Review of robo advisors

In this post, we will look at some automated rebalancers and robo advisors. These have exploded in the recent few years from 2011 till 2015, slowly picking up steam and investments. Many manage in the tune of billions. If you read my last post about tax loss harvesting, you will see that it is just a tool. A strategy which should be the side one and not the main or core one. It can be used to capture some value. But I would personally not pay a dime to get this in ETF. For stocks, I would stick to my algorithms and core values and beliefs and change them. The tax loss harvesting gives some money back from IRS to soften this blow and maybe serves as a reminder from them to diversify and not take this to heart. Instead, Uncle IRS is telling you to take a chill and maybe get a sandwich with that money and play it cool.

So here let us review all the available or leading players in the tax effeciency business and the final recommendations regarding it.

1) Wealthfront: free upto first $10,000

2) Betterment: 

It has dynamic pricing.

3) hedgeable: same as above, 0.35% - 0.75%

4) https://www.sigfig.com/site/#/home/am

First $10k is free. After that is 0.25%.

5) Wisebanyan seems free but I am not sure about their sign up process or investment strategy

6) Future Advisor: The most impressive in this list apart from Wealthfront. https://www.futureadvisor.com/content/pricing/retirement-advice .. their fees are free.

7) Charles Schwab Intelligent portfolios: Free. This looks good too.

8) Vanguard: New kid in the block and since most of the above funds leverage on Vanguard ETFs  anyway, it makes sense for Vanguard to look at their voyager clients, anyone with more than $50k in assets to use this service for 0.3% fee. I think this is an overkill and  might not be needed.

9) A whole remaining bunch: Personal Capital, Moneyfront?, RebalanceIRA, Liftoff, tradeking, motif?, what-have-you and so on. Even TD Ameritrade pitched me this about 8 years ago for some x% fee. 

Recommendations:

Split the amount between Future Advisor and Wealthfront. This is not a terrible investment to have and even might make you money. But make sure you put the taxable money in here since your IRAs are anyways tax -deferred and hence you might not really need to save the taxes there or take advantage of tax loss harvesting strategy. Second, in view of the tax loss harvesting do not lose sight of the fundamental strategy of buy low sell high. In 2015 the market is high and volatile. Be ready to sell quickly. It is fine to enter into the index funds in some way now and maybe exit if there is a popup. But still overall individual stocks or etfs, invest conservatively and in drops for now. Third, go all out 100% risk in such accounts. I mean, if you want to invest conservatively, you have your own bond funds or CDs where you can hold your money. There is also balanced funds which will do this for you. Vanguard Wellington and Wellesley funds come to the top. Apart from their balanced funds. So with this robo advisors - go 100% stock funds .. which basically is 100% stock etfs with Domestic and Emerging markets mainly.

Apart from the above two, go with the Charles schwab (https://intelligent.schwab.com/) if you want more assurance on the security front. In terms of loss harvesting strategy, basic rebalancing, I would not venture beyond the above three recommended ones. Maybe I will start with something small and gradually build up from there.

One cant fail to notice the way Schwab or Vanguard have structured their funds with minimum requirements of $5000 or $50,000 in their respective accounts. I think they might do a basic rebalancing along the lines of fixed time based or portfolio allocation based rebalancing. It is low fees to nothing for them. So just like at the outset of this research, I am not too sold on robo advisors. It is good to have some in your portfolio to optimize the tax loss harvesting in taxable account. But beyond that there are simply too many avenues out there to make this the core or central piece of your overall investment strategy.