5 SIMPLE RULES OF SMART INVESTING

@getwealthsimple @mkatchen

Wealthsimple is Canada’s fastest growing online investment manager. We make smart investing

easy, low-cost, and transparent.

Glossary

Stocks

Bonds

Mutual funds

ETFs

Terms Definitions

Ownership stake in a company - also known as equity

Debt investment in which an investor loans money to a company or government

Pool of funds for investing in stocks, bonds, and other assets

Mutual funds that trade on an exchange

- Burton Malkiel, author

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

Rule #1: Start early

Einstein called compounding "mankind's greatest discovery”

3 friends (ages 30, 35, 40) start investing $5,000 per year until they are 65. By that time, they will have invested:

$125,000

$150,000

$175,000

403530

$399,772

$935,511

30

Age

6535

Impact of start date on wealth*

40

$616,729

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

10 years can add $0.5MM+ to your long term savings

Rule #2: Don’t pick stocks

Over 80% of professional stock pickers fail to beat the market

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

CN Equity

Int’l Equity

US Equity

CN Bonds

Percent of funds that under perform

0 10050

72

81

86

98

Personal anecdote: winning a stock picking contest at age 12…

… my winning pick lost 95% of its value between 1999 - 2001

Contest close 12/06/1999

MGI Software closing stock price

Acquisition 12/04/2001

$24.40

$1.18

Source: CBC acquisition announcement, Canada Trust Investment Challenge contest details

Rule #3: Keep costs low

Canadians pay the highest fees of any developed country

Average equity mutual fund fees by country (%)

2.42

0.82

Can

ada

US

A

Chi

na

Ind

ia

Italy

Be

lgiu

m

Sp

ain

No

rway

Ko

rea

Fra

nce

Tha

iland

Taiw

an

Sin

gap

ore UK

Ne

w Z

eal

and

Jap

an

Ge

rman

y

De

nmar

k

So

uth

Afr

ica

Sw

ed

en

Ne

the

rland

s

Sw

itze

rland

Aus

tral

ia

*Morningstar Global Fund Investor Experience Report, 2013

Would you pay $300K for financial advice?

$509,858

$800,594

0

Years

3015

1.6% in additional fees can destroy 36% of your long-term wealth

Growth at 2.42% fees Growth at 0.8% fees

* Average Canadian equity mutual fund charges 2.42% vs USA average fee of 0.8% ** Assumes $100,000 initial deposit, 8% annual returns

Rule #4: Diversify

Markowitz won a Nobel Prize for discovering that diversification reduces risk without hurting returns

Asset classes don’t always move in the same direction

Source: Morningstar, annual performance by asset class

2 assets 6 assets 10 assets

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

Here’s how it works

Impact of diversification on risk and return

2.26%Returns

13.3%Risk

0.17Ratio

2 assets 6 assets 10 assets

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

Here’s how it works

Impact of diversification on risk and return

2.26% 5.49%Returns

13.3% 8.49%Risk

0.17 0.65Ratio

2 assets 6 assets 10 assets

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

Here’s how it works

Impact of diversification on risk and return

2.26% 5.49% 9.72%Returns

13.3% 8.49% 10.17%Risk

0.17 0.65 0.96Ratio

Rule #5: Drown out the noise

Know your risk profile

Risk survey Risk discussion

• Online survey • Ability & willingness

to take risk

• Meet with an investment advisor

• Investment goals

Have the discipline to stick to your plan

Market returnsEquity fund flows

2002 2008 2013

In 2009, $150B flowed out of equity funds even as markets came roaring back

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.

Recap

Rule #1: Start early

Rule #5: Drown out the noise

Rule #2: Don’t pick stocks Rule #3: Keep costs low

Rule #4: Diversify

Questions?

HOW WE DO IT

We assess your risk profile and investment goals to help you create and stick to a long-term investment plan

Risk survey Suitability call

• Online survey • Ability & willingness

to take risk

• Phone call with your Wealth Concierge

• Investment goals

We build you a fully-diversified portfolio across 8-10 asset classes, customized for your risk tolerance

We monitor your portfolio every day and automatically rebalance it to keep you on track

Exp

ect

ed

re

turn

Risk

Your asset allocation will drift from its target as markets move

We optimize your portfolio for tax efficiency on a daily basis

$25 “harvestable” tax-loss benefit per share.

$75

Aug Sept Oct

$100

Tax-loss harvesting example*

* Illustrative example

Transparent and intuitive reporting via web and mobile

Team of advisors

Joe Canavan Prof. Eric Kirzner Roger Martin

David Ossip Dan Debow Andrew D’souza

How to do it yourself (simple)

Risk assessment: wealthsimple.com

ETF selection: wealthsimple.com/example

Brokerage account: Virtual Brokers, iTrade, Questrade, Qtrade

Further reading & support

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wealthsimple.com/google

Disclosures

Wealthsimple Financial Inc. is registered as a Portfolio Manager in Ontario, British Columbia, Quebec, Manitoba, and Alberta. 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.

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