I’m testing Fidelity’s basket trading, AKA “Solo Fidfolios”. I’m only doing the free 30-day trial with $500. I spread my money across eight ETFs, suggested allocation from BetterBuyAndHold, ironically mostly Schwab ETFs:
SCHX 21% Large cap equity
SCHR 16% Intermediate Treasury
VNQ 14% REIT
FRDM 13% (large bid-ask spread - hard to fill) Emerging Market (human rights scored)
SCHJ 10% Corporate bond
SCHQ 9% Long term Treasury
AVUV 9% Small cap value
FNDF 8% Fundamental “RAFI” indexed developed international
I bought them all with one button click, the trades were immediate as far as I could tell, and the hard-to-fill one, FRDM, I got the expected price for, somewhere between bid-ask.
The next exercise is I’ll change SCHX to FNDX RSP (Large cap “RAFI” fundamental weight) and observe that rebalancing / reallocation trade.
I’m not going to pay $60 per year to manage $500, so I’ll let the free trial end, and at the end I just get the ETFs back in the account, unmanaged.
But I can see when I’m taking a retirement distribution with a much larger amount of money with an eight ETF portfolio with specific percentages, I won’t want to fiddle and trade and enter data into spreadsheets just to rebalance every month after I write myself a paycheck. Hopefully in the next few years they add more features, like automated Tax Loss Harvesting.
A few weeks ago I added my daughter with Full Trading Authority to my accounts, so when I’ve past the age where I should be getting online and doing stuff (or driving), she can login and rebalance with a single button click, that would make her busy life easier.
I think some of the ETFs above are demonstrably better than the ones I’d get if I just bought a target date retirement or asset allocation fund, for example RSP. Over a long period of time, it significantly outperforms market-cap weighted S&P500. AVUV does better than IJS, and FRDM does better than EEM, though they don’t have a lot of history yet. But FRDM doesn’t allocate to China, so that’s a plus.
P.S. - what is RAFI?
The Fundamental Index (RAFI) approach uses fundamental measures of company size—such as adjusted sales, retained operating cash flow, and dividends + buybacks—to construct the indexes. These fundamental factors address the inherent bias of traditional indexes, which are based on market capitalization and can give too much weight to overpriced securities and too little weight to underpriced securities. Schwab Fundamental Index Funds are passively managed and track certain indexes within the Russell RAFI Index Series which are based on the Fundamental Index methodology developed by Rob Arnott and Research Affiliates. Charles Schwab Investment Management has an exclusive license to broadly offer investment companies tracking certain indexes within the Russell RAFI Index Series.