan without the SIR. He is only worried about costs involved re switching plans.

We both just started investing and are learning more as we go. I have a Questrade account I just made and bought some Chartwell (CSH.UN) on the TSX at around 8.00 per share and set up a drip.

My buddy is 35 and I am 38 and we are fine with a long haul investment strategy.

Any other advice is wholly appreciated and welcome.

Thanks to everyone!
 

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Given your professed lack of lack of knowledge and experience I would start with some easier learning resources like the Finiki links I gave above:


I had not heard of Lumovest but the investing course looks US focused, very detailed and more aimed at stock picking than newbies.

Here is a great introductory free ebook for investing. The author says more in 16 pages than many do in hundreds. It is US based but the same principles apply in Canada, just substitute Canadian investment products.

You did not include a lot of information in your post like your age, risk tolerance, timeline and how much of your savings this is. Based on what you have said I would have huge reservations about putting a large amount your money in WealthSimple's SRI portfolio. A lot of the companies in those funds are small new businesses in complex fast changing industries. In any nascent industry or segment there are a lot of losers and a very few winners. It happens in every industry from railroads, cars and airlines a hundred years ago to dotcom, cannabis and biotech more recently. As you move to more concentrated portfolios your chance of getting great returns goes up slightly, but the chance of loss increases a lot, and you might need a lot of tenacity to stay invested during rough markets. And the fee is about 4x that of asset allocation ETFs.

Have you thought through why you want to use SRI investing? Have you looked in detail at the holdings and prospectus for all the funds you listed in your original post? Have you looked at the companies those funds hold enough to understand them and expect them to outperform? Have you considered the impact of the additional cost of SRI investing and robo advisors compared to more basic ETFs. Do you have a theory for why SRI investing would be able to outperform given its cost is roughly 4x that of an asset allocation ETF?

My suggestion is to stick to a more balanced broadly based portfolio like Wealthsimple Growth or Balanced, or an asset allocation ETF like Vanguard VGRO or VBAL, or equivalent funds from iShares or BMO. Once you get some investing experience you may wish to take on more risk or move to direct stock investing with a dividend or value focus. Whether you choose robo or ETFs depends on whether you want a little bit of handholding or more of a DIY approach.

Here a couple more good investing resources:

You are unlikely to go wrong if you start with a simple basic low-cost portfolio, then wait until you get some experience to decide if you want to change your strategy.
So I just read the 16 page PDF and it was a good read with some great and sound advice. I'll see if I can get some of those books from the library. The information regarding Vanguard was also really illuminating .
 
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