Overview
Wealthsimple’s Bond portfolio is a managed investing portfolio that we automatically invest for you. Because it doesn’t have a lock-in period or set maturity date, you can fund and withdraw from it at any time without penalties.
The Bond portfolio targets a return that exceeds the Cash rate by 0.5–1%. Right now that means that expected returns are between 4–5% annualized. Actual returns are market-dependent.
A bond portfolio is a collection of bonds lent to a government, corporation, or other entity. A bond portfolio aims to provide investors regular interest income and return the initial investment when the bonds reach maturity. Investors use bond portfolios to diversify their investments while earning steady and predictable returns.
Eligible account types
You can invest in a Bond portfolio in the following account types:
- Tax-Free Savings Account
- Registered Retirement Savings Plan
- First Home Savings Account
- Non-registered
Open a Bond portfolio
You can only open a Bond portfolio on the Wealthsimple mobile app. They’re not available on the Wealthsimple web experience yet.
Follow these steps to open a Bond portfolio:
- Sign in to the Wealthsimple app on your mobile device
- From the Home tab, scroll down and tap + Add an account
- Select Open a new account
- Choose what type of account you want to open
- Select Bond portfolios from the investment options menu
- Review information about Bond portfolios and tap Get started
- Answer questions to assess your suitability
- Follow the prompts to open your Bond portfolio
Frequently asked questions
Why choose a bond portfolio over holding cash?
The bond portfolio offers a higher yield than just holding onto your extra cash, and it can add up over time if you're comfortable taking a small amount of risk.
Although you can certainly do worse than holding your money in a Wealthsimple Cash account, investing in our low-risk bond portfolio might perform even better. Over a few years, your odds of outperforming cash are 80-90%, and the odds of having losses over that period are very low. And even if you happen to underperform Cash once in a while, it typically won't be by much.
Why choose a managed bond portfolio instead of buying individual bonds or bond ETFs myself?
First, the risk of one company defaulting matters a lot less when you hold a diversified portfolio of bonds, rather than picking a few yourself.
Beyond index diversification, we believe professional, active management has advantages over choosing individual bond ETFs. A good bond portfolio carefully mixes two kinds of risks that balance each other out: the risk that borrowers might not repay their loans and the risk that interest rates might change. We change how much of each risk we take on as the market changes, and we do it for two reasons:
- To lower the chance of losing money
- To earn you more interest than you would by just keeping your money in a savings account.
You won't find those features in an off-the-shelf index ETF, which simply takes the issuance of bonds as they come. So, if the government issues a lot of bonds, you buy those. If risky corporations issue a lot of credit, you buy those. It's not optimized for spreading out risk or protecting your money when markets aren't performing in your favour. As a result, you might not earn as much money as you should for the risk you're taking — and if there's a market downturn, you might even lose more money than you'd expect.
What are the fees associated with the bond portfolio?
Great question. The Wealthsimple bond portfolio has two types of fees. And as you might expect from us, they're pretty low.
The first is a management fee. It's what you pay us to take care of your investments. The amount you pay depends on your tier:
- Core: 0.50%
- Premium: 0.40%
- Generation: 0.20%–0.40%
The second is a Management Expense Ratio (also known as an MER). This goes towards the funds we use in your portfolio and is, on average, about 0.20%.
How is this different from GICs, HISAs, or investing in bonds directly?
The Bond portfolio aims to give you reliable returns, but without the drawbacks of other options. Here are some of the advantages:
- Unlike Guaranteed Income Certificates (GICs), you can access your money at any time, because it's not locked in. Compared to High Interest Savings Accounts (HISAs), this portfolio offers higher expected returns by investing in bonds instead of cash.
- If you're considering managing bonds directly, this portfolio saves you the hassle of reinvesting, rebalancing, or adapting to changing market environments, while keeping fees much lower than the average mutual fund.
What does the bond portfolio invest in?
Wealthsimple's Bond portfolio invests in a diversified mix of fixed-income securities. They're carefully selected and managed to aim for steady returns while managing risk.
What are the benefits of short-term bonds?
Short-term bonds are a great way to keep your money stable while earning predictable returns. They're less risky than stocks, easier to liquidate compared to Guaranteed Income Certificates, and generally less affected by changes in interest rates than longer-term bonds.
When is the interest paid out?
The interest from the bonds in your portfolio lands in your account every month. We'll automatically reinvest it so that all of your money is working harder, bringing you closer to your financial goals.
Can I access my funds whenever I need them?
Yes. Unlike GICs, you can withdraw your money anytime, without commitment periods or penalties. Just keep in mind that it takes 1-2 business days to process the sale of your bond portfolio.
What are the risks associated with this portfolio?
Like all investments, this bond portfolio isn't entirely risk-free. While it focuses on high-quality, low-risk bonds, bond values may decline if interest rates rise. There's also some credit risk: during major market downturns, like in 2008 or 2020, the chance of defaults increases, which could lead to minor losses. Our team works hard to keep risks low, but it's important to remember that returns aren't guaranteed.
Is my yield guaranteed?
No. Your yield and interest payouts are variable based on market conditions.
Can I transfer bonds in-kind to my Wealthsimple bond portfolio?
Unfortunately, no.
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