Financial education programs can be humdrum at times, bringing to mind the iconic sleepy classroom scene in the movie Ferris Bueller’s Day Off. With that in mind, Fluor Canada is empowering employees to take stock of their finances through fun and engaging programs that appeal to the different generations that make up its workforce. Employees […]
What is a robo-advisor?
An intelligent investment firm, or robo-advisor , manages your portfolio with as little human intervention as possible, protecting your money from your own self-sabotaging instincts, along with those of your money manager. The company puts decisions into the hands of computer algorithms, which are much more resilient in the face of volatility and uncertainty than we short-sighted humans.
The way I think of it, it s a bit like sending a robot grocery shopping. While
you might get into the aisles and abandon your carefully-tailored meal plan at the first sign of a stomach rumble, your robot companion will never reach for junk food or tabloids at the register. It knows what s good for you, and will stick to the plan you agreed upon together, in your stronger moments dutifully returning home with spinach and quinoa no matter
The difference between index funds and mutual funds
To illustrate his point, Hallam pits the glossy mutual fund against the humble low-fee index fund, an unsexy slice of the overall market that offers broad exposure and an average annual return that hovers around 10%. While there are plenty of mutual funds that beat both that average and the S&P 500 year after year, Hallam encourages his reader to zoom in further to discover just how rare and misleading such a feat truly is.
If financial advisors worked on a volunteer basis and mutual funds were free to run, he notes, they d triumph over index funds about half the time. (Because index funds, being representative of the market at large, can never actually beat that market, which individual stocks and funds can.) But until that fantasy becomes a reality, Hallam estimates that an actively-managed mutual fund will need to beat the S&P 500 by an average of 4.6%