Choosing Between DIY Index Investing and Canada’s Robo Advisors

DIY index investing versus Canada’s robo advisors

As someone who tries to help people optimize their personal finance decisions, I have been frustrated by the DIY investing hurdle for several years now.

I know that I’m not alone in this frustration, and it appears to be quite a common affliction amongst many in the personal finance blogging community.

See, I know that basic index investing using 2-4 vanilla ETFs is relatively easy (with maaaaaybe 3-10 hours of upfront reading) and super cheap. And I know that I can show others that DIY index investing using 2-4 vanilla ETFs is relatively easy and super cheap…

I even know that most of the time, at the end of my sermon our chat, folks will agree that using ETFs, embracing passive investing, and simply rebalancing their portfolios 1-4 times per year is the way to go.

What I don’t know is how to get people to actually execute DIY index investing!

I’m not sure exactly where I lose people...But somewhere along the road from learning about the statistical excellence and relative ease of building a “couch potato portfolio”—and actually opening up a discount brokerage in order to purchase their first few units of an ETF—way too many of the people I’m trying to help get lost.

They wander off course, start looking at maps of a million other investment paths, half-complete the 1-2 forms that are needed, and eventually, several years later, they realize that they:

  1. Never started investing, or
  2. Are still investing in high-fee mutual funds

Clearly these are very sub-optimal outcomes

Do As I Say – Not As I Do

Over the past year, my frustration has eased substantially.

This is due almost solely to changing my go-to recommendation for novice investors that are looking for a basic solution, from discount brokerages to robo advisors.

See, many of the Canadians that I encounter are looking for investment options that embrace the philosophy of index investing, but are even easier to implement than the discount brokerage path.

They want hands-off investing for their hands-on life.

Since writing and updating my definitive overview of Canada’s robo advisors, I have been amazed at how many people have connected with this fintech (financial-technology) solution to everyday investing problems.

This puts me in the somewhat awkward position of recommending a different path than the one I myself travel down since I continue to cut fees to the absolute bone using my discount brokerage account and 3-ETF portfolio (average MER of about .22%).

So I thought that it might be useful to detail exactly what steps you could use to determine if a robo advisor is a better choice for you than the DIY option that most Canadian bloggers recommend.

The temptation when reading about these choices is to default to the lowest possible price (DIY) – but I would caution you against writing off the simple robo option too quickly.

The value of the combination of automation and advice that robo advisors offer, in addition to their simplicity to set up, is very easy to underestimate.

It’s important to remember that while the difference between the MER and/or fees associated with robo advisors and the costs attached to DIY index investing are substantial (likely .5% per year of your portfolio or so), the difference between not getting start at all (paralysis by analysis) and using a robo advisor is massive.

Determining the Best Personal Fit

Without further ado, here are four questions to honestly ask yourself if you want to give yourself the best chance of investing success:

1) Do you want to take 3-10 hours of your time to read about index investing?

Index investing with vanilla ETFs within a discount brokerage account isn’t difficult, but it is intimidating if you don’t spend a few hours upfront to become familiar with the terms used, and the overall psychology behind how investing works.

Related: Intro to Self-Directed Investing

2) Are you comfortable with applying grade nine math to your investment portfolio?

Please don’t take offense to this question. I’m cool with grade nine math, but grade nine foreign languages is a real headache for me!

Re-balancing a basic couch potato portfolio is just about using percentages and fractions to keep your investment portfolio looking the way you initially determined it should look. (Not being swayed by the latest investing fad or watercooler tip.)

3) Does the ease-of-use/ease-of-signing up for something affect your ability to get started and stick with it?

Think about working out. Are you the type of person that is much more likely to work out if you can do it from home or have a gym relatively close by? Or are you more the type of person that becomes so focused on their goals that a 40-minute drive is no obstacle?

4) Do you enjoy having a knowledgeable person to bounce financial ideas off of?

Perhaps you have someone in your life that can fill this role, but many Canadians just aren’t ready to completely cut the cord with a financial advisor. While each robo advisor does “advice” a bit differently, they all offer someone to talk to about basic personal finance questions.

Don’t Get Sidetracked

After witnessing so many potential investors get sidetracked on their way to opening up a discount brokerage account and building their own couch potato portfolio, I’ve come to realize just how valuable a truly hands-off investing experience is to Canadians. In hindsight, considering how popular crazy high-fee mutual funds are, this should have been more apparent to me.

Robo advisors efficiently combine this automatic (no monthly decisions!) investing solution, with the relatively low-fee and markedly better return world of index investing.

The question inevitably becomes: Is .5% of your portfolio annually (roughly) worth the ease of use, low barrier to entry, and advice that comes with a robo advisor?

While the answer for me (an acknowledged personal finance geek) is still no, the answer for many more Canadians than I would have thought not-so-long ago is a resounding “YES”!

This article is a guest post by Kyle Prevost, whom you can find writing at he isn’t at the front of his classroom (or trying to relive his glory days on a basketball court).

Disclosure: Some links in this article may be affiliate links. We're letting you know because it's the right thing to do. Here’s a more detailed disclosure on how HTS makes money.

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John's picture

I think for many Canadians , robo advisors make a lot of sense , since diy with a discount broker still required monitoring and a certain degree of homework and financial literacy.
Many I have spoken to have neither the motivation or time and patience required .

