A: I think one of the first things to consider, David, is if you think you and your wife could be homeowners again, whether or not you ultimately like the apartment thing. If there is a chance that you might need some or all of the $ 1.2 million to buy a condo or house, I’d like to set aside the housing budget that you might need. Keep this in cash for the next six to 12 months until you make a decision.
Your existing Tangerine solution compares favorably with most mutual fund investment options. Fees are almost half the current rate at 1.07%, while other balanced funds are generally in the 2% range.
From a purely paid standpoint, robo-advisors could more than cut this in half, especially given the potential size of your account. Robo-advisors take the same approach to indexing that you probably purposely took with your existing tangerine savings.
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If you believe in passive investing, robo-advisors * are a good solution, especially due to the automatic realignment and monitoring of asset allocation. Your risk tolerance may actually dictate that you should have more or less stock exposure than your typical simple vanilla-compensated mutual fund, David. Robo-advisors ensure that you are assigned according to an asset allocation.
One consideration a robo-advisor may or may not be able to help you with, unless you ask them specifically, is related to taxation. If you and your wife plan to be a retired tenant and you’re investing all that $ 1.2 million, it will generate a lot of taxable investment income – probably $ 25,000 or more per year, depending on how you invest it .
Ideally, you want more tax efficient investments like Canadian stocks outside of your RRSPs * and less tax efficient investments like bonds inside your RRSPs. With an investment advisor or as a DIY investor, you may be better able to influence these decisions than with a robo-advisor. So make sure you consider this when you have the mandatory human interaction of going the robo-advisor route.