A bond portfolio can offer 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 chequing account, investing in a low-risk bond portfolio might perform even better. Over a few years, the probability of outperforming the chequing account is 80-90%, and the probability of having losses over that period is very low. And even if you happen to underperform the chequing account once in a while, it typically won't be by much.

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.

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 (credit risk) and the risk that interest rates might change (duration risk). We change how much of each risk we take on as the market changes, and we do it for two reasons:

1. To lower the chance of losing money
2. 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.

Wealthsimple bond portfolios have 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 0.2%.

A 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 Registered Savings Accounts, this portfolio offers higher expected returns by investing in bonds instead of cash.
• If you're considering managing your own portfolio of bond ETFs 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.

A portfolio of bond ETFs basically gets you a basket of bonds within a single fund, adding instant diversification and reducing the impact of any single issuer's default. By contrast, building your own diversified portfolio of individual bonds requires purchasing multiple securities, then managing them, which can be both time-consuming and more expensive.

Bond ETFs are highly liquid, trading on stock exchanges throughout the day, while individual bonds often have limited liquidity, incur higher transaction costs, and may be difficult to sell before maturity without incurring losses. One last thing to keep in mind is that bond ETFs may provide regular income distributions and are professionally managed, they also charge management fees, whereas individual bonds have no management fees (because you have to manage them yourself).

Yield to maturity (YTM) reflects the expected annual return if bonds are held to maturity at current market prices. For our bond portfolios, YTM is the market value-weighted average of the underlying securities, shown net of management expense ratio. The yield information is updated on a monthly basis.

The yield information is updated monthly. It's worth noting that the yield is subject to change due to fluctuations in dividend payments, ETF prices, and portfolio composition. Past performance is not indicative of future results.