How is your model different from most robo-advisors?

Most robo-advisors are simply a spin-off of the old pie chart investing approach.  Like “hang in there during a bear market” strategies, the typical robo-advisor builds an allocation for you and the “robo” feature involves automatically getting the portfolio back into balance based on some simple programming. 

As numerous studies have shown, portfolios utilizing "auto-rebalancing" did not perform significantly better than standard buy-and-hold static pie chart allocations.  Diversified portfolios and rebalancing are not new concepts and have been used by old school Wall Street firms for decades.  As covered in a separate FAQ, a diversified pie chart of growth ETFs and/or mutual funds will not necessarily save you in a bear market.


Most robo-advisors do not monitor present day market risk, nor do they adjust your allocation based on present day risk.  Therefore, if your robo pie chart contains a heavy weighting to stocks, you will maintain a heavy weighting to stocks during even the most devastating bear market.   “Automatic rebalancing” is basically a form of “buy-and-hold-and-hope” investing.


Unfortunately, like old school pie chart investing, a robo-advisor investor may still get spooked by common human investing missteps.  Even sound advice from a robo-advisor is not useful if the end user does not have the discipline to stay invested during normal pullbacks.  A detailed hypothetical comparison of an automatically-rebalanced portfolio vs. the same portfolio without rebalancing can be found in the auto-rebalancing FAQ