Shrine Drive-Thru: Redwoods National Park
Looking for a passive portfolio where you do nothing but save? The Schrodinger is the portfolio for you. Schwab calls these “Intelligent Portfolios.” I refer to them as Robo Advisor portfolios as they are managed by computer. The owner of the Schrodinger does nothing except invest more cash when available. The Schwab computer performs all the asset allocation and rebalancing when necessary to meet the stated goals of the owner.
I use the Schrodinger as a reference for the other managed and passive ITA portfolios. When the performance data is published I compare the Annualized Internal Rate of Return percentages, the Jensen Alpha, and the Total Relative Weight Rank as this value includes all the risk parameters involved in the portfolio tracking process.
Schrodinger Investment Quiver
The investment quiver of the Schrodinger includes nine (9) ETFs across all critical asset classes. Check them out below.
A yield of 2.0% is respectable for the Schrodinger.
Schrodinger Tranche Recommendations
If I were using the LRPC model, shown below, several ETFs show up as a Buy. Note that I have the look-back period set to one-year. This worksheet is included for demonstration purposes only as I do zero management with the Schrodinger.
Schrodinger Performance Data
Over this past year the Schrodinger is soundly outperforming all benchmarks I track using the IAM software. AOR comes closest and it is over 4 percentage points behind the Schrodinger.
Schrodinger Risk Ratios
Despite a poor 2022 for equities, the Schrodinger has held up quite well as there are few negative values in the following data table.
If we experience a reasonable first quarter in 2023 we might see the slope of the Jensen move back into positive territory.
Schrodinger Interim Update: 19 October 2022
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Lowell,
How does the rebalancing and asset allocation work in the Schwab method? Sound like you treat it as a passive account….
Craig
Craig,
Schwab’s computer model sets up the asset allocation model based on some initial questions and what answers you provide. At the age of the owner of this portfolio, Schwab wanted to invest a higher percentage in bonds. I balked. Rather than lying about the owners age. I convinced Schwab to invest a higher percentage in equities and to down-play international equities. Down-playing international equities was suggested by a reader of this blog.
Actually, I could go into the account and reset the equity percentage to 100%, but I’m not interested in taking that much risk. The Schrodinger is owned by someone other than myself so I set things up with them in mind.
As for re-balancing, this is rare. Early on Schwab was holding a share or two in some Vanguard ETFs. Those “shard” holdings never made sense to me and finally then sold them so the portfolio is now down to about 9 or 10 securities. The re-balancing occurs when new money is added as more shares are purchased. The computer makes the decision as to which ETFs to add to.
Lowell