WealthSimple: Am I doing something wrong, or is this roboadviser not that good?

[rhettryder]

@davidcn Level 1 risk on new RESP asked to be put on and got into high interest savings which invests in PSA 5.31% yield plus grant is good enough until the market tanks.

https://www.purposeinvest.com/funds/purpose-high-interest-savings-fund

https://help.wealthsimple.com/hc/en-ca/articles/360056543874

 

[harulomilymiqz]

@davidcn I put the risk level to 11 on the RESP. Up 10%.

 

[kinderlot]

@davidcn Imagine assuming bonds are not risky

 

[theo3]

@dexter234 S&P is likely a small component of your WS portfolio, you are slightly cherry picking. Bonds got absolutely hammered in the past ~1.5 years so if your risk exposure includes those, that could be part of it also.

 

[pgardner31]

@dexter234 I’m also a WS client and I’ve noticed a similar result. I would attribute a large portion of this to the performance of bond etfs chosen by WS to represent the income portion of your portfolio. The negative 5y return on ZFL.TO is the result of rising interest rates making the lower interest rate bonds held by the ETF have lower face values.

 

[bomberman]

@dexter234 I’m a long term WS client. Like 10 years. My risk level was low and just like you, returns are depressing in the last 3 years or so. Great returns before that though. It’s because of bonds. Yields go up and prices go down. This will change quickly when yields stabilize or go down. I’m going to leave it alone. If you move out of bonds, you lock in your losses. What baffles me is how WS and nearly all advisors were recommending 60/40 portfolios of ETFs to when bond yields were near zero. I stupidly just went along with it because I was busy working and left my investments in the hands of “experts”. These sinking returns were entirely predictable because when yields are zero, they can only go one way.

 

[lbir0]

@bomberman Average bonds are down like 10-15% in 2022 (see VAB ETF for reference) in one of the worst years for bonds in forever. Some of the worst years for stocks have -50% returns or worse.

If you simply look at 1 negative outlier year for bonds as a reason to take more risk than your 60/40 portfolio, you’re selecting your asset allocation for the wrong reasons. Stocks could’ve also gone down significantly more in value since 2022 (and still can) and taking more risk could lead you to losing way more than what your 60/40 split would.

 

[flipflip]

@bomberman Bonds are dirt cheap right now. If and when rates drop they will deliver good returns, they also help reduce your volatility.

 

[bomberman]

@flipflip You might be right. At least rates have room to move downward, unlike two years ago.

 

[yaman]

@dexter234 If you went low risk, your bonds are killing you right now

 

[jamorjoseph]

@yaman Is that predicted to go up do you know?

 

[yaman]

@jamorjoseph I know nothing about bonds, I know that they are "supposed to" balance out a portfolio but the bond market took a massive hit

 

[shetel]

@yaman Bonds are supposed to be uncorrelated or even negatively correlated to stocks and they did their job. They're a diversifier for stock portfolios. They aren't supposed to be a guaranteed positive return over every time period.

 

[drterrapin]

@jamorjoseph They move inversely to interest rates.

They're down because rates rose, if rates fall then they go up

However the coupon is up now so if you hold to maturity it would be no different

 

[covetusx4]

@jamorjoseph They will eventually return more then you put if you hold them long enough that is the nature of bonds.

If you bought bonds in 2020 when rates were rock bottom no one wants them now because new bonds have much higher yeilds so the price of the bonds have fallen to reflect that.

But right now the one you already have are only down because interest rates went up, and new bonds are worth more.

It's a bad idea to sell them now and best to hold onto them until you must take money out or interest rates fall and they go back up.

Now is a good time to buy bonds because the yields are so high. The prices will pop if rates fall, but if they don't you're guaranteed the return long term.

 

[jamorjoseph]

@covetusx4 thank you! Appreciate this response

 

[hesavedme94]

@dexter234 I’m having a similar experience. Started investing in early 2019 and have biweekly contributions, current portfolio is around $150k and its always within a thousand dollars of my contributions, up or down, so basically I haven’t made anything and have lost money relative to inflation, would have made more even in a regular savings account. It’s frustrating.

My risk level is 5, I don’t want a high risk portfolio. I don’t need huge gains - if I had a 4-5% return, that would be fine with me. But a 0% return over nearly 5 years is really making me wonder if something is wrong. I find it frustrating that people try to blame investors like me, saying you need a risk level 9 or 10 to see any gain. That is not how it’s supposed to work, you should be able to have a modest increase over time with a balanced portfolio. Something feels wrong about this as more and more time passes. WS just keeps saying we’re in a downturn but like you, I feel like markets have been doing well, so if our portfolios can’t grow in these conditions, when will they?