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@Sven, age-based funds within 529s operationally work like TDFs for retirement; their glide-paths are to the college age of 18 (vs retirement date of the TDFs). One can mix age-based funds with traditional allocation funds within 529s to achieve a variety of custom glide-paths. But I don't know of a 529 that formally includes a robo-advisor fund within it.
@hank, most performance comparisons of robo-advisors with other funds (TDFs, allocation/hybrid) are for moderate-allocation (around 60-40). There are also variations for MA - MA Aggressive, MA, MA Conservative.
IMO, robo-advisors are nothing more than hyped-up allocation funds that are liked by the younger generation. If one is willing to spend a little time, one can achieve a similar effect with traditional allocation funds (static-allocations; Income, conservative-allocation, moderate-allocation, aggressive-allocation) or TDFs (glide-path allocation). A lot of PR has gone into promoting robo-advisors as something novel when it is just some old wine in new bottles.
If I had a robo I’d be yanking its strings today, asking what the 10 year going over 4.5% means and whether there’s a particularly good investment to try and profit from this. I guess the worst it might do is to suggest, “Take safe shelter immediately!” -
Hindsight is 20/20. Nevertheless this illustrates why trading in and out of sectors based on short term expectations may not pay off. If your question is whether robo advisors make changes more frequently than annually, I believe the answer is yes, perhaps too frequently, depending on the company and the types of investments used. (I'm surmising based on limited information.)
(I'm not seeing any recent moves in a Vanguard managed account that uses only index funds; it was already slightly overweighted toward mid/small cap.)
It doesn't matter whether an account is robo or human advised. The advisors are largely backed by their institution's models. Within the constraints of preferences expressed by individual investors (e.g. Sven expressed a preference to avoid EM), the advisors follow those models.
Take a manager like Will Danoff. Here are the top ten investments of FCNTX (as of July 31): Meta 11.8% (way overweight relative to S&P 500), BRK 9% (way overweight), MSFT 6.5% (similar to S&P 500), AMZN 5.8% (overweight), AAPL 4.8% (underweight), NVDA 4.12% (overweight), UNH 3.89% (overweight), GOOGL 2.63% (slight overweight), GOOG 2.25% (slight overweight), LLY 2.21% (overweight)
These are all in the S&P 500 top 12. Of the S&P 500's top 10, only TSLA is not in FCNTX. #10 in the S&P 500, XOM, is #15 for FCNTX.
More than expected. Much appreciated @msf. Guilty as charged to reacting to short term movements. My question was provoked after spending considerable time digesting a quarterly summary late last night of a long / short CEF I own. It appears to have a 24% short position on SPX. You can play those kinds of games when using leverage.
As Earnie Harwell used to say, “Hang on to your Strohs … “
That’s an interesting list of holdings for FCNTX. I owned BRK for about a year. Let it go recently.
IMO, robo-advisors are nothing more than hyped-up allocation funds that are liked by the younger generation. If one is willing to spend a little time, one can achieve a similar effect with traditional allocation funds (static-allocations; Income, conservative-allocation, moderate-allocation, aggressive-allocation) or TDFs (glide-path allocation). A lot of PR has gone into promoting robo-advisors as something novel when it is just some old wine in new bottles.
No argument here.
The key is the highlighted section. People have to be willing, and interested, in spending a little time. Many are not, though that may seem weird to MFO readers.
As to being able to achieve similar effect with TDFs, Vanguard says the same thing. I quoted a portion of Vanguard's disclosure above. Perhaps I should have included more of it, as it echoes what you are saying. In essence, for the extra fee, you get handholding and some advice but otherwise similar investments, especially if one sticks to index funds (a common makeup of TDFs, not just at Vanguard):
Vanguard offers a range of different solutions to help you meet your financial goals, including self- directed brokerage services, single fund investments (such as Vanguard’s Target Retirement Funds), and different investment advisory programs. If you are considering investing through a total market index investment setting, you should understand that each of the Four Totals [Total Stock, Total Bond, Total Int'l Stock, Total Int'l Bond] is a share class of the mutual funds that are used (or are substantially similar to the mutual funds used) in Vanguard’s Target Retirement Funds. In certain circumstances, your recommended standard portfolio will contain identical allocations to the four Total Funds that are available in a Vanguard Target Retirement Fund, which is generally available at a lower cost than the Services.
