Author Topic: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?  (Read 1536 times)

Nycginger

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So, I want to pull out money from the robo investor I'm in and put it instead in broad ETFs. Seems like the general consensus is that this is the way to go.

The top list is the Robo. What funds should I take this all out of an put it in? Thanks!

(Below that I've included some other investments in a few mutual funds and a broad ETF SWTSX. I don't intend to change these funds but you're welcome to make suggestions if you'd like. Thanks!)


ROBO Investor:

SCHH
CHARLES SCHWAB US REIT ETF   $4,551.90 2   
IEMG
ISHARES CORE MSCI EMERGING ETF   $499.30 2   
IFGL
ISHARES INTERNATIONAL DEV RL EST ETF   $28.67 2   
SCHE
SCHWAB EMERGING MARKETS EQUITY ETF   $3,627.80 2   
FNDE
SCHWAB FUNDA EMG MKTS LARGE COM ETF   $6,438.45 2   
FNDF
SCHWAB FUNDAMENTAL INL LARGE COM ETF   $14,117.54 2   
FNDC
SCHWAB FUNDAMENTAL INTL SMAL COM ETF   $6,448.91 2   
FNDX
SCHWAB FUNDAMENTAL US LARGE CO ETF   $19,416.15 2   
FNDA
SCHWAB FUNDAMENTAL US SMALL COM ETF   $12,502.77 2   
SCHF
SCHWAB INTERNATIONAL EQUITY ETF   $9,787.68 2   
SCHC
SCHWAB INTERNATNAL SMALL CAP EQY ETF   $4,342.88 2   
SCHX
SCHWAB US LARGE CAP ETF   $12,668.97 2   
SCHA
SCHWAB US SMALL CAP ETF   $7,978.66 2   
VNQI
VANGUARD GLBAL EX US REAL ESTATE ETF   $2,070.13 2   
Cash & Money Market 3   $6,818.26   




Other Funds in other accounts:
         
INTU
INTUIT INC   $2,712.24 2   
SWTSX
SCHWAB TOTAL STOCK MKT INDEX   $52.90

ETAGX
EVENTIDE GILEAD CL A   $5,712.54   
SGENX
FIRST EAGLE GLOBAL FUND CL A   $16,960.60   
SWTSX
SCHWAB TOTAL STOCK MKT INDEX   $16,908.07   
VTI
VANGUARD TOTAL STOCK MARKET ETF   $2,988.00 2   
Cash & Money Market 3   $502.55   --
Account Total
$43,071.76


ETAGX
EVENTIDE GILEAD CL A   $5,372.18   
SGENX
FIRST EAGLE GLOBAL FUND CL A   $21,267.20   
Cash & Money Market 3   $25.17   --
Account Total
$26,664.55

toganet

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #1 on: September 12, 2018, 11:00:44 AM »
I was in a similar situation a couple years ago, where I had been using a robo-advisor and allowed it to create a very complicated portfolio.  I've since simplified, by following the advice I got here:

  • First, establish your Investment Policy Statement
  • Then, choose the smallest number of funds that allow you to adhere to your IPS, with preference for low-expense index funds
  • If you are still accumulating, determine how to allocate your Buys to minimize the need to rebalance.
  • Rebalance periodically, though not too often. (I recently switched to quarterly from monthly, some do it once a year on their birthday, etc)
  • There are no more steps.

Rob_bob

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #2 on: September 12, 2018, 04:34:31 PM »
In your "other" funds list it looks like you have three total market funds, pick the one with the lowest ER and add to it plus an International fund and maybe Emerging markets if that fits into your AA.

PizzaSteve

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #3 on: September 12, 2018, 05:38:22 PM »
Dump fundamental weighted funds.  Extra fees for questionable benefit.

I would go SWTSX, SWISX and BND in the US/INTL/BOND  mix you prefer.  I think BND is worth any transaction fee (cant remember if a free trade or not).  The schwab equity funds are great and close enough to vanguard or fidelity or ishare similar funds in index tracking.

jacoavluha

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #4 on: September 12, 2018, 09:43:54 PM »
So, I want to pull out money from the robo investor I'm in and put it instead in broad ETFs.

Schwab's intelligent portfolio already has you in a bunch of broad ETFs. Why do you want to change?

