For investors looking to save for retirement, robo-advisory companies are gaining favour due to low costs. Many robo-advisors calculate an investor's risk tolerance and based on that, build up a portfolio of exchange-traded funds.
So how do robo-advisory firms build portfolios for retirement?
"Sometimes for older investors, especially the ones that are close to retirement, we tend to minimize volatility and we try to reduce that volatility drag on their growth, because they are going to start seeing less and less contributions to their portfolio, potentially even withdrawals in the early retirement age, and we want to make sure that the current market volatility isn't affecting their lifestyle and their bottom line," says Tea Nicola, co-founder and CEO of Vancouver-based robo-advisor WealthBar Financial Services.
To do that, the robo-advisory service tends to focus on high-cash-flow investments that can support lifestyle without subtracting from the principal, as well as those that can mitigate volatility so that investors can reduce anxiety in this state of uncertainty in the market, says Nicola.
We asked Nicola for WealthBar's top ETF picks to hold in a portfolio for retirement. It is important to remember that each investor has a unique set of circumstances, and no advice should be seen in isolation, but as a part of a fully rounded investment plan.
Here are WealthBar's top picks in equity and fixed income.
Top Equity Pick: Horizons S&P 500 ETF (HXS)
Horizons S&P 500 ETF is a four-star fund that has a quantitative rating 882922 of silver. Founded in November 2010, the fund replicates the S&P 500 index. It has a management-expense ratio of 0.11%, and assets of around $780.8 million as of Oct. 3. In line with the index, its top five sector exposures are in technology, financial services, healthcare, consumer cyclicals and industrials.
"This fund is an appropriate pick, because it gives you exposure to the U.S. market, and most importantly, it's a Canadian ETF which means that it doesn't have a hidden currency exchange," says Nicola.
Top Fixed Income Picks: 
Vanguard Canadian Short-Term Bond ETF (VSB) and Vanguard Canadian Short-Term Corporate Bond ETF (VSC)
"We are in an area of interest rates volatility so I would pick a shorter-term fixed-income fund. These are two funds that actually work well together. They give you exposure to government and corporations equally while keeping that duration really short so that we can make decisions if the interest rates change at any point," says Nicola.
Vanguard Canadian Short-Term Bond is a four-star fund that has an analyst rating of silver. The fund tracks the Bloomberg Barclays Global Aggregate Canadian Government/Credit 1–5 Year Float Adjusted Bond Index, which provides market-cap-weighted exposure to investment-grade bonds with less than five years remaining until maturity.
VSB's tilt toward high-quality government bonds, durable cost advantage and strong index-tracking record underpins silver rating, says manager research analyst for Morningstar Research Services Phillip Yoo. The fund charges a management-expense ratio of 0.11%, which is substantially lower than the 0.65% category average MER. In addition to its low fee, the fund has a good index-tracking record, he says.
Vanguard Canadian Short-Term Corporate Bond is also a four-star fund that has an analyst rating of silver. This is one of the lowest-cost options in the Canadian Short-Term Fixed Income Morningstar Category, and it has tightly tracked the Bloomberg Barclays Global Aggregate Canadian Credit 1–5 Year Float Adjusted Bond Index.
"More than 90% of the fund's assets are currently invested in AA, A or BBB rated bonds, which is much higher than the category average of 60%. Many funds in this category allocate some of their assets to high-yield bonds, which this fund avoids. So, the portfolio's overall credit risk is slightly lower than the category average despite the sector concentration concern," says Yoo.
