Author Topic: Vanguard Digital Advisor  (Read 437 times)

Captain Cactus

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Vanguard Digital Advisor
« on: June 19, 2020, 01:20:15 PM »
Anyone have experience with Vanguard Digital Advisor?  What does this actually DO?  Looks like some kind of robo advisor that charges you $4.50 per year for every $3000 invested. 

wingfold2001

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Re: Vanguard Digital Advisor
« Reply #1 on: June 24, 2020, 07:53:38 AM »
I had a bad experience that I posted about before.

It was attractive at first because it was set to adjust my percentage of stocks to bonds every decade or so starting from 65/35.

On Jun 9, just before a big 6% S&P decline, Digital Advisor changed to this wacky thing where my portfolio was suddenly 98/2 instead of 65/35 and set to gradually adjust toward 50/50. I assume the constant adjustment brings them a little bit more money through trade fees.

I signed up with a small amount of my net worth. I was very lucky because I was in the process of moving all my net worth into it prior to the change. Sorry to say it no longer supports my investment goals.
« Last Edit: June 24, 2020, 08:17:51 AM by wingfold2001 »

MustacheAndaHalf

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Re: Vanguard Digital Advisor
« Reply #2 on: June 24, 2020, 12:12:44 PM »
On Jun 9, just before a big 6% S&P decline, Digital Advisor changed to this wacky thing where my portfolio was suddenly 98/2 instead of 65/35 and set to gradually adjust toward 50/50. I assume the constant adjustment brings them a little bit more money through trade fees.
Vanguard charges $0/trade for stocks, ETFs and mutual funds.  They make no money on the trades.

Indexer

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Re: Vanguard Digital Advisor
« Reply #3 on: June 24, 2020, 04:32:19 PM »
It was attractive at first because it was set to adjust my percentage of stocks to bonds every decade or so starting from 65/35.

On Jun 9, just before a big 6% S&P decline, Digital Advisor changed to this wacky thing where my portfolio was suddenly 98/2 instead of 65/35 and set to gradually adjust toward 50/50. I assume the constant adjustment brings them a little bit more money through trade fees.

I'm pretty sure that is not how it is supposed to work. You should probably call and check on that.

My understanding is that digital advisor is supposed to work like Personal Advisor minus the advisor. Both pick your asset allocation based on your goals and risk tolerance, and they both get more conservative as you get closer to your goal. Both use Vanguard's investment philosophy... which means lot of index funds and no market timing.

Unless your goal or risk tolerance justified a move from 65/35 to 98/2 I don't see why it would do that. It isn't built for market timing. Given that this is a forum for people seeking FIRE, did you by chance run what if scenarios comparing retiring in 5 years VS 20 years? Changing that variable would justify a switch from 65/35 to 98/2.

As it's been said, Vanguard doesn't charge for trading, but trading does cost them money. That means, if anything, they have a financial incentive to trade less in your account, not more.


@OP: DA is kind of like Betterment, but in more Vanguard flavor. It builds a custom portfolio, rebalances it, and gets more conservative over time. In other words, it's like a target retirement fund, but it takes asset location(optimizing where each investment should be for taxes) into account. If you are only looking at 1 account type, like a 401k or pretax IRA as opposed to a combination of account types(IRA+Roth+taxable) you are probably better off with a target retirement fund.

wingfold2001

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Re: Vanguard Digital Advisor
« Reply #4 on: June 24, 2020, 11:35:09 PM »
Ok, good to know about the trade fees. I do love vanguard but the folks who run the DA must have been visited by the good idea fairy. See their response from when I contacted them about it. The email they're referring to came after the order execution.
---
Last week, Digital Advisor elevated technology to further personalize the
methodology we use to create your investment glide path. This did have an
affect on your asset allocation, and eliminated bond exposure from your
portfolio. You should have received an email with subject, "Updates from
Vanguard Digital Advisor" about this change last week as well.
---
« Last Edit: June 24, 2020, 11:57:05 PM by wingfold2001 »

MustacheAndaHalf

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Re: Vanguard Digital Advisor
« Reply #5 on: June 25, 2020, 08:23:34 AM »
Last week, Digital Advisor elevated technology to further personalize the
methodology we use to create your investment glide path. This did have an
affect on your asset allocation, and eliminated bond exposure from your
portfolio. You should have received an email with subject, "Updates from
Vanguard Digital Advisor" about this change last week as well.
Very timely message!  I would literally tell them what you said here - not in an accusing way, but that Vanguard's changes right before a market drop caused you to lose money that you didn't expect to lose.  Ask if they'll make it right, owing to the combination of their changes and the market drop being too quick to allow you to react.

Overall, though, 35% bonds is usually reserved for people in retirement.  When you're saving up for your nest egg, it's more common to have closer to 10% bonds.  If you switch back to 65% stocks for the rest of your working years, that will almost certainly hurt your portfolio far more than a -2% loss (-6% drop in equities, 1/3rd of your portfolio switched into equities right before the drop).