E*TRADE Core Portfolios Expert Review
E*TRADE Core Portfolios is the robo-advisor program offered by the well-known E*TRADE Capital Management brand. The E*TRADE robo-advisor offers automated professional investment management, with a competitive fee structure and access to financial consultants.
Similar to other robo-advisors, E*TRADE Core Portfolios combines various asset classes, or types of investments, to create a low-fee diversified mix of exchange traded funds (ETFs). Following the proven Modern Portfolio Theory (MPT), E*Trade Core Portfolios combines U.S. stock, international stock and bond funds to minimize risk and increase returns.
The investment team incorporates your objectives, risk tolerance and time horizon to create a personalized portfolio as determined by your responses to their Investor Profile Questionnaire.
An advantage of the E*TRADE Core Portfolios is that it’s offered by a well-known discount investment company. 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 dollars into the E*TRADE Core Portfolio robo-advisor. It gives you, the best of both worlds – self-directed investing, with a slice of your portfolio professionally managed.
E*TRADE Core Portfolios Robo Advising Features at a Glance
|Overview||Automated investment management robo-advisor offered by E*Trade Capital Management.|
|Minimum Investment Amount||$5,000|
|Fee Structure||0.30%, prorated and paid quarterly|
|Top Features||Access to human financial consultants. Thorough risk questionnaire and very low fee ETFs. Offers tax-sensitive, socially responsible + smart beta portfolios.|
|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||Chat available 24 hours a day, seven days per week. Customer support Monday – Friday, by both phone. Branch assistance as well.|
|Investment Funds||Low-cost, commission-free, index-based ETFs, including municipal bond funds for taxable accounts.|
|Accounts Available||Individual and joint taxable brokerage accounts; custodial accounts; traditional, Roth and rollover IRAs; SEP IRAs|
|Promotions||No account management fee
for the first year.
What Differentiates E*TRADE Core Portfolio Robo Investing From Competitors
One of the primary advantages of E*TRADE Core Portfolios is that it is offered as part of the E*TRADE platform with access to a self-direct investment brokerage account and related. Typical stand-alone robo-advisors lack the integration with traditional investment management firms and their accompanying services.
Another differentiating feature of the E*TRADE Core portfolios is the opportunity to discuss your investment questions with a financial consultant combined with the relatively low management fee. Most robo-advisors with financial advisors, charge higher management fees.
Although, it’s important to distinguish between a financial consultant and a Certified Financial Planner (CFP). A CFP has greater training and expertise, so you would expect to pay more for this type of professional financial advice. For example, Personal Capital charges a higher management fee but also provides users with access to highly qualified CFPs.
Who Benefits from the E*TRADE Core Portfolios Robo-Advisor?
E*TRADE Core Portfolios can be a real benefit to the person who wants a basic robo-advisor investment manager with access to financial consultants, for a low fee.
E*TRADE is also great for active traders, DIY investors and those seeking a portion of their investments digitally and efficiently managed.
If you’re seeking socially responsible, smart beta or tax sensitive investing options, then E*TRADE Core Portfolios might be for you.
Most robo-advisors with access to financial consultants charge more than a 0.30% AUM management fee. So, if you’re budget conscious and desire a robo-advisor with access to financial advisors, the E*TRADE Core portfolios is worth a look.
E*TRADE Core Portfolios Drill Down
E*TRADE Robo-Advisor Review – Core Portfolios Investment Mix
Your portfolio is based on your stated investment objectives, your time horizon and your risk tolerance. E*TRADE uses a detailed Investor Profile Questionnaire to make this determination. In fact, the investor questionnaire is excellent and asks more depthful questions than most robo-advisors (with the exception of Wealthfront’s PATH questionnaire, that attempts to replace a human financial advisor.)
We particularly like that the questionnaire that includes best and worst investment outcome for five sample portfolios.
For instance, the middle choice (between most conservative and most aggressive options) suggests that the best case return for a $100,000 investment would be a $127,000 portfolio value at the end of the year. While the worst case outcome would be an $81,000 value at the end of the year, with a $19,000 loss. The expected one year return is pegged at a reasonable 6% for a $106,000 investment portfolio value.
