I'm sharing my updated experiences with roboadvisors in order to help others make informed decisions. I will try to update this from time to time (assuming I remember to do so). Would be great if others shared their experiences too.
First of all, why use a robo anyway? For me, at least, I have an insatiable urge to "tinker" or "optimize" my investments. If I managed my portfolio in a full DIY fashion, I expect that I'd have a constantly fluctuating asset allocation and possibly daily rebalancing
. So handing things over to an outside entity is probably a good thing. Why a robo vs, say, a target date fund? That's a trickier question. At the end of the day, depending on the robo, a target date fund may give you all or almost all of the benefits at a similar (maybe even cheaper) price. But I like the transparency of the robos, the planning interfaces, and the feeling of ownership of the individual securities underlying the portfolios.
I first started a few years ago with the Schwab Intelligent Portfolios. On paper, this looked pretty good - no fee, wide diversification, tax-loss harvesting, and a great user interface. The issue has been performance. As you can clearly see from Backend Benchmarking's (BB's) "Robo Report" (a valuable resource to anyone interested in robo-advisor accounts), the Schwab value tilt through its fundamental indexing products has resulted in bottom-of-the-table performance. Will value outperform growth going forward? Who the heck knows? But I thought the whole point of BH investing was to be agnostic to "smarter" investing approaches and just own everything, so I am not interested in factor tilts any more. In addition, while I know there have been innumerable debates on this site about the relevance of the "cash drag," BB's recent analysis showed that it creates a performance impediment in up AND down markets. This aligns with my own experience. So I'm migrating away from this service.
About a year ago, I opened a Fidelity Go account. This is probably the barest-bones of the bunch. Very straightforward interface, no factor tilts, simple assets (five funds). It has worked well so far, rebalancing occasionally during recent market turbulence and outperforming Schwab handily. The fees are low but not quite rock bottom: 0.35% of assets, which, in a low-return environment (especially for fixed income) has to be considered. It's a good service and I'll keep a "test" amount of money in it, but it won't be my go-to account.
Earlier this week, I opened a Vanguard Digital Advisor account, which is a new service from our friends in PA. This one has a nice interface that pulls in information from your outside accounts (though, unfortunately, I don't see how you can enter this information manually). Its fees are low at 0.15% (similar to a target date fund). It owns ETFs rather than mutual funds which may present a subtle tax advantage. The portfolio is very simple, with only four funds. Its planning interface implies that it will build in a life cycle glidepath over the coming years, changing my asset mix as I approach retirement (this isn't totally clear- let's see what happens). Based on its low fees and good interface, I'll be putting new money to work using this service going forward (I'm 45yo, 70/30 AA).
I also considered other services. TD looked good but it's about to be absorbed into Schwab. Neither Wealthfront nor Betterment link to Quicken, plus I'd rather work with an incumbent financial institution.
I'll let you know how it goes. Please share your experiences, too!
