E*Trade Robo-Advisor Review – Expert Analysis of Adaptive Portfolio
E*TRADE Adaptive Portfolios Expert Review
E*TRADE Adaptive Portfolio is the robo-advisor program offered by E*TRADE. The E*TRADE robo-advisor offers automated professional management of your account, with a competitive fee structure.
E*TRADE Adaptive Portfolios offers an actively managed robo-advisor portfolio and the traditional passive investment portfolio.
A big advantage of E*TRADE Adaptive Portfolio is that it’s offered by one of the best investment companies. E*TRADE robo investing offers flexibility. As a self-directed investor, you can have an account with E*TRADE, and take advantage of all of the investment tools and benefits. Next, you can put a portion of your investment portfolio into E*TRADE Adaptive Portfolio robo-advisor. It gives you, as an investor, the best of both worlds – self-directed investing, with a slice of your portfolio professionally managed.
E*TRADE Adaptive Portfolios Robo Advising Features at a Glance
|Overview||Automated investment management robo-advisor that offers two distinct portfolio options - active and passive.|
|Minimum Investment Amount||$5,000|
|Fee Structure||0.30%, prorated and paid quarterly|
|Top Features||Hybrid portfolio option, offering the opportunity to outperform the general market through the use of actively managed mutual funds. Access to human financial advisors.|
|Free Services||You can complete the Investor Profile Questionnaire to determine the exact portfolio mix necessary based on your own investment goals, time horizon and risk tolerance level.|
|Contact & Investing Advice||Available 24 hours a day, seven days per week, Monday through Friday, by both phone and live chat|
|Investment Funds||Low-cost, commission-free, index-based ETFs, and actively managed mutual funds|
|Accounts Available||Individual and joint taxable brokerage accounts; custodial accounts; traditional, Roth and rollover IRAs; traditional and Roth 401(k)s|
|Promotions||No account management fee|
for the first six months, if you open an account with a minimum of $5,000, no later than December 31, 2017
What Differentiates E*TRADE Adaptive Portfolio Robo Investing From Competitors
One of the primary advantages of E*TRADE Adaptive Portfolio is that it is offered as part of the E*TRADE platform with access to a self-direct investment brokerage account and related resources along with a managed portfolio option. Typical stand alone robo-advisors lack the integration with traditional investment management firms and their services.
Still another differentiating feature of E*TRADE Adaptive Portfolios are its two distinct portfolios:
1. The first E*TRADE adaptive portfolio option is the typical passively-managed portfolio, that’s comprised of index-based ETF’s. This investment management robo-advisor is expected to perform in line with the market.
2. The second portfolio is a hybrid. This portfolio offers a mix of index-based ETF’s, along with actively managed mutual funds. The mutual funds offer an opportunity for the investor to outperform market indices, such as the S&P 500. This is a rarer portfolio option among robo-advisors.
Both portfolios are fully managed for you. The major difference between the two is in the choice of funds comprising the portfolios.
Who Benefits from the E*TRADE Adaptive Portfolio Financial Advisor Robo?
E*TRADE Adaptive Portfolios can be a real benefit to the person who wants to combine both self-directed and managed investing on the same investment platform. E*TRADE offers a robust trading platform for the self-directed investor. But with E*TRADE Adaptive Portfolios, you can also have a portion of your portfolio professionally managed.
Additionally, the hybrid portfolio provides an opportunity for professional investment management within a robo advisor structure, along with the ability to outperform the general market. This is a unique offering among robo advisors.
If you’re seeking a robo-advisor with access to financial advisors, the E*TRADE adaptive portfolio might be for you.
E*TRADE Adaptive Portfolio Drill Down
E*TRADE Robo-Advisor Review – Adaptive Portfolios Investment Mix
Your portfolio is based on your stated investment objectives, your time horizon and your risk tolerance. E*TRADE uses an Investor Profile Questionnaire to make this determination. Next, your portfolio is customized for your profile, using Modern Portfolio Theory (MPT). You are also given access to a team of investment advisor representatives.
E*TRADE Adaptive Portfolio selects investments based on the risks that they have over the long term, which is defined as generally three years or longer.
Once E*TRADE has determine your investor profile, you will be provided with a detailed investment proposal.