MustacheAndaHalf

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #5 on: September 13, 2018, 06:58:58 AM »
So, I want to pull out money from the robo investor I'm in and put it instead in broad ETFs.
Schwab's intelligent portfolio already has you in a bunch of broad ETFs. Why do you want to change?
OP holds both ISHARES CORE MSCI EMERGING ETF and SCHWAB EMERGING MARKETS EQUITY ETF, and you're saying no change is needed?  Those index funds hold the same thing - a pointless overlap, rather than an "intelligent" portfolio.

shinn497

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #6 on: September 13, 2018, 08:30:31 AM »
I'm still in a robo advisor and will continue with that said advisor.

With that said if you want to change thats cool. In the process of having my money with one I have learned certain things you should pay attention to if you want to change.

- Most importantly, if you pull out you will have to be very careful of how you sell your funds. Robo advisors do a lot of managing and rebalancing, and you do not want to incur a short term gain. I would wait a bit to sell any funds that have incured a capital gain for tihs reason

- Similiarly, if you have any funds that have incurred a short term loss, I would encourage you to sell these immediately to harvest it. A lot of robo advisors use highly correlated funds that track similiar sectors (but different indicies) to allow you to do this while keeping your exporsure roughly the same. This is a time to learn about this strategy.

- In the future you will be responsible for your own tax loss harvesting. So bear that in mind. If you do the second thing, you will learn about it. I'd also probably talk to a tax profesesional

- I'd also tax coordinate your portfolio. There are resources about this. But the simplest formula is to keep assets that incur a marginal tax rate in a roth IRA and assets that can incur a long term capital gains tax rate in a taxable account (after you have maxed out your roth ira of course). If you use a tax deferred account, be really careful of having securities in it since gains in that will be taxed at a marginal rate and this can often be higher. If you have us based securites in it, you can get a negative advantage. The simplest way of doing this is to keep your us securities in your taxable account, and your international securites in your roth IRA. This is because the dividends from international securities can sometimes not be qualified and will be taxed at a marginal rate on a yearly basis.

- If you rebalance, try to avoid selling securies and espeially incurring a short term capital gain. Rebalnce by using dividends OR by addin in additional funds. Also do a similiar thing when you withdraw funds as well.

- Final thing is to pay attention to your investing behaviour, especially if you lose fractional shares. Continue to invest with as much ferocity and as often as possible. If anyhting, try to automate it. Research shows you will do far better the less you pay attention to your investments.

Notice something. None of this involves the actual security selection. My personal opinion is it doesn't matter what you pick as long as it is diversified and low cost . Low cost doesn't necessarily mean low fee. But low fees, highly liquid, and minimal losses due to bid ask spread. Most  vanguard and fidelity funds are like this though.

FWIW in my personal non roboadvised roth ira (which my robo advisor actually tracks anyway), I have a tilt toward small cap and a bit of international. I have no idea if this is better though. But it probably isn't bad.

Nycginger

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #7 on: September 13, 2018, 09:19:36 AM »
I'm still in a robo advisor and will continue with that said advisor.

With that said if you want to change thats cool. In the process of having my money with one I have learned certain things you should pay attention to if you want to change.

- Most importantly, if you pull out you will have to be very careful of how you sell your funds. Robo advisors do a lot of managing and rebalancing, and you do not want to incur a short term gain. I would wait a bit to sell any funds that have incured a capital gain for tihs reason

- Similiarly, if you have any funds that have incurred a short term loss, I would encourage you to sell these immediately to harvest it. A lot of robo advisors use highly correlated funds that track similiar sectors (but different indicies) to allow you to do this while keeping your exporsure roughly the same. This is a time to learn about this strategy.

- In the future you will be responsible for your own tax loss harvesting. So bear that in mind. If you do the second thing, you will learn about it. I'd also probably talk to a tax profesesional

- I'd also tax coordinate your portfolio. There are resources about this. But the simplest formula is to keep assets that incur a marginal tax rate in a roth IRA and assets that can incur a long term capital gains tax rate in a taxable account (after you have maxed out your roth ira of course). If you use a tax deferred account, be really careful of having securities in it since gains in that will be taxed at a marginal rate and this can often be higher. If you have us based securites in it, you can get a negative advantage. The simplest way of doing this is to keep your us securities in your taxable account, and your international securites in your roth IRA. This is because the dividends from international securities can sometimes not be qualified and will be taxed at a marginal rate on a yearly basis.

- If you rebalance, try to avoid selling securies and espeially incurring a short term capital gain. Rebalnce by using dividends OR by addin in additional funds. Also do a similiar thing when you withdraw funds as well.

