Performance, performance, performance …

Recently I read an interesting article in the Globe & Mail by Rob Carrick. It was about robo-advisors and how to pick the right one. In it he said several things I’ve been telling my clients for years, long before there was such a thing as algorithm-based portfolio management.

Right off the top he wrote: “Robo-advisors are for people who want a sound, smart investing solution, not home runs.” Quite frankly, that should be every investor’s goal, because counting on “home runs” is neither realistic or achievable for most of us.

He went on to say: “Stop asking me if I’m tracking the performance of the portfolios that robo-advisors use for clients. It’s far too early to evaluate returns. Robos have been around for one to two years at most – any returns posted over that short a timeframe would be borderline meaningless. Five years is a serious slice of time for judging investment returns, although three years might suffice for a superficial take.”

I couldn’t agree more, and would add that this is true whether you work with an Advisor or an online, automated service.

What really matters is process

And that’s something else Carrick and I agree on. He winds up his article talking about just that, listing the criteria he believes “distinguishes one robo from another:”

• Fees, and how they differ
• Optimum rebalancing frequency
• Effective use of ETFs
• Finding the right mix of investments for your risk tolerance

Unless I’m missing something here, these are some of the same things that all good Advisors focus on. Get that right and add in the sound and relevant advice an Advisor can offer – and what you’ll have is a process that can lead to a higher probability of success and the performance you need.

Alan Friedman is an Investment Advisor with CIBC Wood Gundy in Toronto. The views of Alan Friedman do not necessarily reflect those of CIBC World Markets Inc. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.

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