In January, I brought on a new client who fits the target market of all the Robo-advisors popping up across the country. Read part one here to see how and why he came to us in the first place and the results of Round 1 here and Round 2 here.
Our combatants have gone another 3 months, so let's see where we stand after the 3rd and most turbulent quarter of 2018. A reminder that after 2 rounds the tally is currently Robot 0 - Human 5.
Over the last 3 months, the world markets have been all over the place. I don't pretend to know why and how since that is not my main concern, making sure you have money when you need it is. With that, we recently had a small correction earlier this month that saw a pretty sharp drop. Our Robot friends had an additional loss of -0.15%, bringing the year-to-date loss to -1.51%. Add in their fee of 0.50% and they are down -2.01%. Our properly, long-term-minded portfolio is down -0.37% over that same time to a total year-to-date gain of 0.12%. And remember, that INCLUDES all fees. (For all of those concerned, here are the disclaimers that I am required to post after the mention of returns.)
Robot 0 - Human 6
Now I know what you're thinking. "Ken," you think, "that's not a very good return at all. My funds are up [insert a made up number here]". Well, that is fantastic and I'm happy for your success, however, our client is young, has a long time to invest before he needs his money and like to take risks (ut-hum....poker player!). If we were to look at the historical returns for these two portfolios (of course, that means nothing for the future, but we can all learn from a little history), our portfolio, which is 50% North America and 50% everywhere else, has returned 12% in 2017, 9% in 2016 and 3% in 2015. Our Robot is 75% Canadian, 15% US and 10% everywhere else and the last three years returns were 4%, 4% and -4% respectively. (just to cover my butt, here are those disclaimers again)
I routinely tell my clients to ignore their statements each quarter and definitely don't look at your accounts everyday. You'l go mad with the ups and downs. I am running the experiment and it's driving ME crazy. This is to illustrate that just because something is less expensive doesn't mean you get more for your money. Sometimes, spending a few more dollars for a quality product saves you in the long run. #have4kids #Ishouldknow
Kenneth Coombs CFP CHS RRC
Ken has 14 years experience in the financial services industry, is a Registered Retirement Consultant and a Certified Financial Planner. Ken has written financial planning columns and has been a guest on financial radio and podcast programs.