- Final thing is to pay attention to your investing behaviour, especially if you lose fractional shares. Continue to invest with as much ferocity and as often as possible. If anyhting, try to automate it. Research shows you will do far better the less you pay attention to your investments.

Notice something. None of this involves the actual security selection. My personal opinion is it doesn't matter what you pick as long as it is diversified and low cost . Low cost doesn't necessarily mean low fee. But low fees, highly liquid, and minimal losses due to bid ask spread. Most  vanguard and fidelity funds are like this though.

FWIW in my personal non roboadvised roth ira (which my robo advisor actually tracks anyway), I have a tilt toward small cap and a bit of international. I have no idea if this is better though. But it probably isn't bad.



I guess the reason I was planning to switch was because I'd been led to believe that I wouldn't get the best return with what I have currently and that i'd be better off buying S&P and a few broad ETFs.

I am not sophisticated when it comes to picking funds etc. I am pretty good at making sure I save.

Do you think I should just stay put with what i have?

Thanks!

shinn497

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #8 on: September 13, 2018, 09:37:02 AM »
I'm still in a robo advisor and will continue with that said advisor.

With that said if you want to change thats cool. In the process of having my money with one I have learned certain things you should pay attention to if you want to change.

- Most importantly, if you pull out you will have to be very careful of how you sell your funds. Robo advisors do a lot of managing and rebalancing, and you do not want to incur a short term gain. I would wait a bit to sell any funds that have incured a capital gain for tihs reason

- Similiarly, if you have any funds that have incurred a short term loss, I would encourage you to sell these immediately to harvest it. A lot of robo advisors use highly correlated funds that track similiar sectors (but different indicies) to allow you to do this while keeping your exporsure roughly the same. This is a time to learn about this strategy.

- In the future you will be responsible for your own tax loss harvesting. So bear that in mind. If you do the second thing, you will learn about it. I'd also probably talk to a tax profesesional

- I'd also tax coordinate your portfolio. There are resources about this. But the simplest formula is to keep assets that incur a marginal tax rate in a roth IRA and assets that can incur a long term capital gains tax rate in a taxable account (after you have maxed out your roth ira of course). If you use a tax deferred account, be really careful of having securities in it since gains in that will be taxed at a marginal rate and this can often be higher. If you have us based securites in it, you can get a negative advantage. The simplest way of doing this is to keep your us securities in your taxable account, and your international securites in your roth IRA. This is because the dividends from international securities can sometimes not be qualified and will be taxed at a marginal rate on a yearly basis.

- If you rebalance, try to avoid selling securies and espeially incurring a short term capital gain. Rebalnce by using dividends OR by addin in additional funds. Also do a similiar thing when you withdraw funds as well.

- Final thing is to pay attention to your investing behaviour, especially if you lose fractional shares. Continue to invest with as much ferocity and as often as possible. If anyhting, try to automate it. Research shows you will do far better the less you pay attention to your investments.

Notice something. None of this involves the actual security selection. My personal opinion is it doesn't matter what you pick as long as it is diversified and low cost . Low cost doesn't necessarily mean low fee. But low fees, highly liquid, and minimal losses due to bid ask spread. Most  vanguard and fidelity funds are like this though.

FWIW in my personal non roboadvised roth ira (which my robo advisor actually tracks anyway), I have a tilt toward small cap and a bit of international. I have no idea if this is better though. But it probably isn't bad.



I guess the reason I was planning to switch was because I'd been led to believe that I wouldn't get the best return with what I have currently and that i'd be better off buying S&P and a few broad ETFs.

I am not sophisticated when it comes to picking funds etc. I am pretty good at making sure I save.

Do you think I should just stay put with what i have?

Thanks!

I can'e tell you what to do. There are arguments for and against them. Investing is a personal decision and we all have our own risk tolerances and beliefs.

The argument against robo advisors is one of fees. E.G. the bump in performance or improvement in behaviour they give you does not justify them.

These fees may seem small but can be signficant. Here is a simple example.

Lets say you are up 2.5 million. At a 4% withdrawal rate, you can take out 100k. If your advisor has a .25% fee, than you lose out on 6250. Over 40 years that is 250000k.

In addition, this fee reduces compounding as well.

Now personally I am ok with the fee since I think they do give an improvement in behaviour. I personally don't hold any beliefs about actual fund performance, since who knows really?

