Under my son's advice (note he doesn't know squat about the market), I invested $15K about 1 1/2 year ago in "Wealthfront", which now has almost exactly what I put in it. I.e., no earning.

Admittedly that was with a high risk tolerance, for the hell of it.

If you didn't know, they're one of an increasing number of robo-advisers (algorithm-based investment vehicles) with various levels of human contact. The humans one can call, are not decision makers, but are only there also to explain how your algorithm works, - possibly help you readjust your risk profile as established at the start of the investments. Note that Wealthfront doesn't have that human feature and currently only charges - I think - .25%/annually .

Since then, I've been comparing various other robo-advisers (there are not only individual businesses like Wealthfront , but big brokerage houses like Charles Schwab and Vanguard also have their own).

Their management costs vary from about .15% to .3 % (Schwab charges a flat $300 entry fee for almost any amount + $30/month.)

The ones with human "explainers" (all trained fiduciaries AFAIK) are all very nice (does this matter ultimately?). However, I wonder about likely yields with algorithms. That is, various referring to different ways dividing YOUR "pie" of investment types (based on age, assets, plans for the future, etc.).

Schwab and Vanguard, at least, seem to rely entirely on ETFs, rebalancing regularly (Schwab "daily", Vanguard every few month). The goal being to adjust your holdings to match your original risk profile, to keep your investments to that level. They also have features like tax-loss averaging.

Of course (d'uh!), there's a current element of intrinsic volatility in the world economy today - to say the least! Naming a few: the tarrifs issue, possible war with Iran, the growing trend to terrorism, internally or externally originated (who needs enemies with our own citizen "friends"?)
And, of course, having a lunatic as US president (OK, biased) and the upcoming elections. NOT a good time to invest, as a glance at almost any day's headlines underlines. However, per the science of "Modern Portfolio Theory" dictates that timing the market is anathema, so that shouldn't matter technically!

Also, I keep remembering the oft-cited investment "truism" that historically, index fund investing outperforms active advising. What could go wrong then - or rather, what could be better, especially comparing it to doing nothing with one's assets not currently under management?

So if so, why shouldn't an algorithm based portfolio well-designed to match your risk profile ((all ETFs, and chosen by a computer according to historical averages) be as reliable as a knowledgeable human being who charges tons more?

That is especially if - as all the fiduacieries claim, they are all objective with your best interests guiding them? To wit, they're all salaried (no commissions) and following the current new fiduaciary law requiring transparency about their or their firms profits.

Note that depending on your assets under management, an "ordinary" financial advisor (NOT robo, that is) would be charging at least 1% of your principle annually, up to a tier of at least a million $ at which point your management fee might drop to something like 1/2%.

Investing right now is scary for all, but I keep wondering about these new vehicles - in and of themselves and at this point in time. Again, the time shouldn't matter, I guess. That is, we ought to be able to ignore any sinking feelings that we appear ESPECIALLY poised now to go over a cliff economically. Per that Portfolios Theory which forbids market timing. (Ask Jon!)

I speak as someone still struggling to understand the ins and outs of municipal bonds (where I seem to be aimed by several robo funds I'm consulting to benefit from the comparisons). Also, I speak as someone who's concluded I'm one of the many congenitally unsuited to self-directed investing - something I see numerous experts in the psychology of personal economics agreeing describes most human beings. Ones unable to be cold-blooded enough to treat their OWN money with pure reason. (Dan Arieli, as a prime example of said experts.)

OK, back to the start...Anybody have their own experience or at least, comments about robo-advisers? (Please, no rear view mirror critiques about how stupid anyone considering such a move must be - now especially! As opposed to already having an established portfolio, developed over time per "dollar cost averaging", etc., to distribute ones risk. Long story, etc.)

FWIW if done now with the whole of my savings, I'd certainly establish a lower risk profile than I did back then with Wealthfront.

*Sigh*

I have two Schwab "Intelligent Portfolio" accounts. (One with IRA money, one with "regular" money). One has returned 16% in about 3 years. The other has returned just under 13% in the same time period.

