Hi All,
I work for FutureAdvisor and thought I could shed some light here. I'm going to geek out a bit for this audience, so I apologize if its too much inside baseball. The forum responses are on the right track and very fair (credit to the MMM community) but I'm able to get a little more specific and hope it's of use to everyone.
Obviously I think you should listen to us, but we're not a cult. We just want people to reach their goals and we are relatively confident that if you followed our strategy for decades, that's what would happen. Any and every strategy can do well in any random short term. Our plan is based on an investment strategy left in place for years to decades. The more full cycles it goes through, the better it has done in forward models and back-testing.
First, the performance grade is forward looking. It is based on long term expected performance according to a monte carlo of your current holdings as compared to the portfolio we recommend for you based on your inputs. You can be penalized for having too concentrated of a portfolio because in poor market conditions you have nothing to mitigate the poor returns and rebalance against. We also make some assumption about how often the average DIY investor rebalances and does portfolio maintenance like tax loss harvesting. In our premium service those are fully automated daily, so on top of our asset allocation compared to yours, we claim a slight additional performance improvement that is mostly associated with doing tasks that require you to monitor the portfolio at a granular level daily. You COULD do this with our free recommendations if you had the time, but we don't have any cost basis information on your holdings so you'd have to pay close attention to make sure you don't make mistakes realizing short term gains or creating wash sales, etc.
Our asset allocation (Diversification score) includes at least some bonds and real estate funds for every investor, and is global in nature. The equity allocation is tilted towards a GDP alignment when it comes to country/region breakdown. So even a market cap weighted global fund, such as ACWI, combined with some diversified bonds funds, wouldn't get an A in diversification necessarily. We're very cognizant of avoiding a "home bias" which is the observation that most individual market participants have the highest equity allocation to their home country regardless of where they live. It's not that we think you can't make money with another portfolio, this is just the one that we think works best in the very long run and will do well in the largest variety of circumstances. In other words, it'll get you there with a smoother ride. In getting specific, you appear to be missing international stocks, emerging market stocks, US real estate, foreign real estate, international bonds, and TIPS. But our recommendations are really intended for portfolios larger than $10K. Below that level, the transaction costs can be prohibitive so we recommend target date funds, or the Vanguard 3 fund approach: Total US Market Index, Total International Stock Index, Total Bond Index.
Fee efficiency is directly related to your fund expense ratios. Anything less than a weighted average of 0.20% should be getting an A- at worst, so I suspect that you have some other funds that aren't listed here? If you want to email us at help@futureadvisor.com someone can look into it for you. That's the only grade that doesn't seem right based on what I can see in this forum. Spartan funds and Vanguard Index funds are great options for anyone. We like ETFs for the slightly better tax treatment, but that doesn't matter at all in tax advantaged accounts like IRAs.
Finally, anyone that doesn't link up a taxable brokerage account will get an A+ in tax efficiency. The grade is very simply how many bonds and REITs do you have in a taxable account. The more you have in taxable, the lower the grade. No taxable account, no improper placement is possible so, bingo, A+.
I hope this helps. We try to be as transparent as possible and are always available via the email address above.
-Gary