What is so intelligent about Schwab Intelligent Portfolio??

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rakamaka
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What is so intelligent about Schwab Intelligent Portfolio??

Post by rakamaka » Tue Mar 10, 2015 10:12 am

Schwab has started 'intelligent portfolio'. Charges 0.3% annual fee for robotic rebalancing.
My question is what is so 'intelligent' about this intelligent robot from Schwab(or Vanguard or Fidelity under different name?)
Normal Schwab brokerage account have 175 comission free ETF's, Fidelity over 65, Vanguard over 50 and so on..
Intelligent Schwab have 54 ETFs, much less than 175 in their one brokerage account.
When you give your personal info in Schwab robot, it comes up with a set of allocation. A simple reading of 10 Bogleheads general posts about asset allocation can give you same tailor made allocation ratio(save 0.3% fee)
Then robot reallocates depending on tolarance(never mentions tax implications)..Why individual investor with 3 to 6 ETFs cannot reallocate/rebalance to maintain set ratio of bonds and stock ETFs once in 6 months or 1 year? Don't tell me it is confusing, and time consuming.
Any individual however illetrate, if cannot reallocate or rebalance simple funds in your investment account should not be in business of investing(yes it is a business you are doing) at all. If you are so much mathematically challenged, keep money in CD or do something else.--This is my personal opinion--
--Don't pay investing robot(0.3-1.0%) or even human advisor(1-5%) of your hard earned money, whatever stripes they wear(Schwab, Vanguard, Fidelity, Hedge etc)... Spend a day or two on bogleheads forums and save hundreds of dollars
Thanks

vesalius
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Re: What is so intelligent about Schwab Intelligent Portfoli

Post by vesalius » Tue Mar 10, 2015 11:18 am

Where do you get that a 0.30% fee is charged? Do you have a link for that?

Schwab clearly states that there are 0 fees at this link: Schwab Intelligent Portfolio fees

You are correct that investing in a boglehead or lazy portfolio fashion and rebalancing once a year is intellectually easy. Just like the basic principles of eating in moderation and physical fitness are really simple; however, the vast majority of people won't do it for themselves without hand holding.

There is definitely a place and a wide market for no-fee or very low fee investment advisors that separate a clients emotions and second guessing from harming their returns.

livesoft
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Re: What is so intelligent about Schwab Intelligent Portfoli

Post by livesoft » Tue Mar 10, 2015 11:49 am

It is all about marketing and "Intelligent" has a nice ring to it, doesn't it? It wouldn't be good marketing to call it the "Schwab Reasonable Portfolio", would it?
This signature message sponsored by sscritic: Learn to fish.

rakamaka
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Re: What is so intelligent about Schwab Intelligent Portfoli

Post by rakamaka » Tue Mar 10, 2015 12:05 pm

This is what I got from disclosure brouchure (.pdf file) at the bottom of this link https://intelligent.schwab.com/
looks similar to normal mumbo-jumbo of confusing mutual fund fees....
Fees
The Program includes the following services: (i) SWIA’s Program administration services; (ii) CSIA’s portfolio management services; and (iii) Schwab’s trade execution, custody and related services. Clients are not charged and will not be charged a Program fee for these services.
In similar programs, clients might expect to pay an annual fee of 0.30% of client assets to reflect the value and cost of these services. While clients are not charged a Program fee for services, due to retirement accounts in the Program, for purposes of IRS rules, SWIA makes a nominal calculation that fully offsets in the amount of 0.30% the compensation its affiliates receive from ETF transactions in clients’ accounts. This includes advisory fees for managing Schwab ETFs and fees earned for providing services to third-party ETFs participating in the Schwab ETF OneSource™ program, if CSIA selects them to include in Program accounts. If this affiliate compensation ever exceeds 0.30% of client assets, SWIA would refund the additional amount to client accounts or use it to pay account administrative expenses. In all cases, the result is that clients pay no Program fee.

amartine
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Re: What is so intelligent about Schwab Intelligent Portfoli

Post by amartine » Tue Mar 10, 2015 12:14 pm

vesalius wrote:Where do you get that a 0.30% fee is charged? Do you have a link for that?

Schwab clearly states that there are 0 fees at this link: Schwab Intelligent Portfolio fees

You are correct that investing in a boglehead or lazy portfolio fashion and rebalancing once a year is intellectually easy. Just like the basic principles of eating in moderation and physical fitness are really simple; however, the vast majority of people won't do it for themselves without hand holding.

