Wealthsimple is for people who dream of a smarter way to invest their savings. We use technology to make investing smarter, easier, and transparent.

FIVE RULES OF SMART INVESTING

Smart Simple

- Burton Malkiel, author

“Focus on what you can control and think long term.”

Albert Einstein called compound interest "mankind's greatest discovery". Listen to the world's smartest man - invest early and often.

Rule #1: Start early (simple)

30 35 40 65Age

$399,772

$616,729

$935,511

A 10 year head start can add $535,739 to your long term savings. That could have big implications for you and your family.

Rule #1: Start early (smart)

Impact of start date on savings

*Assumes $5,000 annual contribution, 8% annual returns.

The average Canadian investor pays more than 2% per year in fees. More than any other developed country in the world.

Rule #2: Keep costs low (simple)

Paying 1.9% more in fees has big implications. Over 30 years, you could end up with 40% less in savings ($365,637 in this example).

Rule #2: Keep costs low (smart)

$509,589

$875,496

0

Years

3015

* Average Canadian equity mutual fund charges 2.42% vs Wealthsimple management fee of 0.5% ** Assumes $100,000 initial deposit, 8% annual returns.

Impact of fees on savings

Growth at 2.42%* Growth at 0.5%*

Harry Markowitz won a Nobel Prize for discovering that diversification reduces risk without hurting returns. Some investments go up, others go down.

Rule #3: Diversify (simple)

Diversification leads to higher returns and less risk. We use Modern Portfolio Theory to optimize returns for each level of risk.

Rule #3: Diversify (smart)

2 assets 6 assets 10 assets

2.26% returns

5.49% returns

9.72% returns

13.3% risk

8.49% risk

10.17% risk

Impact of diversification on risk and returns

Source: Bloomberg as of 3/31/14, 10 years from January 2004 - February 2014

0.17 return/risk

0.65 return/risk

0.96 return/risk

Have the conviction to stick to your plan in the best and worst of times. Investors who chase performance or run away from losses are doomed.

Rule #4: Drown out the noise (simple)

Investors often sell low and buy high. In 2009, $150B flowed out of equity mutual funds even as markets came roaring back.

Rule #4: Drown out the noise (smart)

Notes: Cash flows represent net cash moving in or out of stock funds. Market returns are based on the S&P/TSX Composite Index. Sources: Morningstar for cash-flow data; Thomson Reuters Datastream for market returns.

Stock market returns Equity fund flows

2002 2008 2013

Impact of emotion on investor returns

The majority of professional stock pickers fail to beat the market. Simply match the market instead. It's boring and it works.

Rule #5: Don’t pick stocks (simple)

84 percent of active mutual funds fail to beat their performance benchmarks over 10 years.

Rule #5: Don’t pick stocks (smart)

CN Equity

Int’l Equity

US Equity

CN Bonds

Percent of funds that under perform

0 10050

Source: Vanguard calculations using data from Morningstar. Fund classifications and benchmarks provided by Morningstar.

72

81

86

98

Disclosures

Wealthsimple Financial Inc. is registered as a Portfolio Manager in Ontario and British Columbia. Securities in your account are protected up to $1,000,000 CDN. See www.cipf.ca for more details. !Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in loss. We do not provide financial planning services to individual investors. Read our Full Disclosure at wealthsimple.com/legal/.disclosure. !Copyright 2014 Wealthsimple Financial Inc.

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