July 11, 2017 @ 3:05 pm
Cheryl's picture

Let me just start by saying I have an online discount brokerage. I have two ETFs one MER .22 the other .65, both about the same value. I also have mutual funds, the majority are for income. I think what stops most Canadians is that they don't know they can DIY. Many years ago my mother used a stock broker and the thing is we all know stock brokers take a commission and that's about all we know. We don't know if we have to invest a minimum amount or other criteria. And they seem kind of unreachable. And then there's the financial advisor at the bank. Doesn't cost us any money to use him and s/he's pushing mutual funds.

People just don't know about all their options. And maybe they're not looking around.

For me, I like to see an article that says here are the options. Here's a list of some low fee online brokerages. Here's what you do to sign up. Now what do you buy? Here's a list of recommended index funds. Or recommended stocks. And then list the pros and cons. I can tell you my ETFs were bought by reading other blogs and forums and making a list of what people liked and what names I kept seeing coming up, and then doing more research including putting them on my Yahoo Finance watchlist and keeping an eye on them for a bit. I think there's other people out there like me who want to do this and need more DIY advice.

July 11, 2017 @ 3:18 pm
John Ukos
John Ukos's picture

I too have gone the DIY route but your article rings true to my experience. I spent WAY more than 3-10 hrs before getting comfortable with the methods and reasons for DIY (couch potato) before actually pulling the trigger and selling all my mutual funds and saying goodbye to my financial advisor. I read several books and had the good fortune of finding the Canadian Capitalist blog which was great support for this endeavour. His site is still up but not active..still lots of good info. A currently up and running site that is of great use to is the Canadian Couch Potato which also produces a podcast. However I am in total agreement with Stephen in that I cant imagine most people are going to want to go down this road as "easy" as it is. And so to reiterate your point Stephen, yes the robo advisor definitely has a place for Canadian investors that don't want to be drained of their investments by over priced mutual funds.

July 12, 2017 @ 6:26 pm
Stephen Weyman
Stephen Weyman's picture

My experience is that convincing anyone to go the DIY route that isn't already thinking about doing it themselves is near impossible.

July 26, 2017 @ 11:37 pm
Vito's picture

I agree with John, there are some people who just are not interested in investing time to learn about DYI, which baffles me considering its about your financial health, but I understand that the process can seem daunting and overwhelming. As such, in those situations, I think a robot advisor or Tangerine mutual funds are great, even for beginners before they learn how to DYI.

It took me about one year before I took the leap of faith plunge and started DYI with ETFs through a discount brokerage, but during that year (granted one full year is not necessary, but for me it was because I am the type of person that will research (paralysis by analysis) the "you know what" out of something before deciding to invest my hard earned money) I read as much as I could and scoured great websites like CCP before deciding to start. I would say that the ideal scenario for the average Canadian would need about 4-6 months of reading to calm their nerves and feel a little more comfortable with taking on the task of DYI, but when they do, I think they will get more motivated as I have, but there will always be those that won't and I do recommend a robot advisor for the "hands off" approach.

I use a 3 ETF portfolio approach. it just makes things much easier when rebalancing one per year. I invest in XAW, VCN and VSB for a fully globally diversified approach.

July 13, 2017 @ 2:24 am
Stephen Weyman
Stephen Weyman's picture

I don't think you're that abnormal. Simply feeling comfortable looking up ticker symbols and executing a trade with real money takes a lot of nerves, reading, and time.

July 26, 2017 @ 11:38 pm
Jackie K.
Jackie K.'s picture

I'm a retired DIY investor, and my problem with Robo adivers is that I have multiple accounts (taxable, RSP, LIF, TFSA), holding US and CA dollars, all totally close to $1.1M. Sure, I would love to "simply" buy 3 ETF, like Vito wrote, but it's kind of difficult to implement. Maybe there is a way, but I don't know how to do it properly.

Any ideas?

July 16, 2017 @ 4:52 pm
Dave's picture

Jackie, have a look at the complete offering of Robo's on the YoungAndThrifty guide on this article. Some robo's offer quite a significant variation and should be able to handle a diversified profile.

July 19, 2017 @ 6:33 am
Vito's picture

Hi Jackie,

I would take a look at Justin Bender (he's a CFP at PWL Capital) blog at He's got great content and more importantly, he has video tutorials showing exactly how to invest with different financial institutions. For further reading and content, look at CC blog, Canadian Couch Potato with Dan Bortolotti, and Justin's Blog.

Justin is really great, I've sent him email occasionally, either to explain some things from his videos or just about investing in general and he's amazingly generous that he will email back and quite promptly in fact.

I would also strongly encourage you to read Millionaire Teacher by Andrew Hallam. His book (1st ed, the 2nd ed is good too) changed my life and reinforced with CCP blog for further details. I am a bit of a nervous person when it comes to money because I didn't have it growing up and didn't just want to invest without fully understanding the "how to", but have to admit, I don't have a full 100% grasp of all details such as taxes, best practices, etc, in this regard I took a leap of faith, but felt confident enough in understanding the how to do it and why and how to manage it as well.

I invest through Questrade as a DYI, but robo advisors are also great for those that just want to set up the automated/hands off approach.

September 04, 2017 @ 1:47 pm

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