Charles Schwab Robo Advisor Returns: A Comprehensive Guide

Charles Schwab's robo advisor offers a range of investment portfolios with a minimum investment requirement of $5,000.

The robo advisor uses a low-cost index fund approach, which can result in lower fees compared to actively managed funds.

Schwab Intelligent Portfolios offers over 300,000 possible portfolio combinations, allowing investors to create a tailored investment strategy.

Investors can also choose from a variety of risk levels, from conservative to aggressive, to suit their individual risk tolerance.

Check this out: Risk Return Tradeoff

The Charles Schwab robo advisor offers a range of benefits that make it an attractive option for investors.

One of the standout advantages is the absence of an advisory fee for the basic version, which can help keep costs low.

Their user-friendly platform is equipped with excellent planning tools, making it easy to navigate and manage your investments.

Another perk is the good variety of ETF asset classes available, which can help you diversify your portfolio and potentially reduce risk.

Automatic account rebalancing is also a feature that can help you stay on track and maintain a balanced portfolio over time.

And if you need help, 24/7 customer support is available to assist you with any questions or concerns you may have.

Here's a summary of the pros:

Schwab Intelligent Portfolios builds its portfolios using 51 ETFs picked by Schwab experts, giving you access to over 80 variations depending on your goals, risk tolerance, and time horizon.

The platform uses a combination of primary and secondary ETFs for each asset class, allowing for tax-loss harvesting purposes. The primary ETFs are typically from Schwab, offering low Operating Expense Ratios (OERs) ranging from 0.02% to 0.18% with no advisory, trading, or account service fees.

Here are the 21 different asset classes used in Schwab Intelligent Portfolios:

You can't manually customize your portfolio by entering specific percentages for each category, but you can redo the online questionnaire to change your goals, risk tolerance, and other factors to get a new allocation recommendation.

Schwab Intelligent Portfolios builds its portfolios using a combination of 51 ETFs picked by Schwab experts, giving you access to more than 80 variations depending on your goals, risk tolerance, and time horizon.

The portfolios are constructed across 21 different asset classes, including U.S. large company stocks, U.S. small company stocks, international stocks, real estate investment trusts (REITs), and more.

Here are the specific asset classes used by Schwab Intelligent Portfolios:

For each type of asset, Schwab uses a primary ETF and a secondary ETF, which allows for tax-loss harvesting purposes. The primary ETFs are typically from Schwab, offering customers ETF options with low Operating Expense Ratios (OERs) ranging from 0.02% to 0.18% with no advisory, trading, or account service fees.

One notable limitation is that Schwab Intelligent Portfolios does not offer environmental, social, and governance (ESG) or socially responsible investments.

Saving money on taxes is a crucial aspect of portfolio management. Schwab Intelligent Portfolios Premium offers tax-loss harvesting services through a human advisor.

This service allows clients to link external accounts, so the advisor can consider the Schwab Intelligent Portfolio performance and similar funds held elsewhere. Clients can take advantage of market fluctuations by reducing taxes.

By selling positions in a net negative state at the end of the year, clients can take a loss and reestablish a similar position in another fund. This is a key reason why Schwab Intelligent Portfolios performs well.

The list of selectable ETFs includes a redundant grouping of Schwab funds with external funds. This allows for a more comprehensive understanding of market fluctuations.

Explore further: Charles Schwab Index Funds

Schwab Intelligent Portfolios can be a good option for retirees due to its Intelligent Income feature.

This feature lets you set up retirement withdrawals from your account and predicts how long the portfolio will last based on your withdrawal rate and investments.

The robo-advisor determines how to best manage the ETFs to create tax-efficient withdrawals from selling assets.

These features make it a helpful option for retirees to manage their portfolio and make informed decisions.

Both Wealthfront and Schwab Intelligent Portfolios offer a wide range of investment options to suit most investors' needs.

Wealthfront has a long list of assets you can purchase, including stocks, mutual funds, real estate, and natural resources. They also offer ETFs from 11 categories, with most portfolios holding around 7.

One of the best qualities of Wealthfront is the variety of ETFs available, with an average expense ratio of 0.06% - 0.13%. Here are some of Wealthfront's more popular ETFs:

Schwab Intelligent Portfolios also offers a wide range of investment options, with a typical portfolio holding 20 out of 53 ETFs handpicked by Schwab's experts.

Schwab Intelligent Portfolios has a cost-effective approach with no monthly management fee for its basic version.

The Premium version comes with a $300 upfront fee and a $30 monthly fee afterward.

You won't pay commissions on your trades, but you will need to pay investment fees on the ETFs recommended by Schwab.

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Here's a breakdown of the annual gross advisory fees for different account sizes:

The expense ratios for the ETFs range from 0.02% to 0.18%, with a weighted average of 0.13%.

Fees and Insurance are a crucial part of any investment strategy. Schwab Intelligent Portfolios offers a basic version with no advisory fee, which is a huge perk.

