Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
GeorgeHanson
Posts: 2
Joined: Sun Nov 25, 2018 8:34 pm

Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by GeorgeHanson »

Currently with Schwab where I have two IPs (one income, one growth) which have been in place for two years. Both are well diversified (I would say almost too diversified) and overall performance is down a 2% - 5% throughout the year (i.e., not one single month in the green). I’m aware of the cash drag issue but the cash did help a little recently. My issue with the cash is you cannot withdraw cash rather, must sell a little of the funds/ETFs.

I’m seriously thinking about moving the IPs to one, three-fund portfolio at the beginning of the year and would appreciate thoughts on the following:

- Satisfaction/dissatisfaction with Schwab IPs
- I somehow get the impression the three-fund portfolio is ideal for the working/accumulation stage. Hopefully this is not true but experiences with starting a three-fund at retirement would be great.
- In general, how has YTD performance been with a 40% US stock, 10% international stock and 50% bond portfolio? Performance on three-fund portfolios close to this mix is fine.

Thank you!
PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by PFInterest »

3 find is for everyone: accumulation and otherwise
Multiply total US return by 40% add to total intl etcetcetc
User avatar
nedsaid
Posts: 13839
Joined: Fri Nov 23, 2012 12:33 pm

Re: Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by nedsaid »

GeorgeHanson wrote: Sun Nov 25, 2018 8:40 pm Currently with Schwab where I have two IPs (one income, one growth) which have been in place for two years. Both are well diversified (I would say almost too diversified) and overall performance is down a 2% - 5% throughout the year (i.e., not one single month in the green). I’m aware of the cash drag issue but the cash did help a little recently. My issue with the cash is you cannot withdraw cash rather, must sell a little of the funds/ETFs.

I’m seriously thinking about moving the IPs to one, three-fund portfolio at the beginning of the year and would appreciate thoughts on the following:

- Satisfaction/dissatisfaction with Schwab IPs
- I somehow get the impression the three-fund portfolio is ideal for the working/accumulation stage. Hopefully this is not true but experiences with starting a three-fund at retirement would be great.
- In general, how has YTD performance been with a 40% US stock, 10% international stock and 50% bond portfolio? Performance on three-fund portfolios close to this mix is fine.

Thank you!
I think either way would be fine. The Three Fund portfolio has been doing great and has the advantage of being very easy for an investor to manage himself. The Schwab Intelligent Portfolios are complex and with so many positions you will see many more trades as the portfolio rebalances. The costs of either route would be very low. Schwab does manage for tax efficiency.

If your Schwab accounts have been down 2% to 5% in 2018, that is about what one should expect. I think I am down probably 6% to 7% year to date. So don't sweat your portfolio performance.

It boils down to whether you want a simple portfolio you can manage yourself or a more complex portfolio managed by Schwab. My guess is that your costs and performance will be about the same either way. From what I can see, the Schwab portfolios are fairly complex.
A fool and his money are good for business.
typical.investor
Posts: 2293
Joined: Mon Jun 11, 2018 3:17 am

Re: Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by typical.investor »

GeorgeHanson wrote: Sun Nov 25, 2018 8:40 pm - Satisfaction/dissatisfaction with Schwab IPs
- I somehow get the impression the three-fund portfolio is ideal for the working/accumulation stage. Hopefully this is not true but experiences with starting a three-fund at retirement would be great.
- In general, how has YTD performance been with a 40% US stock, 10% international stock and 50% bond portfolio? Performance on three-fund portfolios close to this mix is fine.
There is a good write up here https://theroboreport.com/ (I'm not affiliated with them and you have to register an email. They send mail when a new report is out)

Unfortunately they stop at two year returns. Anyway, as you say the cash actually helped and Schwab has the best two year returns for fixed income.

Fidelity Go did the best which is due to their being light on international stocks. Schwab is about 50%-50% and includes value stocks which haven't done that well recently. Overall Schwab was middle of the pack on two year returns. Anyway, some of your stocks in the IP are cheaper valuations (value and international), so hopefully we will see more returns there. Of course, your allocations might not be exactly the same.

I like the funds Schwab uses. There are great debates around here if small value and international will pay off, and I use the same funds Schwab uses for IP to get access there. I don't recommend a drastic switch out of asset classes that haven't been doing well recently. That is a classic way to underperform. US stocks can't go on a tear forever -- their valuations are too high and the dollar will reverse at some point (it's cyclical).
User avatar
Nate79
Posts: 6421
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by Nate79 »

I had SIP in the past and was satisfied. It is an excellent free robo service. The so called cash drag is not an issue as has been pointed out many times on here in the past by myself because their overall fixed income return includes the cash as a risk reduction. The exact return of SIP vs 3 fund or whatever will depend on the exact stock/bond mix and time scale. Schwab uses a more value tilt so might outperform in the future but I doubt by much.
Angst
Posts: 2430
Joined: Sat Jun 09, 2007 11:31 am

Re: Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by Angst »

GeorgeHanson wrote: Sun Nov 25, 2018 8:40 pm Currently with Schwab where I have two IPs (one income, one growth) which have been in place for two years. Both are well diversified (I would say almost too diversified) and overall performance is down a 2% - 5% throughout the year (i.e., not one single month in the green). I’m aware of the cash drag issue but the cash did help a little recently. My issue with the cash is you cannot withdraw cash rather, must sell a little of the funds/ETFs.