There is definitely a place and a wide market for no-fee or very low fee investment advisors that separate a clients emotions and second guessing from harming their returns.


Although there is no direct fee, the forced cash allocation (minimum 6%) has an opportunity cost of not being invested elsewhere, even if it were in an online savings account earning 1%, for a $100k portfolio with Schwab IP, your minimum of 6k in cash would only be earning you $60 per year elsewhere, which is negligible. Although your cash will be earning interest with Schwab, the rate right now is 0.1%, so your real opportunity cost is only 0.9% had you decided to keep that money in cash (a whopping $54 lost interest on 6k in cash).. although you can't really treat your cash at Schwab IP like actual cash, i.e. withdraw it without selling off your positions to rebalance back to 6% in cash. The real potential downside is not having that 6k included in your desired asset allocation, which is where you can start to compare costs v. robo advisors. If betterment charges 0.15% in fees on 100k, you can have that 100k entirely in equities if you so choose, however with Schwab you can't. With 100k invested at Schwab you can have at most 94 k in equities, and although you can't expect to have both portfolios perform exactly the same, in an up market you would expect 100k in equities to outgain 94k in equities. For example if both portfolios were to artificially each gain 10% in the span of one year (using rough math, without the complexity of either funds ER's) a portfolio at betterment can rise to ~$110k and command $165 in fees from their 0.15% management fee, in addition to the individual funds ER's. With Schwab your 94k in equities would rise to $103.4k, and you would maintain your 6 k (and 6 bucks of interest) in cash giving you a total of $109.4 k, with no additional fees on top of your funds ER, however you lost the opportunity to earn 10% on 6% of your money. Whether you see this as a "hidden" 0.6% fee given these artificial market conditions is up to interpretation, but its certainly a drag on investment returns in an up market, albeit a "drag" on losses in a downmarket.

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tyler_cracker
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Re: What is so intelligent about Schwab Intelligent Portfoli

Post by tyler_cracker » Tue Mar 10, 2015 12:30 pm

livesoft wrote:It is all about marketing and "Intelligent" has a nice ring to it, doesn't it? It wouldn't be good marketing to call it the "Schwab Reasonable Portfolio", would it?


i think they learned their lesson from the great Fidelity Fund For Dullards debacle of '04.

vesalius
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Re: What is so intelligent about Schwab Intelligent Portfoli

Post by vesalius » Tue Mar 10, 2015 2:10 pm

rakamaka wrote:This is what I got from disclosure brouchure (.pdf file) at the bottom of this link https://intelligent.schwab.com/
looks similar to normal mumbo-jumbo of confusing mutual fund fees....
Fees
The Program includes the following services: (i) SWIA’s Program administration services; (ii) CSIA’s portfolio management services; and (iii) Schwab’s trade execution, custody and related services. Clients are not charged and will not be charged a Program fee for these services.
In similar programs, clients might expect to pay an annual fee of 0.30% of client assets to reflect the value and cost of these services. While clients are not charged a Program fee for services, due to retirement accounts in the Program, for purposes of IRS rules, SWIA makes a nominal calculation that fully offsets in the amount of 0.30% the compensation its affiliates receive from ETF transactions in clients’ accounts. This includes advisory fees for managing Schwab ETFs and fees earned for providing services to third-party ETFs participating in the Schwab ETF OneSource™ program, if CSIA selects them to include in Program accounts. If this affiliate compensation ever exceeds 0.30% of client assets, SWIA would refund the additional amount to client accounts or use it to pay account administrative expenses. In all cases, the result is that clients pay no Program fee.

They are just saying they would value this service at 0.30% of assets and Schwab is covering that so the client does not have to pay it. They then go a step further and state if the fees/cost ever do actually add up to more than 0.30% of assets Schwab will cover that too and the client will continue to pay nothing.

chessmannextmove
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Re: What is so intelligent about Schwab Intelligent Portfoli

Post by chessmannextmove » Tue Mar 10, 2015 5:22 pm

livesoft wrote:It is all about marketing and "Intelligent" has a nice ring to it, doesn't it? It wouldn't be good marketing to call it the "Schwab Reasonable Portfolio", would it?


Hahahahahahahahahaha

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