We think it’s important for our clients to know not just what is in their portfolios, but why it’s there. In this guide, we’ll walk you through how we invest, why we choose the assets we do, and what you can expect from your investments in different market conditions. We tried to be as comprehensive as possible, but if we missed anything and left you with questions, just ask.
The super-short version: Wealthsimple’s Classic portfolios offer broad market exposure that’s designed to generate returns while limiting risk — and give you better performance than most traditional portfolios, especially during downturns. How do we do that? By diversifying: holding more varied geographic exposures, focusing on lower volatility stocks (which tend to have equal or better returns than high-risk stocks), and by investing in riskier government bonds and gold.
Founded in 2014, Wealthsimple caters exclusively to residents of Canada and the U.K. The brand is regulated as an investment dealer in all Canadian provinces and is a member of Investment Industry Regulatory Organization of Canada (IIROC), as well as the Financial Conduct Authority (FCA) in the U.K.
Wealthsimple holds over £3 billion in customer assets in the U.K. and $10 billion in Canada, and caters to more than 2.5 million collective customers. The brand is valued at $5 billion, following its latest investment round of $750 million from a consortium of prominent investors, including Meritech and Greylock.
Wealthsimple is a Canadian online investment management service founded in 2014. It offers various financial products, including automated investing, savings accounts, and tax-filing services. With a mission to make investing accessible to everyone, Wealthsimple uses technology to provide low-cost, diversified portfolios without the need for traditional financial advisors.
By and large, the riskier the asset class, the higher the possible returns. As a group, stocks are typically riskier than bonds, which are riskier than cash — and generally they offer higher long-term returns to match that risk. This means that the more the portfolio is weighted toward stocks, the riskier it tends to be and the greater the long-term potential for returns should be.
There are no guarantees with any investment, just a range of potential outcomes. A portfolio with only one stock has a range of outcomes wider than an Airbus 380. It may bring huge returns, but it also may bring huge losses. With a diversified portfolio, however, you’re no longer betting on a single asset or asset class to determine success or failure. The more varied investments are, the less likely it is they will perform in the same way, which leads to a narrower range of potential outcomes. Your risk decreases while the potential for long-term returns across a variety of market conditions increases.
Here’s how all that stuff above influences the assets we choose for our core portfolio.
Our Approach to Stocks
Stocks drive the risk in our portfolio — which makes how we diversify those stocks and how we balance the risk of our stock portfolio especially important.
Investors tend to have a bias toward wherever they’re from. It’s called the equity home bias, and it exists because foreign holdings tend to be taxed at higher rates — and because there’s comfort in investing in companies you’re familiar with. While there is merit to those arguments, most portfolios have way too much home bias and would be better off being balanced across multiple geographies.
At one time or another, every country or region is bound to underperform. But if you’re diversified geographically you’re often also exposed to a region that exceeds expectations. This helps you smooth out returns, avoid bad outcomes, and improve compounded returns. In addition, systematically rebalancing between outperforming and underperforming regions means you are selling winners and buying losers, which can improve returns..
This chart shows inflation-adjusted stock market returns of six countries compared to a portfolio consisting of the stocks of each country, weighted equally (effectively allocating 1/6 of the portfolio to each country and rebalancing between them monthly). In the shorter term, returns in the portfolio are never the highest or the lowest as any specific country is guaranteed to outperform the average, like the United States has recently. Over the course of 50 years, however, an equally-weighted portfolio generates the highest returns.
Source: Bloomberg. This chart takes the total country returns, by month, since 1971 through February 2023, and deflates them by Canada CPI to generate real returns. All returns in CAD. This analysis is for illustrative purposes only to show the benefits of diversification, and does not consider fees, taxes, or any other implementation costs. Past performance does not guarantee future results, which may vary.
While being diversified geographically means you will end up among the winners over the long term, it also may help you avoid periods of extreme losses. Below, we show the worst inflation-adjusted returns of each country since 1970 over 5 and 10 year periods. In the vast majority of cases, being diversified across countries would have reduced losses significantly.
Source: Bloomberg. This chart takes the total country returns, by month, since 1971 through February 2023, and deflates them by Canada CPI to generate real returns. All returns in CAD. This analysis is for illustrative purposes only to show the benefits of diversification, and does not consider fees, taxes, or any other implementation costs. Past performance does not guarantee future results, which may vary. Inspiration for this analysis comes from Asness, “Seven Thoughts about Running Big Money for the Long-Term”, 2009.
You might think higher-volatility stocks would provide higher returns, but in reality that tends to work at the asset class level, and not for individual stocks. Historically, lower-volatility stocks have actually provided similar or even slightly better returns than their high-volatility counterparts. One theory to explain this is that investors tend to overpay for high-risk assets with the potential for lottery-like returns.
You can see this phenomenon in action in the charts below, which show the returns of stocks sorted by their volatility. Note that the lower volatility stocks have among the highest returns, and the stocks with the highest volatility have the lowest. By focusing on lower-volatility stocks, we can reduce the portfolio’s risk without reducing long-term return expectations.
This analysis is for illustrative purposes only to show the linkage between volatility and returns, and does not consider fees, taxes, or any other implementation costs. Returns are for Russell 1000 (1979-2021), MSCI World (1995-2021), MSCI Emerging Markets (1998-2021). Past performance does not guarantee future results, which may vary.
