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Simplicity Vs. Schwab’s Robo Portfolio

TedTed
in Fund Discussions
FYI: Nearly three years ago, Schwab launched its free robo Intelligent Portfolio and today has over $10 billion in assets. Schwab did not disclose what was in it, so I bought one in order to write about it.

I was somewhat critical in my personal look at the Schwab Intelligent Portfolio as well as a follow-up revisit of Schwab months later. Though there have been some changes, it’s still a 16-fund sophisticated portfolio.
Regards,
Ted
http://www.etf.com/sections/index-investor-corner/simplicity-vs-schwabs-robo-portfolio

Comments

  • MikeMMikeM
    I've own the Schwab robo for about the same time as this guy. I can't disagree with him. I also believe the complexity of the robo does not, or has not as of yet added total return value. The biggest concern I've had, and he stated, is having gold in the portfolio. I personally think gold is a bad investment over time. Certainly it has been over the time of his comparison.

    The other thing I noticed, especially early on when I bought, was the robo seemed to have high international and EM exposure when you summed up equity, bonds and currency. Up until the 2017 that was not the place to be, so at least my robo suffered early on. Currency (like gold) in my mind is another complexity that adds little to no value.

    I think I would recommend the robo to those that want absolutely no interaction with their portfolio, though as the author also notes, this can be done with a simple 1-fund retirement fund. I've been 50:50 in the robo and a self-managed portfolio. My plan is not to give up on the robo altogether, but to reduce it's weight in my over-all. Not exactly sure what I want that ratio to be yet.
  • Old_Skeet
    Hello,

    Here is a thought I feel worth considering about Robo Advisor.

    One of the reasons Robo has the number of funds that it has is to keep asset bloat down on the funds that it invest in. Think of all those investors that have money in Robo and what this sum amounts to. Now, if it was configured much like the Federal Governments Thrift Savings Plan (with only five options) and they spread money only among only these five holdings over the current (about) sixteen funds found in Robo then this puts a lot more money into each position (five) over what they have Robo configured (16). I'm thinking as assets grow under Robo so will the number of funds.

    Something to think on. Deminished returns becasue of asset bloat.
  • msf
    That would be a good theory, except that this invests in ETFs that are primarily index funds.

    Should Vanguard open another total bond market index fund because VBTIX has almost $200B in it? Oh wait, they did: VTBNX. I'm soooo confused.
  • willmatt72
    How would this portfolio perform during a down market? It looks pretty aggressive to me, so it would be nice to see how it performs in both up and down markets.
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