Anyone have personal experience using one of the robo-advisors?
In my quest to improve on throwing money into a target retirement index fund, as well as holding onto cash out of fear, I stumbled across these.
A couple interesting articles:
https://www.cashcowcouple.com/wealthfro ... m1finance/
http://www.mrmoneymustache.com/betterment-vs-vanguard/
http://www.mrmoneymustache.com/2017/02/ ... orthwhile/
The features to implement tax loss harvesting and approximate the indexes without owning the indexes look especially appealing.
Robo-advisors
Re: Robo-advisors
An anti-article:
http://gocurrycracker.com/why-bettermen ... r-dollars/
Long term maybe the tax loss harvesting isn't a gain, especially after robo fees.
http://gocurrycracker.com/why-bettermen ... r-dollars/
Long term maybe the tax loss harvesting isn't a gain, especially after robo fees.
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Jason
Re: Robo-advisors
I use Future Advisor but only in so far as I don't incur costs. It allows me to view my investments in one place, which every retail financial website now encourages. The differences is that it provides suggestions via "How I am investing" vs. "The ideal investment plan" which gives me ideas as to certain specific ETF's.
What I have found with Future Advisor and what I believe it holds in common with other Robos, is that it's essentially Jack Bogle in pixelated form. Owning any individual stock is bad. Owning any mutual fund is bad. It just wants you to index or ETF. It is a millennial innovation (I believe Future Advisor was started by Google engineers), the technological handmaiden to the ETF "Don't pay any fee" philosophy. So my guess is its going to encourage you to continue to throw into target retirement index and will red flag any investment idea you came to on your own.
In a bull environment, it looks like the only way to go. However, next bear cycle, people are going to see its limitations.
There was also an "ethical" issue when one of them (Betterment?) prohibited people from trading during the Brexit decline. So what is "Robo" came into question.
And isn't tax loss harvesting just a euphemism for selling your shitty investments?
What I have found with Future Advisor and what I believe it holds in common with other Robos, is that it's essentially Jack Bogle in pixelated form. Owning any individual stock is bad. Owning any mutual fund is bad. It just wants you to index or ETF. It is a millennial innovation (I believe Future Advisor was started by Google engineers), the technological handmaiden to the ETF "Don't pay any fee" philosophy. So my guess is its going to encourage you to continue to throw into target retirement index and will red flag any investment idea you came to on your own.
In a bull environment, it looks like the only way to go. However, next bear cycle, people are going to see its limitations.
There was also an "ethical" issue when one of them (Betterment?) prohibited people from trading during the Brexit decline. So what is "Robo" came into question.
And isn't tax loss harvesting just a euphemism for selling your shitty investments?
Re: Robo-advisors
I see the prospect of set it and forget it as appealing. But the more I look, I'm not confident after fees, they improve upon my target retirement funds. As Jason predicts, the portfolios are essentially a blend of index funds, or a blend of assets approximating said funds.
It is a good way to lure those who believe low fees above all else, into paying more fees.
The Mr. Money Mustache thread, where betterment upped their fees from .15 to .25, demonstrates another weakness. Business models change. Dealing with moving assets out, even in kind to a new broker, is not something I'd enjoy.
It looks to me like tax loss harvesting is selling a loser, to get the tax benefit. At the same time, a different highly correlated investment is bought with the money. It lowers your basis for the asset, so when time comes to sell later, you do potentially end up paying more in capital gains tax. It looks like only the first $3k has an impact in reducing adjusted gross income for tax purposes, unless you are also being taxed on capital gains that same year. While the losses can carry forward, 3k a year off adjusted gross income isn't a lot, especially considering the reduced basis. There's also a risk of an asset purchased in a different account, within a month of the asset that was sold, being the same, and invalidating the loss.
I don't think I'm up for tracking all that, just to save a little money on my taxes.
It is a good way to lure those who believe low fees above all else, into paying more fees.
The Mr. Money Mustache thread, where betterment upped their fees from .15 to .25, demonstrates another weakness. Business models change. Dealing with moving assets out, even in kind to a new broker, is not something I'd enjoy.
