Roboadvisor vs. S&P500 Index Fund

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beebee5004
Posts: 9
Joined: Fri Feb 22, 2019 6:24 pm

Roboadvisor vs. S&P500 Index Fund

Post by beebee5004 » Fri Jul 31, 2020 4:53 pm

I am looking at the performance of a roboadvisor in comparison to the S&P500 index since Jan 2019. The S&P500 has outperformed the roboadvisor by around 18% since then, and the roboadvisor's diverse portfolio appears to have exhibited as much volatility as the S&P500 index during the market downturn this year. Is this a good reason to consider moving all money from the roboadvisor to an S&P500 index? I understand that, in theory, the market trends in the future may result in the roboadvisor outperforming the S&P500, or having more stability than the S&P500. I guess my question is whether, in practice, this seems at all likely for the foreseeable future.

muffins14
Posts: 241
Joined: Wed Oct 26, 2016 4:14 am

Re: Roboadvisor vs. S&P500 Index Fund

Post by muffins14 » Fri Jul 31, 2020 4:57 pm

I think that this (past performance) is not a good reason to move away from the robo-advisor, but there are many other very good reasons to do so, such as:

Costs
Potential to end up with many undesired investments because you don't control the portfolio
Costs

123
Posts: 6078
Joined: Fri Oct 12, 2012 3:55 pm

Re: Roboadvisor vs. S&P500 Index Fund

Post by 123 » Fri Jul 31, 2020 5:02 pm

What asset allocation or investing goal was the roboadvisor trying to maintain/achieve? Eighteen months is hardly an adequate enough period to evaluate any investment strategy. However if the "investment strategy" was just to "make money" then you're just going to get random error anyway.
The closest helping hand is at the end of your own arm.

H-Town
Posts: 2818
Joined: Sun Feb 26, 2017 2:08 pm

Re: Roboadvisor vs. S&P500 Index Fund

Post by H-Town » Fri Jul 31, 2020 5:10 pm

beebee5004 wrote:
Fri Jul 31, 2020 4:53 pm
I am looking at the performance of a roboadvisor in comparison to the S&P500 index since Jan 2019. The S&P500 has outperformed the roboadvisor by around 18% since then, and the roboadvisor's diverse portfolio appears to have exhibited as much volatility as the S&P500 index during the market downturn this year. Is this a good reason to consider moving all money from the roboadvisor to an S&P500 index? I understand that, in theory, the market trends in the future may result in the roboadvisor outperforming the S&P500, or having more stability than the S&P500. I guess my question is whether, in practice, this seems at all likely for the foreseeable future.
You need to compare apple to apple. Roboadvisor used a mixture of ETF and/or stocks/bonds. It also charges you a flat fee, i.e. 0.25% by Betterment. If all else equal, you will always underperform the "market" by 0.25% a year.

rgs92
Posts: 2701
Joined: Mon Mar 02, 2009 8:00 pm

Re: Roboadvisor vs. S&P500 Index Fund

Post by rgs92 » Fri Jul 31, 2020 5:54 pm

I would not think any reasonable evaluation of performance could be based on a time period of a year and a half. There is always a list of broad-based mutual funds that perform better than index funds for limited periods of time, even multiyear or decade-long periods. But beyond that, this is not the case. This is one of the main findings upon which Bogleheads is based.

GmanJeff
Posts: 619
Joined: Sun Jun 11, 2017 7:12 am

Re: Roboadvisor vs. S&P500 Index Fund

Post by GmanJeff » Sat Aug 01, 2020 6:53 am


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