If money is tight and you are over 59 1/2, one might consider an IRA withdrawal that funds your HSA. This could be done each year until age 65. Taxes due on the IRA withdrawal (in the amount equal to the tax deductible HSA contribution) cancel each other out.
IRA “withdrawal” to HSA “contribution” Strategy:
If money is tight and you’re 59½ or older, you could take a regular withdrawal from your IRA and use it to contribute to your HSA. The tax bite from the traditional IRA withdrawal and the tax deduction from the HSA contribution should nearly cancel each other out. And most importantly, you can do this more than once—in fact, every year if you want.
Comments
@hank, most performance comparisons of robo-advisors with other funds (TDFs, allocation/hybrid) are for moderate-allocation (around 60-40). There are also variations for MA - MA Aggressive, MA, MA Conservative.
IMO, robo-advisors are nothing more than hyped-up allocation funds that are liked by the younger generation. If one is willing to spend a little time, one can achieve a similar effect with traditional allocation funds (static-allocations; Income, conservative-allocation, moderate-allocation, aggressive-allocation) or TDFs (glide-path allocation). A lot of PR has gone into promoting robo-advisors as something novel when it is just some old wine in new bottles.
Hopefully not early this year. YTD (through Sept 22, data from M*),
VOO (S&P 500): 13.89% (23rd percentile LCblend)
IVOO (S&P 400): 3.92% (48th percentile, MCblend)
DFAS: 2.91% (50th percentile; SCblend)
Hindsight is 20/20. Nevertheless this illustrates why trading in and out of sectors based on short term expectations may not pay off. If your question is whether robo advisors make changes more frequently than annually, I believe the answer is yes, perhaps too frequently, depending on the company and the types of investments used. (I'm surmising based on limited information.)
(I'm not seeing any recent moves in a Vanguard managed account that uses only index funds; it was already slightly overweighted toward mid/small cap.)
It doesn't matter whether an account is robo or human advised. The advisors are largely backed by their institution's models. Within the constraints of preferences expressed by individual investors (e.g. Sven expressed a preference to avoid EM), the advisors follow those models.
Take a manager like Will Danoff. Here are the top ten investments of FCNTX (as of July 31):
Meta 11.8% (way overweight relative to S&P 500),
BRK 9% (way overweight),
MSFT 6.5% (similar to S&P 500),
AMZN 5.8% (overweight),
AAPL 4.8% (underweight),
NVDA 4.12% (overweight),
UNH 3.89% (overweight),
GOOGL 2.63% (slight overweight),
GOOG 2.25% (slight overweight),
LLY 2.21% (overweight)
These are all in the S&P 500 top 12. Of the S&P 500's top 10, only TSLA is not in FCNTX. #10 in the S&P 500, XOM, is #15 for FCNTX.
More than expected. Much appreciated @msf. Guilty as charged to reacting to short term movements. My question was provoked after spending considerable time digesting a quarterly summary late last night of a long / short CEF I own. It appears to have a 24% short position on SPX. You can play those kinds of games when using leverage.
As Earnie Harwell used to say, “Hang on to your Strohs … “
That’s an interesting list of holdings for FCNTX. I owned BRK for about a year. Let it go recently.
The key is the highlighted section. People have to be willing, and interested, in spending a little time. Many are not, though that may seem weird to MFO readers
As to being able to achieve similar effect with TDFs, Vanguard says the same thing. I quoted a portion of Vanguard's disclosure above. Perhaps I should have included more of it, as it echoes what you are saying. In essence, for the extra fee, you get handholding and some advice but otherwise similar investments, especially if one sticks to index funds (a common makeup of TDFs, not just at Vanguard): https://personal.vanguard.com/pdf/vanguard-digital-advice-brochure.pdf
OTOH, if one is willing to spend the time with the advisor, one can wind up with portfolios that are significantly more personalized.
If money is tight and you are over 59 1/2, one might consider an IRA withdrawal that funds your HSA. This could be done each year until age 65. Taxes due on the IRA withdrawal (in the amount equal to the tax deductible HSA contribution) cancel each other out.
IRA “withdrawal” to HSA “contribution” Strategy: investopedia - transfer-ira-money-to-an-hsa