Automated portfolio management is the new hotness. In the coming years, I see a continued expansion of players followed by a lot of mergers and acquisitions. ETF.com analyst Elisabeth Kashner has finished her series on robo-advisors with a final comparison of the current field – The Best Robo Advisor … For You . The entire series is interesting for those that care about such things, but here is the final summary chart:
You may (or may not) be surprised by what she actually picks for her son’s starter portfolio.
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Just for fun I manually entered some of my holdings at Future Advisor. They wanted me to link my investment accounts, giving them my user names and passwords — not going to happen. I was not terribly impressed with their analysis and recommendations. It seems like they automatically rejected any fund I had that was not an index fund or ETF and recommended one of those in its place. They dismissed individual stocks outright. Now I don’t claim to be an expert investor, but I’ve spent a lot of time researching and building my portfolio over the years — mostly Vanguard and Fidelity funds as well as a number of stocks — and I would put my results up against anyone else in my age and income bracket. I dare say I believe I’m doing better than 90+%.
This reinforces a perception I have that a lot of these services — probably most — are just the latest gimmick in the investment industry. That they rely so much on index funds and ETFs indicates that they are not doing a lot of research or planning in support of their recommendations — and then charging people fees do something they could do themselves to boot. Understand I have nothing against index funds/ETFS; I own a number myself. I would contend that someone who has already made the decision to invest in these types of funds is probably savvy enough to manage their own portfolio without relying on one of these services.
Another shortcoming I noted was that there was no way (as far as I could tell) to enter 401K, 403b, or other retirement fund balances. In my case that excluded a good portion of my and my wife’s portfolio — so the “action plan” presented was based on a very incomplete analysis of our situation.
I hope she thinks about about including Valued Investing in your comparison. They have a critical feature missing from all the others, I believe: ethics. I think we all want to be ethical people, and not have our personal finances funding and supporting whatever things we think are harming people and the planet (tobacco, missiles/weapons, factory farming, for-profit education or prisons, etc.).
Am I alone here, or don’t others who care about personal finance want to consider ethics when they invest?
What is your opinion on the actual investment strategies of these robos?