Marcus Invest at a glance
Pros: Where Marcus Invest stands out
Marcus Invest provides three broad types of portfolios, each of which can be adjusted based on your risk tolerance and investing time horizon:
- Core: Uses index funds to invest in a mix of asset classes in major markets, including internationally
- Impact: Similar to the Core portfolio but with some extra flavor of ESG (environment, social and governance) investing, though not all funds here will be ESG-focused
- Smart Beta: Uses certain investment factors (such as valuation or quality) to try to modestly outperform the market, perhaps with lower volatility or risk
The Smart Beta option is a notable standout as a portfolio choice, since few robo-advisors offer it. But it’s worth pointing out that the Smart Beta portfolio uses funds from Goldman Sachs, owner of Marcus. So there’s an inherent conflict of interest here, one that some other robo-advisors also have when they recommend their own funds. That said, Marcus does provide economic incentive if you select this option (more below).
When you open your account, you’ll run through a few quick questions about how long you want to be invested and how you would respond if the market falls. These are used to judge your time horizon and risk tolerance, and thus your allocations to stock funds (riskier and better for long-term investors) and bond funds (safer and better over shorter periods of time.)
If you don’t like the fund allocations that have been selected for the portfolio, you can adjust your answers to these questions later and receive a different allocation.
Each ETF you buy will charge an expense ratio, a fee that’s seamlessly deducted from your account. This fee structure is the same at any robo-advisor, but it’s an additional cost. Marcus helpfully lays out the average range of the costs you could pay for each of its strategies:
- Core: 0.05 - 0.16 percent
- Impact: 0.11 - 0.19 percent
- Smart Beta: 0.15 - 0.17 percent
Why the variation of costs within each strategy? It depends on the mix of funds chosen – some of which are more expensive than others – and based on your time horizon and risk tolerance.
The average expense ratios fall a bit above the range of ETFs offered at other robo-advisors. The difference may amount to a few dollars for every $10,000 invested, so it’s not much. And you could well end up paying less at Marcus, depending on which exact mix of funds you’re in.
It’s worth noting that if you opt for the Smart Beta strategy, any fees from Goldman Sachs funds will be refunded up to your management fee, so in effect you won’t pay anything extra to own those funds.
Clean layout, easy to navigate
The Marcus Invest dashboard is cleanly laid out, and you’ll be able to navigate from it to the relatively few other sections on the site (or app). There you’ll see your balance, and can link to your target portfolio, including all the funds that you’re buying. Each ETF also links out cleanly to the prospectus, so you can see the costs for each investment and other relevant information.
The dashboard also gives you projected performance data over time and across three scenarios, so you can gauge how large your portfolio might grow in any given year in the future. A “deposit impact” tool shows you what effect adding money will have on your total wealth over time, a useful visual to show the power of compounding and a handy reminder to add money.
The dashboard also provides you with performance details, so you can understand just how well your portfolio is doing. And that’s about where the tools at Marcus Invest end (more later).
Marcus Invest offers automatic rebalancing on its portfolio, which is something of a standard feature in robo-advisors these days. With rebalancing, a robo-advisor moves your portfolio back to its target allocations when it runs too far away from them, due perhaps to one asset growing faster than others. Basically it brings your portfolio back to its originally intended alignment.
At Marcus, investment professionals set the maximum “drift” the account can experience before it needs a realignment. While the robo algorithm alerts the team about a rebalance and what trades could be made, it’s the human advisors that review those trades and approve them. In certain situations – say, during volatile markets – these pros can delay or override rebalancing.
Marcus also thinks about taxes in this rebalancing process, selling the funds with the least tax impact first, in order to minimize taxes. However, it’s not clear if and how the robo-advisor factors in new money coming into the account as a means to rebalancing – and therefore, avoiding all tax implications – as an alternative to actually selling funds.
Marcus Invest offers a robo-advisor that’s likely to perform well for many investors, and it’s a natural fit for those who already have a Marcus bank account, allowing them to consolidate their financial accounts with one institution:
- Marcus Invest performs the core investing functions, such as portfolio management and automatic rebalancing, and does so in a clean, easy-to-use layout.
- The robo-advisor’s management fee comes in toward the higher end of the industry, however, without offering the same level of features as rivals (fewer tools and no tax-loss harvesting, for example).
- A limited number of account types and the lack of human advisors may be deal-breakers for many potential clients, however.
For those who need access to human advisors, Betterment’s premium tier at only a slightly higher price point could be an attractive alternative. Or those who demand the lowest cost could look at Ellevest, SoFi Automatic Investing or even Schwab Intelligent Portfolios.
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