Schwab Intelligent Portfolios

[ShoulderThingThatGoesUp]

Schwab is advertising a service that will manage your account without fees. They automatically rebalance, charge no commissions, and do tax loss harvesting (we were just out of capital gains tax zone last year). They earn money by putting your money in Schwab ETFs, which have very low cost ratios, comparable to Vanguard. I want to "set it and forget it" - is there a reason I shouldn't do this?

[skyrefuge]

You're mistaken about how they earn their money. It's done by forcing you to keep a portion of your portfolio in cash, which results in an effective charge of perhaps 0.5%, depending on how you look at it. Detailed explanation here, along with more discussion of SIP in that thread.

As far as whether the benefits of tax-loss harvesting outweigh the fees, the answer is "probably not".  See Dodge's January 21, 2015, 12:01 pm comment (at his others) at http://www.mrmoneymustache.com/betterment-vs-vanguard/ (it references Betterment rather than SIP, but the concept is the same):

The math shows that after a few years (between 1 and 3 typically), any particular deposit will pay more in fees, than it gains in Tax Loss Harvesting. If you’re investing with the expectation that your money will grow, you must also acknowledge that Tax Loss Harvesting on any one particular deposit will eventually not be possible (there will be no losses to harvest). On average all TLH activity stops on any particular deposit after about a year.

After a few years, the cost from the higher fee will negate the early benefit from TLH, and it’s all downhill from there. This has been the case for every single year that the ETFs in Betterment’s portfolio have been around. You can mask this, by continuing to deposit higher and higher amounts, to capture a bigger and bigger first-year benefit, but you’re really just doubling down on higher and higher fees. Sooner or later, it will catch up with you.

It is inevitable, for the simple reason that the fees are both *percentage based* (so they get higher as your account grows), and *forever* (each and every year, for the rest of your life), while the tax loss harvesting benefit is *temporary*.