Schwab Intelligent Portfolios from Charles Schwab is an automated investment advisory service that uses sophisticated algorithms to build, monitor and automatically rebalance a diversified portfolio, based on your financial goals. However, what makes Schwab Intelligent Portfolios different from other robo-advisors? Find out in this article about Schwab robo investing below.
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The Schwab Intelligent Portfolio can help you work towards a variety of saving and investing goals, such as making sure you have enough money for retirement, building up your kids’ college savings or a rainy day fund, or just working to build long-term wealth.
To open an account, you’ll first answer eleven questions about your financial goals, your tolerance to risk and what sort of timescales you’re working to. Then you’ll find yourself presented with a recommended diversified portfolio of low-cost ETFs based on your needs.
Up to 20 different asset classes may be contained within your portfolio, along with an FDIC-insured cash allocation. Cutting edge technology is used to monitor your portfolio daily, automatically rebalancing it when needed, so you won’t need to worry too much about keeping track of how your investments are performing.
Additionally, periodic evaluations take place to ensure your asset allocation is balanced regarding risk and return. Like some other robo-advisors, Schwab Intelligent Portfolios offer tax-loss harvesting. This is a service you can activate for free if your taxable portfolio contains $50,000 or more.
The types of accounts available with a Schwab Intelligent Portfolio include:
- Individual, joint and custodial brokerage accounts.
- Retirement accounts (Roth IRA, Traditional IRA, SEP IRA, SIMPLE IRA, and Rollover IRA).
- Revocable Living Trust accounts (Single Trustee and Two Trustees).
Many other robo-advisors charge account management or advisory fees, which can be in the region of 0.25% of the assets managed. Schwab, on the other hand, doesn’t charge any advisory fees or commissions. Note that you will have to pay the operating expense on the ETFs in your portfolio, just as you would if you were a DIY investor.
To open a Schwab Intelligent Portfolio account, you’ll need to invest a minimum of $5,000. This may present a problem for those new to investing who haven’t yet had the chance to build up much of a sum to invest.
It’s worth noting that if you have a 401(k) or IRA, you can use a Schwab Intelligent Portfolio to roll over your assets into a Rollover or Roth IRA account.
Wealthfront offers a similar service in that you’ll get a diversified portfolio of low-cost ETFs, automatically rebalanced when required, based on your financial goals. There are some notable differences between Wealthfront and Schwab Intelligent Portfolios to be aware of, as follows:
- Fees – Wealthfront charges a 0.25% annual advisory fee of your assets under management. Schwab Intelligent Portfolios wins in this respect, with zero advisory fees per year.
- Account minimum – New investors may find it easier to get started with Wealthfront since you can open an account with just $500 – significantly less than the $5,000 stipulated by Schwab Intelligent Portfolios.
- Cash allocation – With a Schwab Intelligent Portfolio, a percentage of it will be held in cash. The cash allocation varies according to the investor’s risk profile but could be anywhere from 6% to 29% of the account’s value. The most conservative portfolios will hold the most cash. What this ultimately means is that some – perhaps even quite a bit – of your money will remain uninvested, so you could lose out on returns.
The Schwab Intelligent Portfolio is a worthy contender in the world of robo-advisors. Passive and beginner investors will no doubt appreciate the automated portfolio rebalancing while the lack of fees along with Schwab’s 24/7 customer support, 365 days per year will appeal to most investors. However, the high cash allocation in a Schwab Intelligent Portfolio and the relatively steep $5,000 account minimum may be offputting for some people.
There are more than 200 robo-advisors in the U.S. currently, so be sure to do your research before you make your decision as to which one to use for automated investing. As a starting point, check out our articles about WiseBanyon vs. Betterment and Personal Capital vs. Wealthfront.
*The information in this article is correct at the time of publishing. Please note that it shouldn’t be construed as professional investment advice.