Long-term investors looking for a lower-cost digital-first platform designed around their goals may want to turn to an automated investment offering.
Investors often hear they should spend more time on strategy and forge a relationship with a financial adviser who can provide input, albeit at a cost.
There’s nothing wrong with that, but between jobs, raising a family, and other responsibilities, not everyone has the time and resources to go full throttle. Those investors might consider turning to less costly and more technologically-focused options to help pursue short- and long-term goals with the benefits of professional management. In comes “robo” advice.
These automated digital services allow investors to easily input their personal goals, basic financial information, risk tolerance, and time horizon, and receive a recommendation for a diversified portfolio. After opening and funding an account, investors are able to monitor progress electronically for easy transparency.
Additionally, investors can rely on automatic re-balancing of their portfolio as markets change, helping maintain appropriate asset allocation parameters over time.
“With Essential Portfolios, an investor can get a portfolio recommendation in 15 minutes or less,” said Tom Casey, Senior Manager, Guidance Product Management at TD Ameritrade. The advisory services are provided by TD Ameritrade Investment Management, LLC. After that, investors can open and fund a TD Ameritrade Investing Account, and have a well-diversified portfolio managed at a very affordable cost. Advisory fees for an Essential Portfolio are 0.30%, and the minimum investment is only $5,000.
That minimum is close to the $5,500 annual limit for contributions to Individual Retirement Accounts (IRAs) for those under age 50, so an automated solution could serve as a natural place for a young investor to start planning for future retirement needs.
One element that sets Essential Portfolios apart from other “robo” advisor products is the Morningstar connection. Investment vehicles used include ETFs recommended by Morningstar Investment Management, grouped into five goal-oriented portfolios designed to fit a range of risk tolerances, ranging from conservative to more aggressive investment strategies. TD Ameritrade Investment Management, LLC. conducts due diligence on Morningstar’s recommendations and validates them, so there’s plenty of professional experience that goes into the components and allocations of the available portfolios.
“Our relationship with Morningstar means there’s no bias toward fund selection recommendations,” Casey said. “We’re looking to find the funds best suited for each portfolio.”
Doing the research and monitoring investments is work for an investor, and a “robo” program can alleviate some of that burden. Easing this burden can provide some relief, and help free investors up to focus on the things in life that really matter to them, which, when it comes right down to it, are the reasons why they’re investing in the first place.
FIGURE 1: START WITH THE GOAL.
Essential Portfolios starts with several investment goals and guides investors through questions that establish individual risk tolerance, target timing, and other relevant facts that help identify a recommended portfolio. Image Source: TD Ameritrade Investment Management, LLC.
Casey cautions that "robo” advisors may not be for every investor. Those with complicated estate or tax planning needs or who prefer more “hands-on” support from a personal financial adviser may want to check out other offerings.
But automated investing solutions like Essential Portfolios are there for the many investors with long-term goals who need a lower cost, but still want a portfolio that’s easily accessed digitally.
“Automated investing is a potential solution for those looking to get started with investing who still want professional advice,” Casey said.
Whatever sort of investor one may be, it always makes sense to set goals, stick to a plan, and revisit the plan every now and then. This could happen, for instance, when a new job begins or retirement is directly ahead and investment portfolio allocations may need adjustments to match changing life circumstances. Automated investing tools can help investors start good investing habits and adjust goals and investments to new circumstances.
The information presented is for informational and educational purposes only. Content presented is not an investment recommendation or advice and should not be relied upon in making the decision to buy or sell a security or pursue a particular investment strategy.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
Before investing carefully consider the underlying funds’ objectives, risks, charges, and expenses. For a prospectus containing this and other important information about each fund, contact us at 888-310-7921. Please read the prospectus carefully before investing.
All investments involve risk, including loss of principal. Past performance does not guarantee future results. There is no assurance that the investment process will consistently lead to successful investing. Asset allocation and diversification do not eliminate the risk of experiencing investment losses.
ETFs can entail risks similar to direct stock ownership, including market, sector, or industry risks. Some ETFs may involve international risk, currency risk, commodity risk, and interest rate risk. Trading prices may not reflect the net asset value of the underlying securities.
Morningstar Investment Management LLC is a registered investment adviser and subsidiary of Morningstar, Inc. Morningstar Investment Management LLC provides consulting services to TD Ameritrade Investment Management LLC (‘TD Ameritrade Investment Management’) by providing recommendations to TD Ameritrade Investment Management regarding asset allocation targets and selection of securities; however, TD Ameritrade Investment Management retains the discretion to accept, modify or reject Morningstar Investment Management LLC’s recommendations. Morningstar Investment Management LLC selects securities from the universe of investments made available through TD Ameritrade. In performing its services, Morningstar Investment Management LLC may engage the services of its affiliate, Morningstar Investment Services LLC, a registered investment adviser and subsidiary of Morningstar Investment Management LLC. Neither Morningstar Investment Management LLC nor Morningstar Investment Services is acting in the capacity of advisor to TD Ameritrade Investment Management’s clients. Asset Allocation target allocations are subject to change without notice. Morningstar Investment Management LLC establishes the allocations using its proprietary asset classifications. If alternative classification methods are used, the allocations may not meet the asset allocation targets. The Morningstar name and logo are registered marks of Morningstar, Inc. Morningstar Investment Management LLC is not affiliated with TD Ameritrade Investment Management or TD Ameritrade.Advisory services are provided by TD Ameritrade Investment Management, LLC , (“TD Ameritrade Investment Management”) a registered investment advisor. Brokerage services provided by TD Ameritrade, Inc. TD Ameritrade Investment Management provides discretionary advisory services for a fee. Risks applicable to any portfolio are those associated with its underlying securities. For more information, please see the Disclosure Brochure (Form ADV Part 2A).
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2020 TD Ameritrade.