It looks to me like tax loss harvesting is selling a loser, to get the tax benefit. At the same time, a different highly correlated investment is bought with the money. It lowers your basis for the asset, so when time comes to sell later, you do potentially end up paying more in capital gains tax. It looks like only the first $3k has an impact in reducing adjusted gross income for tax purposes, unless you are also being taxed on capital gains that same year. While the losses can carry forward, 3k a year off adjusted gross income isn't a lot, especially considering the reduced basis. There's also a risk of an asset purchased in a different account, within a month of the asset that was sold, being the same, and invalidating the loss.
I don't think I'm up for tracking all that, just to save a little money on my taxes.
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Jason
Re: Robo-advisors
For a while, I was looking into this, but something made me stay away. I can't remember exactly what so caveat emptor. It was probably trading fees.
https://www.motifinvesting.com
https://www.motifinvesting.com
Re: Robo-advisors
So marketing is the innovation. Got it.
Re: Robo-advisors
Personally if I had to get an advisor I'd just get a fee only advisor that does indexing rather than a robo. In Canada there are tax deductions available on the fee's and the advisor can also help with planning, coaching, big purchases, insurance, college for kids etc. They can also advise and help implement a strategy for dealing with your money as you age. DIY is highly fragile to senility! This forum is full of a bunch of smarty pants STEM geeks who can easily do a cheap DIY strategy now but in 50-60 years many of us will be getting lost in the bathroom.
The fact that the word robo-advisor even refers to robotics bothers me because obviously it's not robotics at all. It's really just some expensive marketing, a fund of funds equivalent as discussed. I'm also bothered that the word advisor is used because really there is no advice given. A better word might be Automatic-Trader or some such.
The fact that the word robo-advisor even refers to robotics bothers me because obviously it's not robotics at all. It's really just some expensive marketing, a fund of funds equivalent as discussed. I'm also bothered that the word advisor is used because really there is no advice given. A better word might be Automatic-Trader or some such.
Re: Robo-advisors
Yeah, https://www.motifinvesting.com and https://www.openinvest.co looked promising but not actually attractive to use.
Honestly, I think blockchain will disrupt the space. If I'm not mistaken, Overstock heading the effort of building it out.
Honestly, I think blockchain will disrupt the space. If I'm not mistaken, Overstock heading the effort of building it out.
Re: Robo-advisors
I have been happy with Betterment, since I use it for a working capital account - and I have experienced much better returns than my bank. However, maybe I should move it elsewhere reading some of the replies. After reading this thread, I searched for 'savings account' and 'working capital account' in the forum search but didn't really find any good answers. Do most of you just keep your working capital in a personal Vanguard account? If not, where have you found consistent returns for easy access capital?
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prognastat
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Re: Robo-advisors
My Betterment returns have consistently underperformed my other investments so despite their low fees if I'm paying fees to them on top of the fees for the funds they purchase and in return get lower returns than I do myself on both Vanguard and my 401k accounts then I would say it isn't worth it. It consistently lags a few % below my other investments so it's a not insignificant amount.
I'm not too disappointed, because at the time I was already maxing out my 401k and the alternative at the time would have been leaving it in the bank which would have underperformed even worse of course, but I would recommend brushing up just a little bit on passive index investing and from my experience you will get better returns for lower fees and it only costs you an hour a year or so in extra work and some reading up front.
The only reason I can see with going for the robo-advisor is if you tend to be easily influenced and want to avoid selling in a panic when you shouldn't be by having it all automated.
I'm not too disappointed, because at the time I was already maxing out my 401k and the alternative at the time would have been leaving it in the bank which would have underperformed even worse of course, but I would recommend brushing up just a little bit on passive index investing and from my experience you will get better returns for lower fees and it only costs you an hour a year or so in extra work and some reading up front.
The only reason I can see with going for the robo-advisor is if you tend to be easily influenced and want to avoid selling in a panic when you shouldn't be by having it all automated.
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jacob
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Re: Robo-advisors
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