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Robo-advisers vs managed accounts?

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phyllis
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Robo-advisers vs managed accounts?  Reply with quote  

Hi, I've been trying really hard to figure out the best place to put my IRA accounts. I am a buy-and-hold kind of investor because I don't know enough to pick stocks, etc. myself. Currently my IRAs are held by a brokerage and are invested in mutual funds. I know the expense ratios on those are much higher than ETF index funds. I was thinking of switching to a robo-adviser (like Betterment or Wealthfront) and just investing everything in a portfolio of indexed ETF funds. Is this a good idea? I feel like paying fees on a managed account won't necessarily make more money in the long run than just indexing to the market. I like that these robo-adviser sites are very diversified and super low cost. I don't know anyone actually using them though. Anybody have thoughts on this? I think my mutual funds charge around 1.00% in fees. Some of these robo-adviser sites charge only 0.15% plus the cost for the ETFs (.09% to .15% depending on the fund). Wondering if I wouldn't come out ahead.

Thanks, Phyllis
Post Mon Jun 27, 2016 6:49 pm
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oldguy
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You would probably come out ahead - but trading in/out by a robo-provider is unlikely to be better than buying the index directly.
Go to a no-load fund company (Fidelity, Vanguard, TR Price, etc) and buy the SP500 Index. That gives you a broad diversification across all segments of the market, and it is unmanaged, usually about 0.1% fee.

The return over nearly any 30-yerar block that you look at is 11%/year.
http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html#.V3Gd4DWyDSZ
Post Mon Jun 27, 2016 9:44 pm
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phyllis
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Thanks!!! I will take a look at this. I had been mainly thinking robo-advisers because I had no idea which funds to buy. I've got at least 20 more years until I retire (probably longer) and want to increase my retirement as much as I can. Thanks!
Post Tue Jun 28, 2016 3:06 am
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littleroc02us
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I also have about 20 years of investing and a good portion of our retirement is with the VTSAX Index fund through Vanguard, which tracks over 3,000 companies. It has been very prosperous for us and pretty much a no brainer. The expense ratio is so .005% and it's returned around 10% over the last 10 years. There is no trading and all we do is deposit money and forget.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Tue Jun 28, 2016 1:42 pm
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phyllis
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Thanks! This is really helpful.
Post Tue Jun 28, 2016 6:50 pm
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