Here is what I encourage you to do. Learn. A lot of these robo advisors have blogs and whitepapers. Read them all thoroughly and see if their beliefs match yours. Evaluate if you are confident if you can replicate their methods. OR if you agree with their assumptions. Then decide if you want to continue. Also read criticisms of them and see if you agree with those as well.

Honestly though. I truely don't believe it matters either way. The biggest and most important factor in investing is actually putting money in. Whatever gets you to do that will serve you the best. And only you can determine that.

jacoavluha

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #9 on: September 13, 2018, 10:17:26 AM »
So, I want to pull out money from the robo investor I'm in and put it instead in broad ETFs.
Schwab's intelligent portfolio already has you in a bunch of broad ETFs. Why do you want to change?
OP holds both ISHARES CORE MSCI EMERGING ETF and SCHWAB EMERGING MARKETS EQUITY ETF, and you're saying no change is needed?  Those index funds hold the same thing - a pointless overlap, rather than an "intelligent" portfolio.

Did I say no change was needed?

jacoavluha

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #10 on: September 13, 2018, 10:22:44 AM »
I think you should consider Schwab's Target Index funds.

https://www.schwab.com/public/schwab/investing/accounts_products/investment/mutual_funds/mutual_fund_portfolio/target_funds

Note - not the regular Target funds.

These carry a 0.08 expense ratio and offer an excellent diversified portfolio of broad index ETFs. You should choose based upon your desired stock to bond allocation. That is all you need, in one fund. And you already have money at Schwab.

appleshampooid

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #11 on: September 13, 2018, 10:38:53 AM »
- I'd also tax coordinate your portfolio. There are resources about this. But the simplest formula is to keep assets that incur a marginal tax rate in a roth IRA and assets that can incur a long term capital gains tax rate in a taxable account (after you have maxed out your roth ira of course). If you use a tax deferred account, be really careful of having securities in it since gains in that will be taxed at a marginal rate and this can often be higher.
Note that the bolded here assumes you will be in a high marginal rate tax bracket when you withdraw from the tax-deferred account. As this is a MMM board, many of us are aiming for the opposite - low or 0 tax in retirement due to low income needs and  savvy construction of income streams between conversion pipelines, withdrawal of Roth basis, and LTCG rates on taxable investments. Basically the GCC approach - https://www.gocurrycracker.com/never-pay-taxes-again/

Quote
If you have us based securites in it, you can get a negative advantage. The simplest way of doing this is to keep your us securities in your taxable account, and your international securites in your roth IRA. This is because the dividends from international securities can sometimes not be qualified and will be taxed at a marginal rate on a yearly basis.
You are discounting here the tax advantage of holding international investments in your taxable accounts - you will get a credit against international taxes paid. Depending on your bracket, this can make up for and even exceed the fact that not all dividends are qualified. The BH wiki has lots of details on this : https://www.bogleheads.org/wiki/Tax-efficient_fund_placement#Step_3:_Placing_international_stock_funds_in_the_taxable_account


shinn497

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Re: Pulling Money out of Robo Investor: What Broad ETFs should I put it in?
« Reply #12 on: September 13, 2018, 11:24:35 AM »
- I'd also tax coordinate your portfolio. There are resources about this. But the simplest formula is to keep assets that incur a marginal tax rate in a roth IRA and assets that can incur a long term capital gains tax rate in a taxable account (after you have maxed out your roth ira of course). If you use a tax deferred account, be really careful of having securities in it since gains in that will be taxed at a marginal rate and this can often be higher.
Note that the bolded here assumes you will be in a high marginal rate tax bracket when you withdraw from the tax-deferred account. As this is a MMM board, many of us are aiming for the opposite - low or 0 tax in retirement due to low income needs and  savvy construction of income streams between conversion pipelines, withdrawal of Roth basis, and LTCG rates on taxable investments. Basically the GCC approach - https://www.gocurrycracker.com/never-pay-taxes-again/

Quote
If you have us based securites in it, you can get a negative advantage. The simplest way of doing this is to keep your us securities in your taxable account, and your international securites in your roth IRA. This is because the dividends from international securities can sometimes not be qualified and will be taxed at a marginal rate on a yearly basis.
You are discounting here the tax advantage of holding international investments in your taxable accounts - you will get a credit against international taxes paid. Depending on your bracket, this can make up for and even exceed the fact that not all dividends are qualified. The BH wiki has lots of details on this : https://www.bogleheads.org/wiki/Tax-efficient_fund_placement#Step_3:_Placing_international_stock_funds_in_the_taxable_account

These are excellent points! I will research them ty.