Overall, I'm fairly satisfied with them. Put money in there and ignore it.

BUT, I also have a plain vanilla Schwab Brokerage account. In that account I dumped some funds into one of Schwabs EFTs, and that EFT has returned nearly 28% in 3 years.

It's free to open a brokerage account, there's no minimum deposit required, you get a free checking account along with the brokerage account and the checking account comes with a debit card that repays you for all ATM surcharges and which has no foreign transaction fees. If you travel or live abroad, that card is golden.

I guess what I would say is to open a Schwab brokerage account (or open an IRA if your funds are IRA funds), then pick your own EFT's through that account. Your fees will be close to zero, and you'll get some nice side bene's as well.

JMHO.

Bless you, Dan!

Just wondering how you went about picking the ETF(s?) you put in the "plain vanilla" brokerage account.

Also if you rebalanced it/them over the last year.

And again, how anybody sees the notion of investing now (emphasis on the NOW) in particular - conservative investor.

I know it's contrary to the catechism of Modern Portfolio Theory as is any question about time but...I mean, is this one of the worst times in history or what?

The long-term overboughtness of the Market, the ever looming Recession (does anyone really doubt it?), plus the political/economic realities of the world economy now.

The market was rising when you invested. Hard to lose (again that truism about index funds beating almost all human advisers).

Count me scared! And or scared AND stupid...
(OK, and Trump - and the election 18 months off.)

(Feeling the lemming in me pulling my inclinations.)

Regarding investing now versus later, that is very much a personal decision. It is impossible to time the market, so it's impossible to know when to invest. We're invested now, and have been for awhile. BUT, we don't need to draw funds out of our investments for the next few years so we're comfortable with letting it ride.

I don't read about the market, I don't study the market, I don't pay attention to signals or any of that. Neither does Sue. We're at a point where we don't need to draw on our funds in the immediate future, and so choose to take the risk of simply ignoring what's happening. We do have about 30% of our investments in a guaranteed return fund so I guess that means we've kind of hedged our bet a little.

As for picking the ETF, I just picked a broad based fund that had been performing well and that had very low fees.

There's no right answer to figure out. You can read and study forever, and never find the answer. The only thing to figure out IMO is what risk you're ok with, and to then use that as a guide on what to do.

We have modified our risk profile through the years, primarily to account for the potential for impending retirement, and kids' college tuition costs. (Yes, these two events occurred within a decade of each other, don't judge ).

Because the market is volatile, we have our money in a few different money market accounts, as well as some bonds, etc. We distribute the amount in each investment "bucket" based on the closest match to what we established as the risk profile we're willing to have. About every 6 months or so, we look at how much money is in each bucket (because some areas are better/worse than others in generating income), and rebalance to bring our risk profile back to what we want.

This is a pretty standard investment strategy. The notion of having all your investments in one money market, or all in bonds, or whatever, gives you no flexibility. Within the larger picture we select where we invest (e.g., we want our money market funds to be primarily "green," we want some to be international, etc.), but we don't pick individual stocks.

If you're willing to take on a high risk investment, that's fine. But I would put more thought into it--could you afford to lose a significant amount of that investment? This is a personal decision, but it is a decision that requires thought.

YMMV, of course!

quote:

Originally posted by Nina:
We have modified our risk profile through the years, primarily to account for the potential for impending retirement, and kids' college tuition costs. (Yes, these two events occurred within a decade of each other, don't judge ).

Because the market is volatile, we have our money in a few different money market accounts, as well as some bonds, etc. We distribute the amount in each investment "bucket" based on the closest match to what we established as the risk profile we're willing to have. About every 6 months or so, we look at how much money is in each bucket (because some areas are better/worse than others in generating income), and rebalance to bring our risk profile back to what we want.

This is a pretty standard investment strategy. The notion of having all your investments in one money market, or all in bonds, or whatever, gives you no flexibility. Within the larger picture we select where we invest (e.g., we want our money market funds to be primarily "green," we want some to be international, etc.), but we don't pick individual stocks.

