Wealthsimple is a robo-advisor that focuses on strategies designed to help you grow your wealth over time using passive investing techniques based on modern portfolio theory. The idea is that the way you include asset classes in your portfolio matters more than individual investments. Wealthsimple takes this concept and encourages you to learn how to invest money consistently over time to build long-term wealth.
In this Wealthsimple review, we’ll look at how this robo-advisor works so you can decide whether it’s the right choice for you.
- What is Wealthsimple?
- How does Wealthsimple work?
- Who can use Wealthsimple?
- How much can you earn with Wealthsimple?
- How to maximize your earnings with Wealthsimple
- How to stay safe investing with Wealthsimple
- Common questions about Wealthsimple
- How to sign up for Wealthsimple
- Other investment apps consider
What is Wealthsimple?
Is Wealthsimple legit? The simple answer is yes. Wealthsimple was founded in 2014 in Toronto. The company has offices in Toronto, London, and Brooklyn. Wealthsimple has more than 1 million users worldwide and won a Webby Award for Best Financial Services Website. It is also included in the Fintech 100 as a leading global fintech company.
The company claims to be “building the world’s most human financial company” and offers socially responsible investing and halal investing portfolios. In general, Wealthsimple is a reputable company that offers the ability to invest in a variety of assets.
We consider it one of the best investment apps out there because it provides easy access to investing, without the need for you to do a lot of the heavy lifting.
How does Wealthsimple work?
Wealthsimple is fairly straightforward. As with many robo-advisors, you answer questions that reveal your risk tolerance, as well as your financial goals and timeline. Once that’s done, Wealthsimple assembles an investment portfolio using various index exchange-traded funds.
By using index ETFs, Wealthsimple relies on a wide swath of the stock market to create diversified portfolios, rather than trying to pick winning stocks. This strategy can provide stability. Some of the assets that Wealthsimple uses when creating portfolios include:
- U.S. stocks
- Foreign stocks
- Municipal bonds
- Global stocks
- Emerging markets
- U.S. government bonds
- U.S. inflation-linked bonds
Because Wealthsimple uses the principles of MPT, they look to reduce risk and optimize portfolios based on asset classes like stocks and bonds. The idea is that the right diversification can help you grow your wealth over time. Will you see huge jumps in your net worth? Probably not. But you can grow your portfolio with consistency. It’s a way to earn passive income over time by building your investments.
Wealthsimple encourages regular investing, so you can decide how much to invest each month and the money will be invested in the proportions designated in your portfolio. On top of that, Wealthsimple offers some helpful perks, including mobile apps and a roundup feature that lets you invest your spare change. Its automatic rebalancing feature adjusts your portfolio when things start to drift away from the desired allocation. It also automatically reinvests your dividends and offers optional tax-loss harvesting. You can also get expert advice from a Wealthsimple financial advisor, whether you invest $100 or $1 million.
Who can use Wealthsimple?
Wealthsimple is a Canadian company, but it does accept U.S. investors. In order to open a Wealthsimple account, you must have a U.S. residential address and a valid Social Security number, or be in the U.S. on a permitted visa. You might not have access to all the same features as a Canadian would, but you’ll be able to take advantage of the robo-advising and build an investment portfolio.
Like many robo-advisors, Wealthsimple is best for someone looking to grow their wealth over time by investing regular amounts each month. In general, this investing platform is likely to work best for those who like a hands-off approach to investing. You can tweak your portfolio risk level, but Wealthsimple isn’t designed for frequent trading or access to a lot of exotic assets.
Those who are looking to invest a set amount each month and grow their wealth over time are most likely to benefit from using Wealthsimple. Wealthsimple supports several different investment account types to help you meet your goals, including Roth IRAs, traditional IRAs, SEP IRAs, and joint accounts. Here’s a quick look at its different investment tiers:
|Account type||Account minimum||Management fee||Features|
|Wealthsimple Basic||$0||.50%||Free portfolio review, automatic rebalancing, access to a human advisor, automatic deposits, and dividend reinvesting|
|Wealthsimple Black||$100,000||.40%||Free portfolio review, automatic rebalancing, expert financial advice, automatic deposits, dividend reinvesting, tax-loss harvesting, and a dedicated financial planning session|
|Wealthsimple Generation||$500,000||.40%||Free portfolio review, automatic rebalancing, access to a human advisor, automatic deposits, dividend reinvesting, tax-loss harvesting, and a dedicated team of financial advisors|
How much can you earn with Wealthsimple?
As with any type of investing, how much you earn with Wealthsimple depends on how well your investment portfolio does, as well as how much you put in.
With investing, you purchase assets in the hope they provide you with a return that allows you to grow your wealth and meet your financial goals. In general, you can expect higher returns if you take on more risk.
If you choose a growth portfolio with Wealthsimple, your asset allocation will be weighted more heavily toward stocks, and you may see a higher rate of return. For example, the S&P 500 index saw a return of 31.22% in 2019 (with a real return of 28.29%), whereas T-bonds saw a return of 9.64% (real return of 7.18%).
However, there are also greater fluctuations with investments that are considered riskier. Between 1928 and 2019, the annual real return on the S&P 500 was as high as 58.20% and as low as a loss of 38.90%. That’s a pretty big swing. On the other hand, T-bills saw its best annual real return of 21.28% and its worst annual loss of 14.57% during the same period. The swings are much smaller, though there is always the risk of loss.
