Schwab Intelligent Portfolio

[retired1]

Has anyone looked into Schwab Intelligent Portfolio ? They say no advisory fees, commissions or account service fees charged. What's the catch? Underlying investments (?). It sounds a good way to do DRIP in ETFs.


Link: https://intelligent.schwab.com/publi...t/how-it-works

[Chuckanut]

About 10-12% of your money is always in cash from what I can see.

I have a small amount in one. I am going to let it run for 3 years and see how it compares to the total stock market. Based upon my answers to their questions, I am in a portfolio that is all stocks except for some REIT funds and the above cash. I rigged my answers to get this portfolio.

Their automatic tax-loss trading may be something of value to those in higher brackets. I think you need $50k to get that feature.

[LuckyDog]

We have some of our Schwab money invested in an IP. Expenses are virtually zero. Performance is about what you would expect for the asset allocation. We were up about 13% last year with about 40% in stocks. Out advisor explicitly told us that he wanted us to know that he would make some money on our purchase of the IP. That was OK with us as he did a fantastic job of getting us headed in the right direction...

[OldShooter]

I set up a $100K test portfolio a couple of years ago. I had to do their questionnaire over and over again to find the set of answers that minimized the cash that the portfolio held. The questionnaire assumes that this account is your only asset and attempts to assess risk tolerance and suitability from a few answers to questions. One way they make their money is to hold the cash and pay low interest rates on it.

The investments that the robot selected were heavily in Schwab passive funds (no surprise there, no objection either). IIRC there were about 10-15 funds -- waaay too complex where one or two broadly invested funds would do the job. But then investing would look easy. Which it is if you're paying attention to the academic research.

I let it run for about a year and a half. Performance slightly lagged a simple portfolio of 65% US domestic total market and 35% total international market. I didn't bother to try to prize out why the discrepancy existed. I finally closed out the account out of boredom and because I was tired of having my portfolio position list junked up with tiny positions in too many funds.

For a young person whose total portfolio would be given to the robot it is probably not a bad option. But if he/she took the few minutes to understand a simple two- or three-fund portfolio I don't think the robot would have any advantage.

[MikeTN]

I've had an IP account for about 9 months now: I answered the questions to indicate I wanted as high an equity % as possible. I ended up with about 8% money market, which is where they make money as it pays only about 0.15% interest. However, because I have so little in MM, it is not costing me much. In general I think the portfolio they picked makes sense for an aggressive investor, and is probably better than a simple 3-fund portfolio.

[OldShooter]

Quote:

Originally Posted by MikeTN ... In general I think the portfolio they picked makes sense for an aggressive investor, and is probably better than a simple 3-fund portfolio.

@MikeTN, with respect, what facts do you have to back up that opinion? Have you done some backtesting, or ??

As described in my post above, in a 18 month test with real money on the table the Schwab robot did not outperform a simple two-fund portfolio. I didn't mention it, but I did adjust the equity performance numbers to eliminate the dead weight of the required cash allocation. Even with that adjustment the robot underperformed.

(I will be the first to admit that 18 months in the market is not a statistically sound basis for an definitive evaluation but given the relatively recent introduction of Schwab's robot that's pretty much all we have.)

[ncbill]

Quote:

Originally Posted by MikeTN I've had an IP account for about 9 months now: I answered the questions to indicate I wanted as high an equity % as possible. I ended up with about 8% money market, which is where they make money as it pays only about 0.15% interest. However, because I have so little in MM, it is not costing me much. In general I think the portfolio they picked makes sense for an aggressive investor, and is probably better than a simple 3-fund portfolio.

So what is the expense ratio for the funds in the account?

[OldShooter]

Quote:

Originally Posted by ncbill So what is the expense ratio for the funds in the account?

Here is what the robot gave me for equity investments:

Schwab Emerging Markets Equity ETFâ„¢ SCHE
Schwab Fundamental Emerging Markets Large Company Index ETF FNDE
Schwab Fundamental International Large Company Index ETF FNDF
Schwab Fundamental International Small Company Index ETF FNDC
Schwab Fundamental U.S. Large Company Index ETF FNDX
Schwab Fundamental U.S. Small Company Index ETF FNDA
Schwab International Equity ETFâ„¢ SCHF
Schwab International Small-Cap Equity ETFâ„¢ SCHC
Schwab U.S. Large-Cap ETF SCHX
Schwab U.S. REIT ETFâ„¢ SCHH
Schwab U.S. Small-Cap ETF SCHA
Vanguard Global ex-U.S. Real Estate Index Fund ETF Shares VNQI

You can look up the expenses as you like, but I think they are all low cost funds. The portfolio had some home country bias: around 60% US/40% international.

As I said, I closed the account out of boredom and because keeping track of so many funds comprising just $100K was a pain. The portfolio did underperform my standard two-fund benchmark but not by much and that difference is probably attributable to slightly different sector allocations. So I don't hate the robot. He just didn't do anything special for me. I'm sure this is a fine option for some.

[bingybear]

The standard funds are real low ER IIRC. The fundamental are a bit more expensive. I would assume they have to pay something to use the Russell Fundamental indexes.