E*TRADE Robo-Advisor offers three categories of investment portfolios.
The three categories of investment portfolios includes:
- Core – This is the basic passive index fund investing strategy, with diversified asset classes.
- Socially Responsible – This investment style considers a company’s social, environmental and corporate governance impact in addition to financial returns.
- Smart Beta – This investment style seeks to outperform typical index fund investing, by constructing passively managed investment funds based on criteria expected to perform well. Examples of smart beta investing include, value stocks, equal weight index funds or dividend focused index funds.
The investment options are quite varied and include:
- 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
- Municipal bonds
For taxable accounts, the E*TRADE robo-advisor offers tax-sensitive ETFs to minimize taxes.
The portfolios provide automatic rebalancing, performed semiannually. We personally prefer less frequent rebalancing, such as this, as it gives the winning stocks a greater amount of time to perform rather than selling them off more frequently. Some robo-advisors rebalance much more regularly.
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 Core 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. In fact, any time you buy an exchange traded fund (ETF) or mutual fund, you’ll pay a small management fee.
The E*TRADE minimum is $5,000 for access to the core portfolios.
E*TRADE Core 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 questions that will be used to determine your Investor Profile.
The investor profile questions include:
1. When will you first need the money from this account? Next you’re asked when how you expect to withdraw the money, over time or in a lump sum.
2. Once you begin taking money out, how long will you continue taking money out?
3. Which sample portfolio would you prefer, based on hypothetical one-year results, assuming a $100K investment? There are five Sample portfolios all with differing possible returns and potential losses. They trend from very conservative, with lower returns and losses to aggressive with the potential for greater returns and losses.
4. How much risk are you willing to take to try and beat inflation. You’re offered 4 choices from very low to high risk.
6. The next question is another way to get at your risk comfort.
After investing for one year, which best and worst case scenario would you prefer? As the image shows, the greatest potential returns also include a larger potential for losses. The most aggressive portfolio suggests a best case scenario of a 42% gain and a comfort with a -29% loss.
7. Which hypothetical one-year best and worst case investment results would you prefer ? (Several gain/loss scenarios are presented.)
Once you complete the questionnaire, your Investor Profile is created:
My answers yielded a balanced, 60% stock, 40% bond portfolio.
That’s right in line with my current asset allocation!
The chart below shows the recommended portfolio, along side a lower and higher risk option.
The asset mix show general categories of stocks and bonds, such as loarge-cap stocks, small-mid cap stocks, international stocks, core bonds and cash. The specific funds aren’t revealed until the account is opened.
We like the investment questionnaire and believe it’s informative and comprehensive.
After completing the questionnaire, 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 Core Portfolios Pros and Cons
E*TRADE Core Portfolios Robo Advising Pros
The E*TRADE robo advisor has more in common with it’s competitors than not. Yet, there are several advantages that set this platform apart.
- The ability to engage in self-directed investing, with the option to move some or all of your portfolio over to theE*TRADE robo-advisor Core Portfolios. Although this is similar to Schwab, Fidelity and other investment broker created robo-advisors.
- The opportunity to invest in smart beta and socially responsible funds is a plus.
- Access to human financial advisors, a unique advantage at this price point.
- Advisory fee waiver for the first year after opening your account can save you some cash.
- 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 Core 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. Although the taxable accounts can invest in municipal bond funds that aren’t taxable.
- 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. And Schwab, another investment firm competitor offers their basic service for free.
- The E*TRADE $5,000 minimum could deter small investors.
E*TRADE Core Portfolios Robo-Advisor Review Wrap Up
E*TRADE Core 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 opportunity to invest with socially responsible strategies offers investors the chance to align their money and their values.
The smart beta investing options might allow you to beat the market, should those strategies prevail. Their also another option for investors seeking more options than a simple passive index fund investment strategy.
E*TRADE robo-advisor is a solid solution for the investor who wants the benefit of low cost portfolio management, with investing style variety and financial consultants with whom to chat.
If you’d like more information, or you’d like to open an account, visit the E*TRADE Core Portfolios website.
Updated; December 1, 2018
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