If you're willing to take on a high risk investment, that's fine. But I would put more thought into it--could you afford to lose a significant amount of that investment? This is a personal decision, but it is a decision that requires thought.

YMMV, of course!

Much appreciation, Nina, even though you answered a different question from what I asked and I think misunderstood my willingness to take on a "high risk investment*. I wondered about the wisdom of using a "robo adviser" as my "investment counselor", especially one at either Schwab or Vanguard - with a human contact (only to answer questions, though. Don't think it's a collaboration like working with a regular fiduciary.)

However, I MUCH appreciate your discussing the issue of risk tolerance and volatility and adddressing the issues I raised at all.

Do I understand you are basically avoiding market exposure now because of current volatility and your family risk tolerance? (Go to PMs if this is too nosy to discuss "in public"!)

I would assume that either of those two brokerage firm's algorithms would put me mostly in bonds on account of my own risk tolerance and inability to tolerate loss. (This pertains to the issue of holding assets in cash because of market volatility). NOT at all or ever to "hold cash" (how I see current money market funds.)

The advisory services human interface those firms offer in combination with an algorithm-based portfolio don't seem to have any willingness/interest in putting consumers, however conservative, even in part in cash. By "cash" I very much mean money markets, unless I misunderstood you.

"They" say, you haven't lost anything unless you sell, but when you're past a certain age, you may HAVE to sell assets if the market is in a protracted recession.

Those advisory services only have available their own ETF products, which I think answers my suspicions about their "self-interest" in soliciting clients. The question of "what's in it for them?" (compared to human financial advisors of yore who often directed clients to products from which they personally benefited). Namely, Schwab and Vanguard only put their own products in their ETF portfolios. Well, maybe Schwab includes a few from outside but for reasons I don't get, are said to be "less transparent" than Vanguard who is said to be a bad thing.

Either way, I doubt very much they'd put a client's money in a money market fund (however conservative said client wanted to - ought to be, because it would be just that much less being used to purchase their own products.

So perhaps that's a built in flaw of the robo-investors. What if a client can't really afford as much market exposure as their products involve?

*I'm NOT! The Wealthfront investment was relatively small, and has paid greatly in education even though as of today I've only had a return of 1.5% in $. (Wonder what would have happened if I'd chosen 20 - 30% for a risk profile, instead of 70%!

The risk even within the market varies. You can get money markets that are low(er) risk. The market will always be a bit jumpy, though. But you can minimize it by investing in lower-risk stocks (things like blue chips as opposed to smaller, higher risk startups and such). But when you mix it with bonds (which are generally much less volatile) then your overall risk can be further reduced.

Like you, we're just getting to an age when we may not have the luxury of riding out a bad market for 8-10 years, waiting for a rebound. That's why we've switched our risk profile. When we were younger, we were more willing and able to ride out the inevitable lows, waiting for the highs. And it's always seemed counterintuitive, but you make more money in a bear market, because you can buy more stock at lower prices and have the gains when the market rises.

As for robo managers, to be honest I don't know much and don't worry about it. I either am willing to place my trust in my investment manager (or company) or I'm not. If they're using a robo manager or tea leaves or incantations to manage their portfolio is something I honestly don't worry about. I look at the history of the market fund, or the investor, or the company. If I'm OK with their historical rates of return, then that's as far as I go. My goal with investments is to think a lot about it on occasion, then put it out of mind.

I should also mention that we have a financial advisor who helps with this. There's no way that I am personally knowledgeable enough to know all the investment options, money markets, etc., nor am I interested in becoming an expert. I leave that to the experts. Our financial advisor is a nice Jewish boy (well man, at this point) who we've been with for decades, and who came highly recommended. A great guy.

Aha!

My missing ingredient - the "nice Jewish boy"vetted by a friend!

I'd be willing to forego face to face meeting with him, if he'd consider taking me on as a client.