Test Accounts Week 11

The S&P 500 Index fell again last week by 2.2%. As usual, Betterment and Wealthfront also fell, but to lesser extents, 1.0% and 1.1% respectively. Folio Investing, a stock mainly portfolio dropped 2.3%. The Schwab Intelligent Portfolios (SIP), surprisingly gained 0.5%.

Lending Club just keeps marching along, up 0.3%. Lending Club has taken over the cummulative lead up 1.8%. Not bad considering payments only started 5 weeks ago. In fact, all test account have outperformed the S&P 500 Index, except for Folio Investing. It is still suffering from the $290 annual fee taken out 2 weeks ago.

Wealthfront has introduced Direct Indexing: The Wealthfront 100. With this option, Wealthfront replaces some of their US Stock ETF with individual stocks. This allows them to sell losers and increase tax loss harvesting. They claim a bump in returns by up to 2%. This is only applicable to taxable accounts and requires a minimum of $100,000. Obvious not going to have any impact on our test account.

I’m not sure if there will be a mid-week post. If you follow me on Twitter @billlanke I’ll let you know when I make the next post.

W/E	S&P 500	BTRMNT	WLTFRNT	FOLIO	LND CLB	SCHWAB
16-Jan	-1.2%	0.0%	0.4%	-0.2%	0.0%	-0.2%
23-Jan	1.6%	1.1%	0.7%	2.0%	0.0%	1.0%
30-Jan	-2.8%	-1.5%	-0.9%	-2.0%	0.0%	-1.3%
6-Feb	3.0%	1.0%	1.0%	0.9%	0.0%	1.3%
14-Feb	2.0%	1.0%	0.8%	1.8%	0.0%	1.2%
21-Feb	0.6%	0.6%	0.4%	0.5%	0.0%	0.4%
28-Feb	-0.3%	0.2%	0.2%	0.3%	0.7%	0.0%
6-Mar	-1.6%	-1.6%	-1.8%	-0.9%	0.3%	-2.1%
13-Mar	-0.9%	-0.1%	-0.3%	-3.4%	0.2%	-0.7%
20-Mar	2.7%	2.1%	2.0%	3.5%	0.2%	1.0%
27-Mar	-2.2%	-1.0%	-1.1%	-2.3%	0.3%	0.5%

Schwab Intelligent Portfolios Operations

We now have the actual ETF purchases in the Schwab Intelligent Portfolios (SIP) account. Schwab indicated that you cannot buy fractional shares of ETFs. So like Wealthfront they only deal in whole shares. This makes it more difficult to match the desired allocations. For example, they recommend that you have 2% of your holdings in international REITs. They use VNQI for this and purchased 4 shares resulting in a 10% overage (buying 3 shares would have left a more significant underage). Since Betterment and Folio Investing use fractional shares, they can more easily match the desired allocations.

Having the number of shares for each ETF allowed me to go back and use the weekly closing price of each ETF to simulate what would have happened if the account had started at the same time as the other test accounts. I’ve added another column in my week over week percent change table.

W/E	S&P 500	BTRMNT	WLTFRNT	FOLIO	LND CLB	SCHWAB
16-Jan	-1.2%	0.0%	0.4%	-0.2%	0.0%	-0.2%
23-Jan	1.6%	1.1%	0.7%	2.0%	0.0%	1.0%
30-Jan	-2.8%	-1.5%	-0.9%	-2.0%	0.0%	-1.3%
6-Feb	3.0%	1.0%	1.0%	0.9%	0.0%	1.3%
14-Feb	2.0%	1.0%	0.8%	1.8%	0.0%	1.2%
21-Feb	0.6%	0.6%	0.4%	0.5%	0.0%	0.4%
28-Feb	-0.3%	0.2%	0.2%	0.3%	0.7%	0.0%
6-Mar	-1.6%	-1.6%	-1.8%	-0.9%	0.3%	-2.1%
13-Mar	-0.9%	-0.1%	-0.3%	-3.4%	0.2%	-0.7%
20-Mar	2.7%	2.1%	2.0%	3.5%	0.2%	2.5%

It seems that the SIP is a little more volatile than the other two robo-advisers. I looked at the allocations and noticed that SIP had a higher percentage of international funds and these have been more volatile recently.

There are some discussions online saying that SIP isn’t really free. Whie there aren’t any service charges, there are expenses taken out of the ETFs held in robo-accounts. So the annual cost of having one of these accounts is the sum of the service fees and the expenses taken out of the ETFs. So I added the expense ratio to a spread sheet that I keep. I then computed the annual cost of each ETF by multiplying this expense ratio times $10,000 times the allocation percentages. These were summed for each robo-adviser. For SIP, I computed the expense cost for the ETFs and divided this by the sum of the ETFs. This gave me an expense ratio that I applied to the cash holdings.

The total ETF expenses were $15.36 for Betterment, $17.61 for Wealthfront, and $25.71 for Schwab’s SIP. When you add the annual service charge, SIP becomes the least expensive at $25.71 (no service charge). Betterment’s annual costs becomes $40.36 then Wealthfront at 42.61.

I plan on adding this SIP account to the weekly updates. Follow me on twitter @billlanke and I’ll let you know when I do so.