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Robo-Advisors - Barron's Rankings, 2024

Robo-Advisors - Barron's Rankings, 2024

Robo-advisors are now $1.09 trillion business. Those are no longer seen as steppingstones to other strategies. In fact both the young & the people approaching retirement like them. The leaders in the AUM now are all latecomers with financial &/or marketing muscle; the original pioneers Betterment & Wealthfront do have respectable presence. So, it isn't all about ERs. But the competition is tough & some big players like JPM, GS have left this business.

Performance Ranking (overall based on multiple criteria): Fidelity, Merrill, SoFi, Vanguard, Wealthfront, Betterment, Schwab, Empower, Ally, USB, E*Trade/MS, SigFig, Wells Fargo, Acorns

1-Yr Performance for Allocation 60-40: SoFi, Fidelity, Vanguard, Wealthfront, USB, Empower, Betterment, Merrill, Ally, Schwab

AUM: Vanguard, Edelman, Morningstar, Fidelity, Schwab, Betterment, Wealthfront, Guided Choice

https://www.barrons.com/articles/best-robo-advisors-c2b901fe?mod=hp_columnists

Comments

  • I haven't checked recently but in the past Vanguard ( and Schwab) had sig International exposure. I am surprised they have done so well
  • Schwab is at the bottom of the performance rankings YTD, 1 year (the only robo with single digit returns, more than a point behind second worst), and 5 year (tie for worst). Over three years it did 0.2% better than the worst.

    As a blind guess without checking, I suspect the cause is cash drag, especially since Vanguard has outperformed Schab recently by more than 3%, and by more than 1% over three and five years.

    Schwab ranks in the middle of the pack overall. That seems to be due to broad financial planning tools and features like Intelligent Income (mentioned by Barron's) for managing a monthly income stream. Raw performance only counts for so much; with Barron's that's 25% of the total score.
  • edited August 13
    The mandatory 12% in cash that returns about 0.2%, plus the mistimed heavy allotments to international, emerging markets and small caps since the funds inception has been a losing strategy for Schwab's Intelligent Portfolio. At one time it was 1/2 my retirement savings. I thought it would be care-free professionally managed money. After about 8 years, I finally gave up and baled on it at the end of last year. What sounded like a good idea, was not.
  • edited August 13
    @MikeM +1 2 3

    Have followed with interest your work with Schwab’s robo over many years. Appreciate all your comments. I’m thinking there are some actively managed allocation funds that might do quite well what robos profess to do.

    I subscribe to a newsletter that publishes a “recommended portfolio” consisting of 10 index funds. (It’s currently almost 50% cash.) I don’t follow the recommendations - and can’t see any particular brilliance to the approach after about 3 years following it, except that the index funds recommended carry much lower ER’s than I pay for my actively managed funds.
  • edited August 13
    @hank
    Ten index funds is too much 'diworstificiation' to my mind.

    --- Diworsification is the process of adding investments to a portfolio in such a way that the risk-return tradeoff is worsened.

    A quote from Steve Jobs (Apple) that applies to the many things to many investors attempt to chase or justify.
    “A lot of times, people don't know what they want until you show it to them”
    ― Steve Jobs
    NOTE: We've remained U.S. centered with investments since the GFC. Hell, Europe remained broken for years after the melt. AND, if investment 'things' become bad here, they're probably worse everywhere else, globally.

  • edited August 13
    catch22 said:

    @hank
    Ten index funds is too much 'diworstificiation' to my mind.

    --- Diworsification is the process of adding investments to a portfolio in such a way that the risk-return tradeoff is worsened.

    A quote from Steve Jobs (Apple) that applies to the many things too many investors attempt to chase or justify.

    “A lot of times, people don't know what they want until you show it to them”
    ― Steve Jobs
    NOTE: We've remained U.S. centered with investments since the GFC. Hell, Europe remained broken for years after the melt. AND, if investment 'things' become bad here, they're probably worse everywhere else, globally.

    -

    Thanks @catch22

    Re: your #10 complex (Decaphobia)

    Does this mean you won’t go near asset allocation “fund-of-funds”? The ones I look at, including several well regarded ones from T Rowe Price (like TRRIX) typically invest in 15-25 other funds. While this one doesn’t limit holdings to just index funds, you can find many that do. What do you know that these managers don’t?

    The reason I myself maintain 10 equal weight positions in assets like OEFs, CEFs, ETFs, stocks (9 positions + cash) is the ease of swapping out one position for something else should I desire to take profits from an over-performer or raise / lower the portfolio’s overall risk profile. Having fewer than 9 holdings (+ cash) would entail a greater degree of risk in selling 100% of a position and replacing it with another. In my dreams … I envision having only 5-7 holdings. But am in no hurry to achieve that elusive goal.

    To each his own. I was happy to own only a single fund (TEMWX) during most of my working years. Sir John did a great job managing it in the early days. I think what’s really important is that investors have a plan and adhere to it, whatever plan fits their needs. Investing a lifetime’s accumulated wealth at 80 isn’t the same as building an asset base when you are 25 or slyly gaming the markets at 50.

  • Applause directed at Catch and Hank.
  • Hi @hank
    I subscribe to a newsletter that publishes a “recommended portfolio” consisting of 10 index funds
    ..... T Rowe Price (like TRRIX) typically invest in 15-25 other funds. What do you know that these managers don’t?
    The only thing we know that the 'managers' don't, is what we want to hold in our portfolio at this time.
    The TRRIX example that was noted has 27 other funds of funds. Way too many.
    As to 10 index funds, the same would apply at this time.
    If we had an advisor present such choices; the first input from us would be the 'elimination list'.
    ---NO International equity or bonds for either developed or emerging markets. NO value funds. NO hedged. NO high yield bonds. NO mid or small cap. NO metals.

    We're a Medicare/SS/pension(s) household, and while we enjoy having decent annual returns; we also have capital preservation in mind.
    Most of us spend $1,000's each and every year for house and auto insurance, and never file a claim; and the money is gone forever.
    We treat our bond fund holdings/MMKT's as 'investment insurance' currently using BAGIX (active managed). We'll not likely outrun inflation and taxes, but maintain the capital.

    The AGG bond etf is similar in high quality to BAGIX (ER = .30).
    I've watched over the years and charted these two against bond 'index' funds. BAGIX has maintained near 1% annualized above the returns of the other two (etf and index). AGG and bond index funds run very close paths. I'm not trying to sell, but to offer the view.

    Our portfolio is 40/60.
    ---The 40 in equity is split between growth (17%) and conservative equity (23%)(healthcare).
    ---The 60 is I.G. bond fund (33%) and MMKT (67% @5% yield).

    Technically, we have 7 holdings; if one counts the MMKT.

    NOTE: We've remained fully U.S. centered with investments since 2008. We have more than enough foreign exposure inside the equities, from their foreign earnings and/or some foreign holdings.

    Remain curious,
    Catch
  • @catch22 : Thank you for the run down.
    Have a good one, Derf
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