Please log in to bookmark this story.But, what about home buying?That’s the thought I had after reading a question submitted by an impressive 26-year-old newsletter reader who has saved $200,000. “Do you suggest using a financial advisor who charges 1 per cent annually to manage the money, or using a roboadviser like Wealthsimple?” he asked.My suggestion if I had to pick between the two would be a roboadviser, but that’s getting ahead of things. Given that we’re in Canada, where real estate rules, I have to wonder if this 26-year-old plans to buy a home in the next five years. If so, then all or most of that $200,000 would likely go toward a down payment.This brings us to the ever-hazy difference between saving and investing. Someone with down payment money for a home purchase within five years is a saver and thus best served with a high interest savings account. Investing is ideally for money you won’t need for six to 10 years or more. The longer you stay invested, the more likely it is unavoidable periodic downturns will be nicely offset by the good times.With that lecture dispensed with, let’s get to investing that $200,000. The issue with paying 1 per cent fees to an adviser is that it’s hard to see where the value would be. In the 2020s, it’s not enough for an adviser to justify fees with portfolio management only. Financial planning is the usual add-on, but 26-year-olds have limited need for this service. Young adults who do want to talk to a planner are better off setting up a session or two with a fee-for-service planner charging a flat fee.A roboadviser, with fees typically in the 0.4 to 0.5 per cent range, is a more economical fit for investors who want help managing a portfolio. And now for a third option: open a digital investing account and just buy an asset allocation exchange-traded fund. If this 26-year-old were investing for the long term, an asset allocation ETF with 80 per cent of its assets in stocks and 20 per cent in bonds would work well. Pretty much all the big ETF providers offer this type of growth fund, as well as more and less aggressive mixes.With a zero-commission broker, the portfolio management cost of investing with an asset allocation ETF is zero. That just leaves the cost of owning these ETFs, which is about 0.2 to 0.35 per cent. These fees are taken off the top by ETF companies, which report net returns to their clients. Investors don’t pay them directly.A final note about ETF fees – they apply as well to robo-adviser portfolios, which make extensive use of ETFs. If an adviser puts you in an ETF or mutual fund, fees for those products apply as well as the adviser’s own fee.From readersDo you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.Tools and guidesA multiyear chart showing how various types of investments have performed on a year-by-year basis going back to 2009. Please enable JavaScript t
Gio. Gen 16th, 2025
