So you have a few bucks laying around, you heard about robo advisors, and it got you thinking? In November of last year, I had the same thought so I searched for the best robo advisors, opened multiple accounts, funding the accounts and set up a competition for a month.
The goal was to see which robo advisor would provide the best return on the investment. There are a lot of variables but this short test should help narrow down the best-performing ones out there. The amount invested was the same for 3 of the 4 tested. The fourth tested I was already using so the amount invested was not changed. All amounts were under $10,000 which may factor into one of the robos pricing. The duration was one month in November 2017. A much longer test would show how the robos change as market conditions change. In order to maximize the return and keep a similar investing profile, each was set up for growth and the most aggressive out there. One should look at your own goals and risk profiles before embarking on your own journey.
The first account we will look at is Wealthfront. It is one of the top two largest out there by aum. the one month return was the lowest after fees at 1.24%. Looking at the rate if every month was the same would be 14.87. One of the nice things about this company is the first $10,000 invested has no fees and if referred by someone else, you can both invest $15,000 without fees.
The second account was with Betterment. They are the largest of the robos. The interface was nice and they also tried to look at your other investment portfolios, much like Wealthfront. The difference between Wealthfront and Betterment is pretty slim. The one-month performance was 1.32% and if it was over 12 months would be 15.80%.
The third is Charles Schwab and their Intelligent Portfolio. The minimum investment is much higher at $5,000 and the direct investing option isn’t available until $50,000. They asked the most questions of all the robos to build your investment risk profile. There are no upfront fees for this service. They make money by investing in many funds they run. Another way they make money is the larger than normal cash reserve. This annoyed me the most when but their returns speak for themselves. The one month return was 1.64% and over 12 months at the same rate it would be 19.66%.
The last account we will look at is WiseBanyan. This is the smallest of the 4 and easiest to get started. The price to start was pretty much anything you want to put in. The fees were 0 but you could add-on items for better tax savings. They seem like the newcomer and at the time, did not work with Mint.com. Over the course of one month, the return was 1.8%. If every month was the same the performance would be 21.63%.
In the end, the top performer was Wisebanyan. The difference between Betterment and Wealthfront was minimal but Betterment was a little easier to use. Charles Schwab had the second lowest fees and second highest return. this service seemed more tailored to me and was easy to use. One major advantage was the breadth of account types available and the ability to consolidate multiple other brokerage accounts in one place. This was the broker I went with and have been happy over the past 7 months.
Below is a quick look at all the results:
1 month 12 mos est
WiseBanyan 1.80% 21.63%
Charles Schwab 1.64% 19.66%
Betterment 1.32% 15.80%
Wealthfront 1.24% 14.87%
Disclaimer: I am not a financial advisor and this post my own opinion. please seek your professional advisors before taking on any financial risk. These remarks are meant to share my experience and not provide any advice. I do not own any stock in the companies mentioned above.