Author Topic: Financial service companies that automatically rebalance?  (Read 2772 times)

Mighty-Dollar

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Financial service companies that automatically rebalance?
« on: December 20, 2016, 04:37:28 PM »
I know that the index fund VNINX automatically rebalances, but this fund is only for people want 60% stocks and 40% bonds. What if someone wants some other allocation ratio like 50/50 or 40/60? Are these financial service companies that will automatically rebalance for you? 

zazpowered

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Re: Financial service companies that automatically rebalance?
« Reply #1 on: December 20, 2016, 04:59:45 PM »
Are you talking about robo-advisors? such as Wealthfront and Betterment?

Mighty-Dollar

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Re: Financial service companies that automatically rebalance?
« Reply #2 on: December 20, 2016, 07:32:53 PM »
Do Wealthfront and Betterment automatically rebalance for you?

Rubyist

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Re: Financial service companies that automatically rebalance?
« Reply #3 on: December 20, 2016, 09:47:05 PM »
Vanguard has 20/80, 40/60, 60/40 and 80/20 "LifeStrategy" funds. I think there's a 50/50 one somewhere too.

https://investor.vanguard.com/mutual-funds/lifestrategy/#/

zazpowered

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Re: Financial service companies that automatically rebalance?
« Reply #4 on: December 21, 2016, 12:22:47 AM »
Do Wealthfront and Betterment automatically rebalance for you?

Yes. Probably the main feature of robo advisors is automatic rebalancing. The other main one is tax loss harvesting. With a robo advisor you can select the percentage of stocks and bonds you want in your portfolio

Mighty-Dollar

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Re: Financial service companies that automatically rebalance?
« Reply #5 on: December 21, 2016, 10:37:41 PM »
Are Betterment and Wealthfront privately held companies? Any potential for a Bernie Madoff?

zazpowered

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Re: Financial service companies that automatically rebalance?
« Reply #6 on: December 21, 2016, 11:18:50 PM »
Are Betterment and Wealthfront privately held companies? Any potential for a Bernie Madoff?

They are private and Betterment is the biggest with over 6B assets under management. I guess there's possibility for a Bernie Madoff type situation but you know exactly what you are investing in and you can withdraw your money at any time. You can see a comparison of robo-advisor portfolios here: https://senzu.io/investing/robo-advisors

SeattleCPA

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Re: Financial service companies that automatically rebalance?
« Reply #7 on: December 22, 2016, 08:25:03 AM »
Sometimes people not only want to "automate" rebalancing... but they want to gradually adjust their asset allocation formulas over time as their capacity to bear risk changes.

I don't know if betterment and wealthfront do that asset allocation formula adjustment... (Be interested to hear if someone knows. ) But obviously the target retirement funds do tweak your AA over time.


zazpowered

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Re: Financial service companies that automatically rebalance?
« Reply #8 on: December 22, 2016, 08:50:48 PM »
Sometimes people not only want to "automate" rebalancing... but they want to gradually adjust their asset allocation formulas over time as their capacity to bear risk changes.

I don't know if betterment and wealthfront do that asset allocation formula adjustment... (Be interested to hear if someone knows. ) But obviously the target retirement funds do tweak your AA over time.

I don't know that robo-advisors will do that for you automatically but you can toggle your risk score which will change the % of stocks vs bonds in your portfolio. For example a risk score of 9 at betterment is a portfolio that is 90% stock and 10% bonds.

NorCal

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Re: Financial service companies that automatically rebalance?
« Reply #9 on: December 22, 2016, 08:54:31 PM »
I put a small IRA in the Schwab robo-advisor as an experiment.  For the most part, "robo-advising" is simply a fancy way of having an account that automatically rebalances in some formulatic way.

Schwab has you set a risk tolerance that you can adjust up or down based on preference.

zazpowered

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Re: Financial service companies that automatically rebalance?
« Reply #10 on: December 23, 2016, 12:28:50 AM »
I put a small IRA in the Schwab robo-advisor as an experiment.  For the most part, "robo-advising" is simply a fancy way of having an account that automatically rebalances in some formulatic way.

Schwab has you set a risk tolerance that you can adjust up or down based on preference.

What do you think of the service so far?

NorCal

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Re: Financial service companies that automatically rebalance?
« Reply #11 on: December 23, 2016, 07:25:35 AM »
I put a small IRA in the Schwab robo-advisor as an experiment.  For the most part, "robo-advising" is simply a fancy way of having an account that automatically rebalances in some formulatic way.

Schwab has you set a risk tolerance that you can adjust up or down based on preference.

What do you think of the service so far?

No complaints.  My money has been there since June 2015.  There's been times where it outperformed the market and times when it underperformed the market, which will be true of any portfolio that is different than "the market".  Having a background in finance, I can say the approach to portfolio building from any of these services is fundamentally sound.  The only reason I went with Schwab over the others is because I already had an account there.  I don't think I'll move other accounts there just because my personal preference to be personally involved in investing.

While there are plenty of internet warriors that will tell you Wealthfront/Betterment/Schwab is best and all the others are the devil, the practical differences are so minor as to be immaterial.  Some will outperform others, but only time will tell which ones.  Be aware that Betterment has better marketing than the rest.  I strongly suspect Betterment pays much higher commission rates to bloggers than Wealthfront.  This isn't to say the product is better or worse.  Just realize the blog recommendations are likely biased.

I strongly recommend any of these product (whichever suits your personal preference) if you're the type of person who wants to be hands-off in your investments.

Personal Capital does have a different approach than the others.  Putting on my finance theory hat, Personal Capital has built an optimal individualized index fund.  It's pretty cool.  The only problem is that their service is the most expensive.  And while it's theoretically superior, the price point is a pretty serious drawback.
« Last Edit: December 24, 2016, 09:03:16 AM by NorCal »

zazpowered

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Re: Financial service companies that automatically rebalance?
« Reply #12 on: December 23, 2016, 02:02:24 PM »
That's really helpful. Thank you!

I'm prob gonna test it out at some point and it's free so why not

Tjat

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Re: Financial service companies that automatically rebalance?
« Reply #13 on: December 24, 2016, 02:36:56 PM »
Is it really worth paying some company an additional 0.5% in fees to save yourself a 5 min transaction every quarter?

Mighty-Dollar

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Re: Financial service companies that automatically rebalance?
« Reply #14 on: December 25, 2016, 02:56:13 PM »
Is it really worth paying some company an additional 0.5% in fees to save yourself a 5 min transaction every quarter?
I wouldn't pay someone half a percent to rebalance. That's 4.8% after 10 years. 9.5% after 20 years.