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Using a robo-adviser is a smart thing to do if you want help build and maintain a soundly constructed portfolio of low-fee ETFs.

But you can run your own ETF portfolio at half the cost or less. Let’s roughly figure a robo-adviser would cost you a total fee of 0.75 per cent – 0.5 per cent to manage the portfolio and 0.25 per cent charged by the ETFs (that comes off the top of returns, which are reported on a net basis). A DIY investor using an online brokerage firm that charges no commissions to buy ETFs could get overall costs down to 0.35 per cent or less, including ETFs and commissions for selling ETFs to periodically rebalance the portfolio.

We’ll use the Freedom 0.11 Portfolio of four ETFs, which I wrote about in a column earlier this year. With a weighting of 40 per cent in bonds and 20 per cent each in Canadian, U.S. and international stocks, the weighted average management expense ratio for this portfolio works out to 0.11 per cent. You could get the MER a little lower if you used more stocks and less bonds.

Here’s a quick recap of the funds in the portfolio:

  • iShares Core Canadian Short Term Bond Index ETF (XSB): MER of 0.11 per cent.
  • BMO S&P/TSX Capped Composite Index ETF (ZCN): MER of 0.06 per cent.
  • Vanguard S&P 500 Index ETF (VFV): MER of 0.08 per cent.
  • TD International Equity Index ETF (TPE): MER of 0.2 per cent.

Brokers that would charge you zero commissions to buy these funds are Questrade and Virtual Brokers (regular sell commissions apply). National Bank Direct Brokerage offers completely commission-free ETF trading if you buy or sell more than 100 shares at a time. For this exercise, let’s use an account of $25,000. That’s enough to put your account beyond the reach of the maintenance or low-activity fees some brokers slap on small accounts.

On average, online brokers charge $10 to trade stocks and ETFs. If you used one of the brokers listed above, you could make any number of ETF purchases through the year and not pay anything. Let’s figure on six sell transactions per year to rebalance your portfolio (sell winners, buy more of your losers), which would be a total of $60, or 0.24 per cent of $25,000. Add 0.11 per cent to that for the ETFs you own, and you have an all-in cost of 0.35 per cent (the exception is NBDB, where your cost remains at 0.11 per cent if you trade at least 100 shares).

The cost of rebalancing your do-it-yourself ETF portfolio would decline as your account got bigger ($60 spread over a bigger base). Robo-adviser fees decline as your account grows into six figures, but you’ll consistently save by investing on your own. If you need help managing your portfolio, and there’s nothing wrong with that, the extra cost of a robo is worth it.

Note: Qtrade and Scotia iTrade have no cost ETF trading, but only for a limited selection of funds.