The Premium version, however, charges a $300 upfront fee and a $30 monthly fee afterward. This is still relatively reasonable, especially considering the access to human advisors it provides.

Schwab doesn't charge commissions on trades, but you will need to pay investment fees on the ETFs. These fees range from 0.02% to 0.18%, with a weighted average of 0.13%.

Wealthfront, on the other hand, charges a 0.25% annual management fee. This is a relatively low fee, especially considering the features it offers.

Here's a comparison of the fees for Schwab and Wealthfront:

It's worth noting that Wealthfront's fees can be lower than Schwab's, especially if you opt out of certain features like Risk Parity. However, both services offer a range of features that can help you save money in the long run.

The cash portion of your Schwab Intelligent Portfolios account has FDIC insurance, which covers up to $250,000 per account.

Schwab Bank holds the money, so you can rest assured that your cash is safe.

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To get started with a Schwab Intelligent Portfolios account, you'll need to meet the minimum requirements. The minimum balance for a standard account is $5,000.

This is a relatively high minimum compared to other robo-advisors, so it's essential to consider your financial situation before opening an account. Schwab Intelligent Portfolios offers a premium account for those who want access to a human advisor, and that requires a minimum deposit of at least $25,000.

To access more advanced features like tax-loss harvesting, you'll need to have a balance of at least $50,000.

The performance and returns of a Charles Schwab robo advisor can be measured in various ways.

Historical returns of a U.S. based portfolio with a moderate risk profile had a three-year historical return of 8.50% as of 2024. Past performance does not guarantee the same future returns.

Intriguing read: Vanguard Robo Advisor Performance

To get a more accurate picture, you can explore the Rolling Returns for a single portfolio, or check the return differential by switching on the "Head To Head" toggle.

Here are the yearly returns for two portfolios:

It's essential to note that the S&P 500 isn't "the market", as it's often mistakenly described. It measures just one market segment: U.S. large-cap stocks.

A fresh viewpoint: Stock Market Average Return History

Portfolio Returns are a crucial aspect of evaluating your investment portfolio's performance.

You can use the historical returns of your target portfolio to predict your growth, but note that past performance does not guarantee the same future returns.

A U.S. based portfolio with a moderate risk profile had a three-year historical return of 8.50% as of 2024.

To measure the performance of your portfolio, it's essential to understand that the S&P 500 isn't "the market", as it's often mistakenly described.

The S&P 500 measures just one market segment: U.S. large-cap stocks.

You can explore the Rolling Returns for a single portfolio, or check the return differential, by switching on the "Head To Head" toggle.

Here are the yearly returns for two portfolios:

Drawdowns are a natural part of investing, and understanding them is crucial for making informed decisions. A drawdown refers to the decline in value from a relative peak value to a relative trough.

The maximum drawdown is the maximum observed loss from a peak to a trough of a portfolio before a new peak is attained. This can be seen in the Conservative Income portfolio, which experienced a maximum drawdown of -12.16% between September 2021 and July 2024, taking 35 months to recover.

Conservative Income also had a drawdown of -11.50% between January 2022 and September 2024, which took 33 months to recover. In contrast, the Robo Advisor 20 Value Tilt portfolio experienced a drawdown of -9.97% between May 2008 and July 2009, which took 15 months to recover.

The recovery time can vary greatly, with some drawdowns taking as little as 5 months to recover, while others take up to 35 months. For example, the Conservative Income portfolio's drawdown of -4.38% between February 2020 and June 2020 took only 5 months to recover.

Here's a summary of some notable drawdowns for both portfolios:

It's essential to note that these drawdowns can be significant, but they are a normal part of investing. By understanding the potential risks and recovery times, you can make more informed decisions about your investments.

Charles Schwab is a well-established financial services company that has been around since 1971. They're known for their low-cost brokerage services and a wide range of investment products.

In 2015, Charles Schwab launched Schwab Intelligent Portfolios, a robo-advisor that uses automated technology to manage investment portfolios.

Schwab Intelligent Portfolios offers a range of portfolios with no management fees or commissions, making it an attractive option for investors who want to keep costs low.

Investors can choose from a variety of portfolios, each with a different asset allocation and risk level, allowing them to select a portfolio that fits their individual financial goals and risk tolerance.

The minimum investment requirement for Schwab Intelligent Portfolios is $5,000, making it accessible to a wide range of investors.

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The Charles Schwab robo advisor is a great option for new investors, with a low account minimum of $500. This makes it accessible to those just starting out.

The fees are also competitive, coming in at 0.25% annually. This is a relatively low cost compared to other investment options.

One of the standout features of this robo advisor is its automatic rebalancing, which helps to ensure your portfolio stays on track. This can be a huge time-saver and stress-reducer.

Tax-loss harvesting is also available, which can help you minimize your tax liability. This can be a big benefit for investors who are looking to maximize their returns.

Here are the key facts at a glance: