Title says it all. I’ve been reading about the Fidelity Robo Investing, and it sounds good. I know there are a few financial experts here, and I assume there are some well-read lay people, so I wondered what everyone thinks.
I’m middle aged, I’ve saved a bit of money, and I have massive trust issues with turning my money over to an advisor (how do I know if they’re a crook or not?)
I have most of my money with Fidelity, but I don’t use Robo. You’ve got a little bit of a Catch-22 here, inasmuch as anyone with enough expertise in the financial markets to judge the quality of the Robo service would not need it and would not be using them.
Fidelity are obviously completely trustworthy and transparent, so there are certainly much worse options. But bear in mind that although 0.35% a year doesn’t sound much, it’s not insignificant. It’s great value if you have $100k to invest. But if you have more like $1 million, are you getting $3,500 in value per year? That’s a significant chunk of the income from your portfolio, or to look at it another way it’s 9% of your nest-egg if you retire in 25 years.
There’s is no added value in “rebalancing” your investments frequently in response to market moves, you should only be making significant changes if your life circumstances change significantly and your long term objectives change. So I question the value of recurring fees that Robo seeks to justify by “rebalancing”. What you really need is a careful one-off review of your life circumstance and thus your financial needs and objectives, then to set up a simple diversified portfolio of between 3 and 10 low cost ETFs or mutual funds that you aim to just leave alone. Once you are clear on what your objectives and risk/timeframe parameters are, setting up that portfolio is easy - I or others on here could easily tell you sensible ETFs to use and why.
One thing that it is worthwhile to pay close attention to with annual review is your tax situation, since tax optimization can make a massive difference to your investment returns. And I think Robo does not do that for you at all.
Riemann makes a lot of good points. The other thing to consider is that a lot of the value an actual advisor brings you is being a firewall for you before you make impulsive decisions. Everyone knows “buy low, sell high” , but few people actually act that way. An advisor talks you down when you want to pull everything out of the market after it crashes.
Many people are able to make rational decisions - but not as many that think they can. I don’t see the robo advisor feature being able to provide that service.
Thanks.
And in case it wasn’t clear, I wasn’t talking about Fidelity when I mentioned giving my money to an advisor (should have said manager). I trust Fidelity. Over the years I’ve had a few managers suggested to me and always got cold feet about handing over my money. Generally they want .8-1.0% for that, and (IMO) want to over-manage.
That said, I’d really like some advice on the best allocation for what I have (and yeah, I’m all mutual funds).
I should note that it isn’t all retirement money, some is just savings.
Since the supposed value of the roboadvisor will be in determining an appropriate asset allocation (and not in any future rebalancing), I don’t know why someone couldn’t take a small amount of their money (say 10%) and put it in a roboadvisor, and then when you see how the roboadvisor allocates the fund just mirror that on a personal account with the remaining 90%. I suppose at that point you could also withdraw funds from the roboadvisor. Are there limitations in the terms of service to prevent that?
I just tried “getting started” and entered some fictional details, and it gave me a proposed asset allocation immediately. I don’t think that part is worth anything much, it’s just conventional stock/bond allocation.
Right, but once you move from fictional to actually investing some money and they buy the funds, the names of the funds would have to be revealed along with the amount of each fund. I can’t imagine your robo account would be a black box that didn’t show the holding details.