E-Trade Core Portfolios at a glance
Pros: Where E-Trade Core Portfolios stands out
Reasonable management fee
E-Trade’s robo-advisory charges a reasonable management fee for what it offers – 0.30 percent annually of your assets – a figure that’s just above what could be called the industry standard. In practical terms, that fee means you’d pay $30 each year for every $10,000 managed by E-Trade. This fee includes all the routine costs of the robo-advisor service. That’s serious savings over a traditional human advisor where 1 percent might be more common. However, as is typical in the industry, you’ll pay an additional charge for any ETFs (more below).
A management fee is one of the largest expenses you’ll pay at a robo-advisor, and you’ll want to make sure you’re getting your money’s worth. Rivals such as Wealthfront and Betterment offer extra features for a lower management fee (0.25 percent), while Schwab Intelligent Portfolios doesn’t charge a management fee at all, though it has a steeper $5,000 minimum.
E-Trade Core Portfolios offers one of the lowest-cost portfolios around. In fact, the expense ratio of an average portfolio almost couldn’t go any lower. An average portfolio has a weighted expense ratio of just 0.06 percent. That translates into $6 annually for every $10,000 invested.
Now, this is money that goes to the companies managing these funds, not E-Trade itself. But everyone has to pay expense ratios, and it’s vital to minimize them where you can. And this cost comes on top of the management fee that you have to pay to E-Trade. These fees are paid seamlessly, as is typical for any expense ratio with an ETF.
Almost no rival robo-advisor gets below E-Trade’s cost, SoFi Automated Investing being a notable exception.
In addition to the core funds that comprise portfolios, E-Trade also offers a couple other choices that are not standard in most robo-advisor portfolios — a socially responsible ETF and a smart beta ETF. You can opt in to these selections, if you like, but you don’t have to make them part of your portfolio.
E-Trade adds a portion of your money to a socially responsible ETF that focuses on companies with good records in environmental, social and governance issues. These funds often exclude companies in industries such as armaments or fossil fuels if they don’t meet the fund’s criteria.
A smart beta fund looks for certain factors that might drive higher returns with lower risk or achieve the same returns as a traditional index fund with lower risk. This kind of fund often takes a more active approach to investing, with fund managers searching out investments that they think can generate better risk-adjusted returns.
E-Trade Core Portfolios also uses fractional shares when it builds your portfolio, and not all robo-advisors do. This feature is valuable because it allows you to put all your money to work immediately. Without this feature, your money might be sitting in cash until you have enough to buy a full share, as happens at some rival robo-advisor services. So the market could be rising while you’re waiting to have enough money to buy.
E-Trade allows you to not only buy fractional shares but reinvest your portfolio’s dividends in them, too. So any time you get a cash dividend, it’s rolled back into new shares of your investments. Again, that keeps your money invested and working for you at all times.
Access to financial consultants
E-Trade Core Portfolios also provides access to financial consultants, who can help you decide how to invest and build your portfolio. They can help analyze your current portfolio, perhaps helping you see where an additional fund might balance out your portfolio. And it can be helpful to simply run an idea by someone with financial expertise to see if it makes sense.
While this access can be an added perk, you will want to be careful about being upsold on other features that might fall outside the robo-advisor’s management fee. They may sell one-time commission-based services or ongoing services, and those could run up your expenses with features that don’t really add much incremental value to what the robo-advisor already offers.
E-Trade’s robo-advisor delivers all the core functionality and offers a mix of features that should appeal to many kinds of customers:
- A reasonable management fee and low-cost portfolios make E-Trade an attractive option for cost-conscious investors.
- Investors looking for alternative investment options may find something to like here with smart beta and socially responsible options – and the ability to buy fractional shares.
- The ability to speak with human financial consultants could be a plus for many customers, but with the noted caveats.
Those who need features such as tax-loss harvesting and an excellent cash management account should check out Wealthfront and Betterment, both of which excel in these areas. Those looking to consolidate their accounts with one financial institution should consider Fidelity Go (part of Fidelity Investments), Marcus Invest (part of Goldman Sachs) and J.P. Morgan Automated Investment (part of J.P. Morgan Chase).
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