Disclaimer – this post does NOT (haha) contain affiliate links, but it can redirect you to my other blog posts that may contain them.
What have you done during the recent market conditions? Transacted some, or done absolutely nothing?
In an emotionless environment, the drop in US market would have been likely to be significant enough to trigger the rebalancing threshold for a robo-advisor. My robo-advisor did just that.
To highlight one point, just because your robo-advisor hasn’t done anything doesn’t mean it is bad or lousy. It also largely depends on your portfolio composition as well as your risk-profile. If your percentage of equities is low, then the recent correction might not have triggered the rebalancing threshold.
If you refer to my recent records below, you would notice a couple of ‘sell’ transactions. In return, the funds were used to purchase VTI, which is of course the market that has been throwing tantrums.
VTI – Vanguard Total Stock Market ETF
The Fund seeks to track the performance of a benchmark index that measures the
investment return of the overall stock market
So yeah, there you go – AutoWealth is working as intended. I just wanted to take the opportunity to illustrate this event because I don’t think that many beginning investors would have considered this aspect prior to signing up with StashAway or AutoWealth.
I didn’t use StashAway to illustrate this scenario because the rebalancing did not occur. My account with StashAway employs a monthly-deposit system and with fractional ETF shares, the laggard ETFs would already be topped up on a regular basis. Technically, it is a very fine-grained monthly rebalancing system.
A quick note on StashAway – in early October, I received an email from them which detailed the following :
We have distributed $__.__ USD to your account; this amount is 47% of the dividend taxes that were withheld from your account by the US tax authorities in Financial Year 2017. This tax reimbursement usually happens once per year, upon StashAway and our broker finalising the claim back of your dividend withholding taxes from the United States tax authorities.
You’ll see the amount reflected in your transactions tab immediately, as well as in next month’s statement.
All dividends of US-domiciled securities are subject to 30% dividend withholding tax, but dividends qualified as QII (Qualified Interest Income) can be claimed back. In collaboration with our broker, we have made the necessary steps on your behalf to claim back the QII portion of the taxes withheld.
Very cool! I don’t know of anyone doing something like this, so it was a pleasant surprise. They have also just launched their investment services in Malaysia as reported in the news in early November 2018. In increase in footprint is no doubt good news. Larger AUM would in the long run lead to lower fees, I hope.
As expected, I am starting to see some discontentment among investors who had put in some money with robo-advisors. Some are suddenly very interested/critical of the fees that robo-advisors are charging. Let me end with a short quote by Bogle, and hopefully, it will serve you well.
Time is your friend; impulse is your enemy.