I am not sure about what you think, but these are the kind of data points and information that I would like to review, before I invest in a robo-advisor such as AutoWealth. Of course I am going to post it so that you can read for yourselves! And so, it is old news that the market tanked at the end of February. Here goes my attempt to explain what happened to my portfolio and whether it performed as expected.

It is easy to make a sales pitch when times are good. It is the executions when times are bad that defines what they do. (graphic below from their official website)

AutoWealth Review against Alternatives

As an index investor, I love volatility. Big ups and downs that trigger portfolio rebalancing are what I like to see. Take note that when we think of a robo-advisor like AutoWealth, there are two rebalancing thresholds to take note of.

Rebalancing Thresholds

First, the investor profile that mandates the percentage of equities and bonds that make up a portfolio. In my case, it was 60% equities and 40% bonds. Obviously, when both components start moving in violently in different directions (equities, down – bonds, up), rebalancing will take place soon to maintain “near” the 60/40 allocation.

Second, the benchmark that the portfolio is tracking i.e. the methodology. Unlike black-box algorithms, AutoWealth has a simple and transparent methodology aptly named market-returns strategy. It … tracks an index. Yup, that’s all.

My AutoWealth portfolio tracks the MSCI All-Country World Index (60%) and the FTSE World Government Bond Index (40%). This means that it is not always the case of selling bonds for equities, or selling equities for bonds. There may be internal balancing within equities, for example. If the underlying ETFs used to track MSCI All-Country World Index deviates significantly, then one ETF may be sold to buy another, in order to continue tracking the indexes accurately.

In this scenario, it was the former that happened. After a few straights days of equities price declines, AutoWealth robo-advisor triggered a portofolio rebalancing action on the 28th February 2020, selling both bond ETFs, IEF and BWX, in the process. In total, it was approximately 1.8% of my portfolio value.

My AutoWealth Portfolio

My AutoWealth portfolio consists of :

  • Equities 60% (track : VTI, VGK, VPL, VWO
  • Bonds 40% (track  : IEF, BWX

What happened on 28-Feb-2020 :

  • Sold : IEF ($116.91), BWX ($28.78)

Here is the fun part. Let’s walk through that few days and dissect it a little :

1) Dump-y 28th February 2020 was a Friday

28th February 2020 was a Friday. After the “sell” actions were triggered, I assume the follow-up action would be for the transactions to clear before buying equities on the following day that the exchange was open. These were the “standard” automated actions which I have observed on previous instances of rebalancing.

This meant that rebalancing purchases would be made on Monday, 2nd March 2020.

** S&P 500 closed at 2,954 points on 28-Feb-2020.

2) My automated deposits on 1st March 2020

In addition, I have a standing instruction to deposit money on the first day of every month for AutoWealth investment.

Looking the bear market, my AutoWealth account was flushed with cash (from selling bond ETFs and deposits) at the start of the month of March, all ready to plough into the brutal equities market. I was a happy man.

3) Spectacular rebound happened on 2nd March 2020

Ideally, it would have been awesome if the market continued to tank on Monday hence buying on the “cheap”. Not a fairy tale ending, but I shall not complain.

The market rebounded “strongly”, although still quite far off from the highs of mid-February.

** S&P 500 closed at 3,090 points on 02-Mar-2020.

So, what happened?

A Review Of AutoWealth Actions

With the significantly enlarged stash of cash in my account, AutoWealth proceed to deploy it into the market, maintaining the 60/40 allocation as well as mirroring the respective MSCI All-Country World Index and .

As a result of three independent events that occurred in a short span of time, this resulted : I bought back (a portion of) the bond ETFs that I sold – at a slight loss!  This is exactly what a robo-advisor should do. Totally devoid of human emotions and laser-focused on following its programmed algorithm.

What happened on 02-Mar-2020 :

  • Bought : VTI ($151.41) , last purchased 3rd Feb @ $164.41 [8% down]
  • Bought : VGK (52.37), last purchased 3rd Feb @ $56.79 [8% down]
  • Bought : VWO (40.50), last purchased 3rd Feb @ $42.11 [4% down]
  • Bought : IEF ($117.57), BWX ($28.99)

Let’s take a step back and review the actions by AutoWealth. Deploying all the cash into equities would have tilted the allocation beyond the 60/40 profile. Part of it had to be used to buy bond ETFs as well. It was simply automating what it was meant to execute.

See my AutoWealth Review

I have always been pretty open about the fact that I am using AutoWealth (I’m their 12th man – think fans, soccer game), and I have written quite a bit on them. My AutoWealth reviews are mostly what I have observed on the platform – happy to share them with people who are interested! 🙂

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