Over time, this type of volatility tends to even out. In general, stocks go up over time. Although there might be down years, the trend line moves higher. This is why Wealthsimple focuses on using indexing as a strategy. It takes advantage of wider market performance and delivers returns over time because the market generally tends to rise.
It’s important to note that Wealthsimple isn’t designed for those looking to make immediate extra cash. It’s designed with long-term wealth building in mind, so it’s not your best option if you’re looking to make $500 in the next month.
How to maximize your earnings with Wealthsimple
The best way to maximize your earnings with Wealthsimple is to choose a risk level that works well for you and then consistently invest over time. However, investing comes with risk, and there’s no guarantee you’ll make money.
When investing with a robo-advisor using MPT, the goal isn't to beat the market. Instead, it’s to reach your personal financial objectives, whether that’s saving up for a down payment on a house, retiring down the road, or paying for your child’s college. Maximizing your earnings with Wealthsimple is about using the app to create an investment plan that works for you and then sticking to it for the long term.
How to stay safe investing with Wealthsimple
As with any investment, you run the risk of losing your money when you put it with Wealthsimple. Although the company uses tried methods and algorithms to allocate your investment portfolio, you could still see a loss in value. This is especially true if you’re investing during a recession or a time of market volatility.
However, you can make some choices that protect you. First of all, Wealthsimple offers different portfolio options, so if you feel nervous, you can adjust your portfolio so it has a more conservative asset allocation. In Wealthsimple’s most conservative risk level, 49% of your investment portfolio is in municipal bonds.
When deciding what’s appropriate for you, you need to take into account your personal situation, as well as your investment timeline, goals, and risk tolerance. For example, my retirement portfolio (not held at Wealthsimple) is 90% stocks. I’m still in the growth phase and decades away from needing the money. However, my son’s 529 has a different allocation because he will start college in about a year. There is a higher proportion of bond funds in his account because I’ll need to access the funds sooner rather than later.
Consider your own needs before moving forward, and realize that no matter how careful you are, there’s still a chance that you will need to sell your investments at a loss, depending on market conditions.
Common questions about Wealthsimple
Is Wealthsimple a good investment?
Wealthsimple is one of our top picks for the best robo-advisors. It offers some unique perks, including the ability to build an SRI portfolio or a halal portfolio. Whether any investment is a good one for you depends on your individual situation, financial goals, risk tolerance, and timeline. For some investors, Wealthsimple can be a good choice.
Can you make money on Wealthsimple?
Yes, it's possible to make money with Wealthsimple. However, Wealthsimple isn’t set up for trading stocks. It’s set up to make long-term progress toward building wealth. As with any investment, investing your money using Wealthsimple comes with some risk.
What are Wealthsimple's fees?
Wealthsimple has relatively low fees. Their investment management fees range from .50% for a Wealthsimple Basic account to .40% for a Wealthsimple Black or Generation account. Wealthsimple’s ETF expense ratios, which are fees associated with fund management, are approximately .2%.
It’s important to note that the management fees are based on your account balance. Although there are no minimum investment requirements for Wealthsimple, you need to have at least $100,000 in your account to qualify for a Black account and at least $500,000 to qualify for a Generation account.
Is Wealthsimple good for beginners?
Wealthsimple can be a good choice for new investors. You don’t have to do a lot of research or know much about investing. You set up automatic investments and Wealthsimple does the heavy lifting by building a portfolio for you. If you just want to get started and take advantage of compounding returns, Wealthsimple can be a good start. You can let your money grow while you learn more about investing and then branch out. And if you're interested in learning about investing, Wealthsimple also offers a wealth of personal finance resources on its site.
Does Wealthsimple have a minimum investment requirement?
Wealthsimple has no minimum investment requirement for its Basic account, which can make it ideal if you do not have a significant amount of money to invest.
What happens if Wealthsimple goes out of business?
Wealthsimple is covered by Securities Investor Protection Corporation insurance. This insurance covers your investment account up to $500,000 if the company goes out of business. It’s important to note that SIPC insurance doesn’t cover losses due to market events.
How to sign up for Wealthsimple
It’s fairly easy to sign up for a Wealthsimple account.
- Click “Get Started” on the homepage and follow the prompts to the application.
- Fill out the application, which includes basic information about your identity and where you live.
- Answer questions about your investment experience and e-sign agreements to let Wealthsimple manage your investment portfolio.
- Verify your bank by uploading a copy of your bank statement, a voided check, or a screenshot of your bank account.
- It takes about five business days to get you up and running.
Other investment apps consider
Wealthsimple isn’t the only investment app available. For the most part, if you’re looking for similar services, Betterment and Wealthfront can be solid investment options. In addition to retirement savings accounts, Wealthfront has the added benefit of providing a 529, which many robo-advisors don’t, so if you’re hoping to save for college, Wealthfront might be a better choice.
However, Wealthsimple doesn’t have a focus on trading, so if you’re more interested in trading, an investment account with Robinhood might be a better choice. You’ll have more control over your investments and be able to trade individual stocks, rather than relying on a robo-advisor to make your decisions.