Q

How can I invest in ETFs?

A

Either buy them yourself (experts only), go through a traditional advisor (higher fees), or use an automated investment service (a lower, fixed fee).

Maybe you’ve heard that ETFs are a great, low-cost, high performing way to invest your money. But also wonder how a person would go about investing in them. Well, it depends on how familiar you are with investing, and what you want to pay in fees.

If you know a lot about financial markets, and buy and sell securities on your own, you can find an ETF that suits your financial goals and buy it. You’ll need a brokerage account. Any major brokerage will allow you to buy any existing ETF, not just their proprietary ETFs (though don’t be at all surprised if they try to interest you in theirs first!). They will, however, probably charge a fee for every trade you make, so if you change investments often it can get pricey quickly. Another option is to buy your ETFs through a traditional financial advisor. Advisors, hopefully, will know more than you about choosing the perfect ETF for your needs, as well as how each ETF fits into your larger portfolio. The disadvantage is you’re going to pay relatively high fees. Most traditional investment advisors make their living by charging you a percentage of any money they manage. That fee — which could be well north of 2% annually — can run counter to one of the main advantages of the ETF. Yep: ETFs charge extremely low fees but these advisors charge their fees on top of what the ETFs charge.

Lastly, you may buy ETFs through an automated online investment service like Wealthsimple. (Some call us robo-advisors because your account is largely handled by precise computer algorithms. But all the actual human beings who design portfolios and talk to you on the phone when you need help don’t think of themselves as robots.) Robo-advisors charge management fees on top of what the ETFs charge too. The major advantage of an automated online investment service is that it offers the institutional knowledge and guidance offered by traditional advisors, for lower (0.50% - 0.40%) management fees.

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