INVESTING FOR THE 21ST CENTURY

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  • Fiscal Frontiers

Robo Investing: 2019 YTD

March 2019 Update

(Disclaimer at end of post)


INTRODUCTION


The first quarter of 2019 is officially in the books and it has been fairly phenomenal so far! As of April 5, 2019, our robo-advisors were up a total of 12.49%, from a combined $2,000.00 to $2,249.81, as follows:

  1. Questwealth: $1,133.23

  2. WealthSimple: $1,116.58


The Questwealth account has led the WealthSimple account since January 17th. However, looking at the two accounts, they have moved in virtual lockstep since the beginning of the year, moving up and down together consistently.


If you are interested in investing with Questwealth, use our referral code (baxg1ibj) to get your first month of management free!


Before we compare our WealthSimple and Questwealth accounts directly to the ETFs we have chosen for comparison, we should discuss those ETFs individually.


OUR ETFS

We have outlined Our Control Group for this blog, being three Vanguard ETFs. As a quick recap, we are keeping track of:

  • The Vanguard S&P 500 ETF (VOO): which is designed to track the S&P 500, the most commonly cited benchmark for stock market investors.

  • The Vanguard Total World Stock ETF (VT): which is designed to track the global stock markets as a whole, with holdings in 8,109 different stocks and 42.1% of the market value being derived from outside North America.

  • The Vanguard Short-Term Government Bond ETF (VGSH): which is our “risk free” rate of return, obtained by having the fund track the Bloomberg Barclays US Treasury 1–3 Year Bond Index, which includes fixed income securities issued by the US Treasury with maturities between 1 to 3 years.

We’ve done the math such that it is as if we had made a $1,000 investment in each of the above ETFs on January 1, 2019. The value of any dividends paid on the ETFs is invested right back into the ETF. On April 5, 2019, the value of an investment in each of these ETFs looked like this:

With world markets lifting throughout the first quarter of 2019, the VOO and VT ETFs mirrored one another almost perfectly. This is frankly a little surprising to us, since we thought that there would be more differentiation in the World Market ETF (VT) by this point. We get that the U.S. economy makes up roughly 40% of the world stock valuation, but we thought that the other 60% would offer for a bit more variation between the simple S&P U.S. stock market tracker.


And unsurprisingly, our VGSH investment, which is designed to mirror the risk-free rate of return (i.e., be boring and stay fairly steady), was boring and stayed pretty steady.


ROBOTS VS. ETFS


The next table compares our robo accounts to our ETF control group. Note that, if you just want to look at it and get the gist of what happened, then the robo-investments have remained with solid lines and the ETFs are shown again with dashed lines:

And the results show that, at least for the first two months of 2019, when the markets were largely rising, our robots tracked the general market tracking ETFs, though they have fallen a little behind, largely, it looks like, due to an early January dip that the ETFs didn’t experience.


It makes sense that the robots are trailing the general stock market in an environment like this, where everything is ballooning upwards. Even though we designed our robo accounts to be on the more aggressive, long-term growth end of the spectrum, our accounts are still made up of a healthy amount of bonds, because we think even the most aggressive robots will shy away from 100% equity investments.


The hope would be that this strategy pays off when the stock market inevitably does start to finally come back down to Earth. Whether that is a full-blown correction, like some people keep suggesting is on the horizon, or whether it is just one of the daily 5-10% drops that should occur every 1-2 years (but which we haven’t seen since 2011), has yet to be seen.


Each investment started at $1,000 on January 1, 2019, and the value of each of these on April 5, 2019, ranked best to worst, was as follows:


CONCLUSION


We hope to add more robo-investors over the coming months and years. If you have a particular robot you think we should be looking at, then let us know in the comments, on Twitter @fiscalfrontiers or via email at fiscalfrontiers@gmail.com. Alternatively, if you have an ETF that you think would be a good one to track, then let us know via any of those channels, too.


Next week, look for our review of how our 2019 cryptocurrency investing has been going!


We at Fiscal Frontiers are not investment advisers and our only goal is to report to you on the performance of investments we have made so that you can consider our experience along with all the other information available to make an informed decision on what is best for you. Investing in the stock market is inherently risky and all of a particular investment could be lost.

 
 

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