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5 SIMPLE RULES OF SMART INVESTING
@getwealthsimple @mkatchen
Wealthsimple is Canada’s fastest growing online investment manager. We make smart investing
easy, low-cost, and transparent.
- Burton Malkiel, author
“Focus on what you can control and think long term.”
Rule #1: Start early
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
$399,772
$935,511
30
Age
6535
Impact of start date on wealth*
40
$616,729
*Assumes $5,000 annual contribution, 8% annual returns.
10 years can add $0.5MM+ to your long term savings
Rule #2: Don’t pick stocks
Over 80% of professional stock pickers fail to beat the market
Source: Vanguard calculations using data from Morningstar. Fund classifications and benchmarks provided by Morningstar.
CN Equity
Int’l Equity
US Equity
CN Bonds
Percent of funds that under perform
0 10050
72
81
86
98
Personal anecdote: winning a stock picking contest at age 12…
… my winning pick lost 95% of its value between 1999 - 2001
Contest close 12/06/1999
MGI Software closing stock price
Acquisition 12/04/2001
$24.40
$1.18
Source: CBC acquisition announcement, Canada Trust Investment Challenge contest details
Rule #3: Keep costs low
Canadians pay the highest investment fees of any developed country in the world
Average equity mutual fund fees by country (%)
2.42
0.82
Can
ada
US
A
Chi
na
Ind
ia
Italy
Be
lgiu
m
Sp
ain
No
rway
Ko
rea
Fra
nce
Tha
iland
Taiw
an
Sin
gap
ore UK
Ne
w Z
eal
and
Jap
an
Ge
rman
y
De
nmar
k
So
uth
Afr
ica
Sw
ed
en
Ne
the
rland
s
Sw
itze
rland
Aus
tral
ia
*Morningstar Global Fund Investor Experience Report, 2013
Would you pay $300K for financial advice?
$509,858
$800,594
0
Years
3015
1.6% in additional fees can destroy 36% of your long-term wealth
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
Rule #4: Diversify
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
2 assets 6 assets 10 assets
Source: Bloomberg as of 3/31/14, 10 years from January 2004 - February 2014
Here’s how it works
Impact of diversification on risk and return
2 assets 6 assets 10 assets
Source: Bloomberg as of 3/31/14, 10 years from January 2004 - February 2014
Here’s how it works
Impact of diversification on risk and return
2.26% 5.49% 9.72%Returns
2 assets 6 assets 10 assets
Source: Bloomberg as of 3/31/14, 10 years from January 2004 - February 2014
Here’s how it works
Impact of diversification on risk and return
2.26% 5.49% 9.72%Returns
13.3% 8.49% 10.17%Risk
2 assets 6 assets 10 assets
Source: Bloomberg as of 3/31/14, 10 years from January 2004 - February 2014
Here’s how it works
Impact of diversification on risk and return
2.26% 5.49% 9.72%Returns
13.3% 8.49% 10.17%Risk
0.17 0.65 0.96Ratio
Rule #5: Drown out the noise
Have the discipline to stick to your plan
Market returnsEquity fund flows
2002 2008 2013
In 2009, $150B flowed out of equity funds even as markets came roaring back
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.
Know your risk profile
Risk survey Risk discussion
• Online survey • Ability & willingness
to take risk
• Meet with an investment advisor
• Investment goals
Recap
Rule #1: Start early
Rule #5: Drown out the noise
Rule #2: Don’t pick stocks Rule #3: Keep costs low
Rule #4: Diversify
Questions?
HOW WE DO IT
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
We build you a fully-diversified portfolio across 8-10 asset classes, customized for your risk tolerance
We monitor your portfolio every day and automatically rebalance it to keep you on track
Exp
ect
ed
re
turn
Risk
Your asset allocation will drift from its target as markets move
We optimize your portfolio for tax efficiency on a daily basis
$25 “harvestable” tax-loss benefit per share.
$75
Aug Sept Oct
$100
Tax-loss harvesting example*
* Illustrative example
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Michael Katchen, CEO
• Co-founder, 1000memories, YC alumni • Director of Product, Ancestry, Stripe • McKinsey & Co. financial services • Rhodes Scholar
Brett Huneycutt, COO
Team
• Co-founder, 1000memories, YC alumni • Wieden+Kennedy creative • Launched award winning campaigns for
Apple, Levi’s, Focus Features
Rudy Adler, Designer
• Engineer, 1000memories, Ancestry • Mobile developer at AOI Pro in Tokyo • Computer Science at Colby College
Peter Graham, Engineer
• Director or Marketing, Conversion Media, Powered by Search
• Founder, Marketers without Borders, Marketers Unbound
Alex Rascanu, Marketing Director
• Hacker School and HackLab.TO • Ladies Learning Code • Engineer, Virgin mobile, Konrad Group
Kate Murphy, Engineer
• Investment Advisor, RBC DS, shared $300MM book
• Canadian Investment Manager (CIM) • President of Student Council, Huron
Dave Nugent, CIO & CCO
• Founder, Genius Scan, mobile scanning app with 15MM downloads and 2MM MAUs
• Engineer, 1000memories, Ancestry, Amazon • MS in Computer Science
Bruno Virlet, CTO (pending)
• Sales assistant at Raymond James • Business Marketing at George Brown • Canadian Securities Course Candidate
Kayla Wilson, Associate Wealth Concierge
• First designer, Wattpad • Lead designer, Wave Accounting
Huda Idress, UX Designer
Advisors
• Former CEO, Assante Wealth Management • “Person of Influence of the Decade”
Joe Canavan, Advisor
• Head of Value Investing at Rotman • Author of 13 books on investment finance • Founder of the Easy Chair Portfolio
Professor Eric Kirzner, Investment Committee
• Former Dean, Rotman Business School • Former co-head of Monitor Company
Roger Martin, Advisor
• CEO, Ceridian HCM • Founder of Dayforce and Workbrain • EY Entrepreneur of the Year, Top 40 under 40
David Ossip, Advisor
• SVP at Salesforce.com • Co-Founder, Rypple (acquired in 2012)
Dan Debow, AdvisorChristian Lassonde, Adivsor
• Managing Partner, Impression Ventures • Managing Director, Next36 Ventures
• Managing Partner, Impression Ventures • Former Managing Partner, Bryker Capital
Bryan Kerdman, Advisor Andrew D’souza, Advisor
• President, Bionym • Former COO, Top Hat & Top Prospect
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Disclosures
Wealthsimple Financial Inc. is registered as a Portfolio Manager in Ontario, British Columbia, Quebec, Manitoba, and Alberta. 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.
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