Overview

Many investors have a common question: should I pick my own stocks and ETFs, or should I put my money in a managed account? Or, should I do both? Each approach comes with different considerations.

Self-directed investing

Managing an active stock and/or ETF portfolio can take up a lot of time. You should always research each security you’d like to add to your portfolio and make sure it's a good fit for your goals. For a well-diversified stock portfolio, this can take a lot of work.

In addition to selecting your investments by hand, you’ll also need to monitor your account on an ongoing basis to make sure your portfolio meets the target allocation for your account. You should carve out time to regularly rebalance your holdings.

What are the benefits of choosing your own stocks or ETFs?

Aside from the control you have over your investments, the benefit of the self-directed approach is that the fees are typically very low.

For example, Wealthsimple self-directed investing accounts have no fees or commissions to buy or sell stocks and ETFs. There are, however, currency conversion fees on USD investments. Many investment platforms in Canada also offer low-fee options for self-directed investors.

Using managed accounts

Since managed accounts involve someone else managing your money, they typically have a fee associated with them. When using a managed account, the first thing to check is the management fee. For example, Wealthsimple managed investing charges a 0.5% management fee. Many traditional institutions charge around 2%.

What are some of the benefits of a managed account?

Although managed accounts may cost more than investing on your own, there are many benefits to working with an advisory platform:

• Financial planning and advice: Managed accounts often provide access to advisors who can help you think through your entire financial situation and identify and manage risk. Having access to an advisor during times of market stress can offer comfort and prevent costly mistakes.
  
  
• Discipline: Managed accounts follow a disciplined investment approach. Automated investment decisions generally lead to better results and help investors avoid emotional decisions caused by market volatility that can hurt portfolio performance. Managed accounts use automated rebalancing with thresholds that maximize diversification and risk management benefits while keeping transaction costs low.
  
  
• Tax and ETF fee optimization: At Wealthsimple, managed stock accounts use certain low-cost ETFs traded on US exchanges for RRSPs, but use an equivalent Canadian-listed ETF for TFSAs, to minimize non-resident withholding tax charged to Canadians on US assets. We also negotiate on your behalf with ETF providers to reduce your MER.
  
  
• Time: For investors who may not have the time to build and maintain a sophisticated portfolio, a managed account can provide a great solution for long-term investments.

Frequently asked questions