For several months now, Schwab has been promoting their upcoming “Intelligent Portfolios” platform, which will offer automated rebalancing and tax-loss harvesting of a portfolio of ETFs. The big selling point is that there is no fee for the service, aside from the cost of the funds held in the portfolio.
Frankly, an automatically rebalanced portfolio of Schwab’s super low-cost ETFs sounds pretty darned neat to me. For lazy investors such as myself, such a thing could even be preferable to a low-cost Target Retirement or LifeStrategy fund from Vanguard.
Unfortunately, now that Schwab has released additional information, we can see that the service isn’t going to be nearly as exciting as it could have been. You don’t get to choose the portfolio. Schwab assesses your risk tolerance and puts you into one of a few portfolios that they’ve created. And those portfolios have (what I consider to be) two drawbacks:
- They include some higher-cost ETFs, and
- They include a mandatory cash holding (which will earn almost nothing).
The Finance Buff has more information:
- Schwab Intelligent Portfolios: “Holding Cash Is Good For You” from The Finance Buff
- Part Two: The 4% Spending Rule, 20 Years Later from Maria Bruno
- Do I Own Too Many Mutual Funds? from Roger Wohlner
- Getting Real About Fund Fees from Allan Roth
- Dominated Strategies and Dynamic Spending from Dirk Cotton
- The Problem with Naming a Trust as Beneficiary of an Annuity from Michael Kitces
Other Money-Related Articles
- Shopping Obamacare Plans from Darrow Kirkpatrick
- Survey Says Tax Refunds Going into Savings, Paying Off Debt from Kay Bell
Thanks for reading!