Whether you choose the ETF portfolio or the hybrid portfolio, your portfolio will include between six and eight funds. Those funds might be invested in the following asset classes:
- Large cap stocks
- Mid cap stocks
- Small cap stocks
- Emerging market stocks
- International market stocks
- Treasury Inflation Protected Securities (TIPS)
- High-yield bonds
- Short- and intermediate-term bonds
The portfolios provide automatic rebalancing, performed semiannually. You also have mobile access through both Android and iOS. All accounts are covered by SIPC, for up to $500,000 in cash and securities, including up to $250,000 in cash. SIPC coverage protects against broker failure, not against losses due to market factors. Additional coverage is available through London insurers.
E*TRADE Adaptive Portfolios Fees
In addition to the annual advisory fee of 0.30%, which is prorated and paid quarterly, you will also pay fund related expenses, such as 12b-1 fees and fund management fees. However, these secondary fees are typical with robo advisors and are paid to the fund company, not to E*TRADE.
The E*TRADE minimum is $5,000 for access to the adaptive portfolio management.
You should also be aware that with the hybrid portfolio, the use of actively managed mutual funds will result in slightly higher investment fees.
E*TRADE Adaptive Portfolios Sign-up Process
The first step in opening an E*TRADE Adaptive Portfolios account is to complete the Investor Profile Questionnaire. In it, you will be asked a series of eight questions that will be used to determine your Investor Profile.
The eight questions are:
1. When will you first need the money from this account?
2. Once you begin taking money out, how long will you continue taking money out?
3. When it comes to investing this money, what do you care about most?
4. Which sample portfolio would you prefer, based on hypothetical one-year results, assuming a $100K investment?
Which comes with the following options:
5. Which of the following best reflects your general viewpoint towards inflation and risk?
6. If you had a diversified portfolio that plunged 20% with the market but didn’t need the money for 10 years, how would you react?
7. Which hypothetical one-year best and worst case investment results would you prefer ? (Several gain/loss scenarios are presented.)
8. “I am comfortable with investments that may frequently have large declines in value if there is the potential for higher returns.” Do you…Strongly Agree, Disagree, Somewhat Agree, Agree, Strongly Agree?
Once you complete the questionnaire, your Investor Profile is created:
At that point, you can open your account and fund it. You always have the option to change your Investor Profile, by changing your answers to the questionnaire.
E*TRADE Adaptive Portfolios Pros and Cons
E*TRADE Adaptive Portfolios Robo Advising Pros
- The ability to engage in self-directed investing, with the option to move some or all of your portfolio over to E*TRADE robo-advisor Adaptive Portfolios.
- The hybrid portfolio offers an opportunity to outperform the market. Most robo advisors match returns of their underlying market indices. (Index matching performance isn’t a bad thing, as the unmanaged index returns beat most active trading strategies.) E*TRADE Adaptive Portfolios’ use of actively managed mutual funds gives you an opportunity to outperform the market, within the framework of a fully managed portfolio.
- Access to human financial advisors, a unique advantage at this price point.
- Advisory fee waiver for the first six months after opening your account.
- You have the ability to change your Investor Profile, and thus your portfolio allocations at any time.
- 24/7 customer service is great for the investor who wants assistance nights and week-ends.
E*TRADE Adaptive Portfolios Robo Advising Cons
- Tax-loss harvesting is not offered. This is not a “deal breaker” for many investors, but it has become a common offering by many robo-advisors, and its absence could be seen as negative.
- Rebalancing occurs semiannually. This could be a negative if there are major swings in the market, that move your allocations significantly away from their targets before the rebalancing date. Although, there’s little research to suggest more frequent rebalancing is beneficial.
- The annual management fee of 0.30% is competitive, but slightly above standalone robo advisors, like Betterment and Wealthfront, each of which charges a 0.25% annual fee.
- The E*TRADE $5,000 minimum could deter small investors.
E*TRADE Adaptive Portfolios Robo-Advisor Review Wrap Up
E*TRADE Adaptive Portfolios may be one of the better robo advisors available, due in large part to being part of the E*TRADE family. You can use the E*TRADE platform for self-directed investing – and it’s one of the better platforms available – and hold at least some of your money in the managed portfolios.
The hybrid portfolio, which also invests in actively managed mutual funds in an attempt to provide above market rates of return, is highly innovative. Many robo-advisor investors may be unaware that most platform managers have no capability to outperform the market. Although, attempting to ‘beat the market’ isn’t synonymous with earning higher than market-matching returns. And, active strategies come with greater risk and expenses.
E*TRADE robo-advisor is a solid solution for the investor who wants the benefit of low cost portfolio management, with the ability to outperform the market and access to a discount brokerage account.
If you’d like more information, or you’d like to open an account, visit the E*TRADE Adaptive Portfolios website.