I’m seriously thinking about moving the IPs to one, three-fund portfolio at the beginning of the year and would appreciate thoughts on the following:

- Satisfaction/dissatisfaction with Schwab IPs
- I somehow get the impression the three-fund portfolio is ideal for the working/accumulation stage. Hopefully this is not true but experiences with starting a three-fund at retirement would be great.
- In general, how has YTD performance been with a 40% US stock, 10% international stock and 50% bond portfolio? Performance on three-fund portfolios close to this mix is fine.

Thank you!

The underlined part of your message above, along with the subject heading "...in retirement" lead me to think you might first want to focus on your plans and understanding of withdrawal methods in retirement. Many, probably most people in the forum advocate looking at the portfolio's total return, not it's dividends specifically, when considering how to take withdrawals in retirement. Have you read through the Wiki on this subject?

https://www.bogleheads.org/wiki/Withdrawal_methods
mpnret
Posts: 319
Joined: Sun May 20, 2018 9:16 am

Re: Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by mpnret »

You may want to do a search on Schwab Intelligent Portfolio or SIP on the forum. Lots of past discussion. Here is one: viewtopic.php?f=1&t=254802&p=4037763#p4037763
I don't use SIP but did evaluate awhile back and found Schwab had hidden fees. Maybe I shouldn't call them hidden fees because thay are actually on the Schwab website for those who look. First one was the cash drag. My sample portfolio had a cash amount well into 6 figures which was non-negotiable. I was told if I need some cash I could take it out but it would automatically be replenished from my investments. Schwab does let you know they are making money from your cash with this quote from their website: "Schwab Intelligent Advisory charges no commissions or account service fees. Schwab affiliates do earn revenue from the underlying assets in Schwab Intelligent Portfolios® accounts. This revenue comes from managing Schwab ETFs™ and providing services relating to certain third-party ETFs that can be selected for the portfolio, and from the cash feature on the accounts. Revenue may also be received from the market centers where ETF trade orders are routed for execution."
Next fee was the higher expense ratio of the funds used by SIP. The Schwab website lists it as .17%. My 4 fund portfolio at Vanguard has an expense ratio of .07%.
Topic Author
GeorgeHanson
Posts: 2
Joined: Sun Nov 25, 2018 8:34 pm

Re: Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by GeorgeHanson »

A sincere thank you to everybody for taking the time to reply to my questions with your insights and resources. With your help, I now have a little more homework to do. Thanks again!
Alex GR
Posts: 161
Joined: Mon Jul 31, 2017 9:17 am

Re: Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by Alex GR »

May I ask a silly question? (I am still learning)
If the cash portion of the robo-portfolio is so high, can we mitigate this problem by just having less cash in an emergency fund?
For example, suppose my emergency fund is $70000 and cash portion of IP would be $50000. So I set up the IP(where cash portion is $50k) and leave $20k emergency fund (MM). The amount of cash hasn't changed-cash is cash. Is it that simple or is there more to the story?
I suspect selling though may be a taxable event?
mpnret
Posts: 319
Joined: Sun May 20, 2018 9:16 am

Re: Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by mpnret »

Alex GR wrote: Mon Nov 26, 2018 3:42 pm May I ask a silly question? (I am still learning)
If the cash portion of the robo-portfolio is so high, can we mitigate this problem by just having less cash in an emergency fund?
For example, suppose my emergency fund is $70000 and cash portion of IP would be $50000. So I set up the IP(where cash portion is $50k) and leave $20k emergency fund (MM). The amount of cash hasn't changed-cash is cash. Is it that simple or is there more to the story?
I suspect selling though may be a taxable event?
Is 50k in SIP really the same as cash in your emergency fund? You can spend money in your emergency without selling investments. However, if you spend cash from your SIP the portfolio automatically rebalances to your required cash position. So the 50k is cash in the sense that it is in an account called cash and earning next to nothing in interest but it really comes out of your other funds.
User avatar
Nate79
Posts: 6421
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Schwab Intelligent Portfolio (IP) or Three-fund in Retirement?

Post by Nate79 »

You could transfer your SIP in kind to your taxable account in case you wanted to acces the emergency fund cash. Pretty extreme action to get at cash but it is possible without needing to sell. It's a pretty fast process, no more than a week or so.
Post Reply