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2017 Best Robo-Advisor Performance – The Research Is In

When searching for your best robo-advisor, short-term performance is one factor to consider. Read this best robo-advisor article and store the results in your investment research tool box.

Condor Capital Management took on the responsibility of measuring the returns of the most prominent robo-advisors last year in their “Bringing Transparency to Robo Investing” report. Using their excellent data from actually investing in 15 of the major robo investment advisors, after the third quarter, we evaluated the winners and participants in “2016 Best Robo-Advisor Returns – Who’s the Winner?” Today, we’ll dig into the full 2016 returns of 15 top robo-advisors.

Today’s exploration includes results from each robo-advisor firm’s full year investment results. Thus, some companies will be left out, and the IRA account information isn’t included in this overview.

Before we dive into the results, it’s helpful to take a holistic viewpoint.

What Factors to Consider When Choosing a Robo-Advisor

The top robo-advisors for 2017 research is one piece in your investment planning decision. In fact, when choosing a robo-advisor there are many factors to consider:

  • Available number and style of ETFs
  • Range of account types
  • Availability of human financial assistance
  • Fee structure
  • Access to DIY + Robo-Advisor investment opportunities
  • Required minimum investment amount

Use this 2017 Best Robo-Advisor Performance data along with other factors in your search for your best robo-advisor. Although it’s easy to simply pick an investment advisor at the top of the pack, using a single year’s data to choose your investment manager is a short term approach for a long-term decision.

Behind the Scenes of the 2017 Best Robo-Advisor Performance

Condor Capital chose a moderate investment asset allocation. The taxable model portfolios were invested in 60% stock and 40% bond exchange traded funds (ETFs). The IRA accounts were invested more aggressively, although lack full year data. Thus their results aren’t included in this article.

You’ll find the winners in this years rob0-advisor contest asset allocations matched up the best with the out-performers in the U.S. and global economies. In other words, the top robo-advisors ETF picks had a greater allocation to the 2016 top performing asset classes.

For the taxable accounts, the digital advisors most heavily weighted toward U.S. equities, corporate bonds and emerging market stocks and bonds did well. In the domestic sphere, the small caps outperformed the larger caps. Regarding investment style, a value investing tilt beat growth over the year.

The Condor Capital report broke out Equity and Fixed Income portfolio data as well as reporting on overall performance.

2017 best robo-advisor performance + returns from the top digital investment managers.

Image credit; Condor Capital Wealth Management

Overall, you’ll notice a low annual portfolio return for Vanguard’s Personal Advisor Services of 5.55% in comparison with Schwab’s 10.75%. Personal Capital’s 9.41% was a close second and offers investors access to a dedicated financial advisor and an opportunity to invest in individual stocks as well as ETFs. Several of the contenders lacked full year data and thus weren’t included. At present, since Ally.com’s acquisition of TradeKing Advisors, this robo isn’t accepting new clients.

WiseBanyan’s zero fee, zero minimum investment account fared well with a 7.98% annual return in 2016. This robo-advisor was just slightly behind the 3rd place finisher, SigFig’s 8.62% return.

Overall Portfolio Results:

  • Winner: Schwab Intelligent Portfolios
  • 2nd Place: Personal Capital
  • 3rd Place: SigFig

Equity Portfolio Results:

  • Winner: Schwab Intelligent Portfolios
  • 2nd Place: Acorns
  • 3rd Place: Personal Capital

Fixed Income Portfolio Results:

Schwab’s Intelligent Portfolios robo-advisor offers investors portfolios culled from 53 ETFs from a wide variety of asset classes. Other than Personal Capital’s approach, which also includes individual stocks, Schwab has among the broadest fund selection and also includes several unique offerings such as a master limited partnership ETF and a gold fund.

2016 Robo Returns versus the S&P 500 and Corporate Bonds

Whenever you check out an investment’s return, it’s useful to consider how your investments might have performed when compared with major stock and bond market indexes.

In 2016, the S&P 500 returned 11.74% and U.S. investment grade corporate bonds returned 5.8%. Integrate those two index returns in a 60% – 40% allocation and you have an annual return of 9.36%. Of all of the robo-contenders, only Schwab beat this simplistic benchmark.

Clearly, in order to make a perfect comparison, you’d want to add in some international and government bond data as well.

2017 Best Robo-Advisor Performance Takeaway

While one-year returns are fascinating to review, it’s important to understand that there’s also a bit of luck in a short term analysis. If the advisors’ ETFs match up well with the market sectors and asset classes that outperformed during the year, then that advisor will benefit. Since no one can predict the future, choosing a robo-advisor solely based upon one year annual returns isn’t necessarily the way to outperform every year.

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Barbara A. Friedberg, MBA, MS

Barbara A. Friedberg, MBA, MS

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