This approach gives us a particularly useful advantage: historically, while indexes like ours that are weighted to minimize volatility have underperformed their market-cap-weighted peers during major rallies and bull markets, they have outperformed them during market downturns. Imagine you have two stocks with similar average annual returns, but one is much more volatile. In a bear market, the less volatile stock is likely to lose less — and that can help compounded returns significantly.
1. We invest in more government bonds — and fewer corporate bonds.
2. We invest in more longer-duration government bonds.
If this is your first time using Wealthsimple, you’ll need to set up your profile before you can open an account. We’ll ask you for some details so we can verify your identity and ensure your account is secure. You’ll only need to enter this information once — it will be used for all your Wealthsimple products.
Before you begin
Be a Canadian citizen, Canadian resident, or have a valid Canadian visa
Meet the minimum age requirement set by your province
Have a Social Insurance Number (SIN)
Have a Canadian residential address
Be able to satisfy identity verification requirements
Set up your profile
To create your profile, follow these steps:
Download the iPhone iOS/android app
Select Sign up
Enter your Email and create a Password
Tap Next to continue
Follow the prompts to fill out your personal information
Note: You’ll need a few key pieces of information on hand to fill out your profile:
Full Name
Social Insurance Number (SIN)
Date of Birth
Address (and potentially a previous address)
Phone Number
Employment information
Creating a step-by-step guide for logging into Wealthsimple can help users who are new to the platform or experiencing issues with access. Here’s a detailed guide you can use:
Website: Go to Wealthsimple's official website using your preferred web browser.
Mobile App: Open the Wealthsimple app on your smartphone or tablet. If you haven’t installed the app, download it from the Apple App Store or Google Play Store.
Website: On the homepage, find the “Log In” button in the upper right corner of the screen. Click on it.
Mobile App: On the app’s main screen, tap the “Log In” button.
Email Field: You’ll be prompted to enter the email address associated with your Wealthsimple account. Type in your email address carefully and ensure it’s correct.
Password Field: After entering your email, type in your password. Make sure you’re using the correct password associated with your account.
Show/Hide Password: You can use the “show” option (usually an eye icon) to view your password as you type, to avoid mistakes.
Two-Factor Authentication (2FA): If you have 2FA enabled on your account, you’ll receive a verification code on your phone or email. Enter this code in the provided field.
Authentication Apps: If you use an authentication app (like Google Authenticator), open it and enter the current code.
Website: Click the “Log In” button to proceed.
Mobile App: Tap the “Log In” button to access your account.
Website: Once logged in, you’ll be directed to your Wealthsimple dashboard, where you can view your investments, account details, and other features.
Mobile App: You’ll be taken to the app’s main dashboard, where you can navigate through various features and account information.
Wealthsimple offers a range of features designed to make investing simple and accessible:
Forgot Password: If you’ve forgotten your password, click on the “Forgot Password” link on the login page and follow the instructions to reset it.
Account Lockout: If your account is locked due to multiple failed login attempts, you may need to wait or contact Wealthsimple support for assistance.
Browser Issues: Ensure your browser is updated and try clearing your cache or cookies if you encounter login issues.
Website: If you continue to experience difficulties, visit the Wealthsimple Help Center or contact their support team.
App: Use the in-app support feature to get help from Wealthsimple’s customer service.
Can I trust Wealthsimple?
Yes, Wealthsimple is trusted by over a million investors, is backed by prominent venture capital investors and is regulated in Canada and the U.K. These factors coupled with its nearly 17 years of operation make Wealthsimple a trustworthy broker for U.K. and Canadian residents.
Wealthsimple is excellent for beginners. Unless you have your mind set on becoming a day trader or active investor, Wealthsimple is a solid choice for investing for the long term, either passively in a self-directed Wealthsimple Trade account or through use of its robo-advisor, Wealthsimple Invest.
Yes, in order for Wealthsimple Canada to verify your credentials when you open a live account, you must provide your Social Insurance Number (SIN) as part of the identity verification process. Wealthsimple uses state-of-the-art security, along with data encryption and two-factor authentication to help protect account information.
Wealthsimple is very much like Robinhood in the sense that it offers both a robo-advisor managed account, Wealthsimple Invest, alongside a self-directed account, Wealthsimple Trade, a user-friendly web trading platform.
With a valuation of $5 billion and over 2.5 million clients, Wealthsimple is considered legit; it’s properly licensed in countries where it offers services, including Canada and the U.K. Being properly regulated is a crucial factor when determining the legitimacy and trustworthiness of a broker.
Wealthsimple Trade is a self-directed investment platform, allowing users to buy and sell various individual stocks and exchange-traded funds (ETFs) on major Canadian and U.S. exchanges.
Wealthsimple offers a good fit for investors of all ages looking to save money and take the next step on the road to long-term financial security. The fees are slightly higher than average for the robo-advisory space, though the account minimum of $0 removes a hurdle for investors who are just starting out.
Wealthsimple is a powerful tool for anyone looking to manage their investments efficiently. Its user-friendly interface, combined with advanced features and robust security measures, makes it an excellent choice for both new and experienced investors. By following the steps outlined in this guide, you can easily log into your Wealthsimple account and start taking control of your financial future.