Early morning light at Painted Hills – Central Oregon.
Schrodinger is the Robo Advisor or computer managed portfolio up for review this morning. Investors not interested in investing or have minimum time to track their investments will find this style portfolio fits their desire to be invested in the market. The Schrodinger is housed and managed by computers at Schwab. There is zero cost to managing this portfolio other than the expense ratios involved with the different ETFs used to populate the portfolio. These are hidden expenses and one does not write a check each month to cover the expense ratios.
The cost to open an account is $5,000, but that may have changed so contact Schwab and inquire about their Intelligent Portfolios as that is what Schwab calls these portfolios. The Schrodinger is set up to minimize international stocks so the emphasis is with U.S. Equities. In addition, the stock/(bond-cash) ratio is approximately 80/20 as you can see from the pie chart below. This may be too aggressive for older investors. The ratio is easily changed by the holder of the Intelligent Portfolio.
Schrodinger Security Holdings
Below is the Schrodinger investment quiver and current holdings. Note that Schwab always holds around 8.0% in cash and this is how they are able to provide this “free” service. It is my understanding this cash is loaned out at higher rates in a similar manner a bank operates.
Personally, I question why an Intelligent Portfolio would include holdings that comprise less than 3% as ETFs such as SCHH add little to no value to the overall portfolio. So much for intelligence.
Schrodinger Performance Data
Despite my personal criticism as to how these Intelligent Portfolios are managed, the performance is more than acceptable. Since 12/31/2021 the Schrodinger has an annualized return more than double the SPY and it is many times more than AOR or AOA, other potential benchmarks. Not a disappointing return for doing nothing except investing money on a regular basis.
A Schrodinger style portfolio is definitely something a young working person should consider when it comes to preparing for retirement. Stay disciplined and save each month. Let the market does its work over time.
Schrodinger Risk Ratios
How is the Schrodinger performing when risk enters the equation? Check out the Jensen Performance Index and Information Ratios. Both are positive and we can’t ask for much more. In addition the slope of the Jensen indicates the portfolio continues to improve over the past year. The latest downturn is evident as the April Jensen is lower than the March Jensen. I don’t pay much attention to month to month variations. Instead I examine longer term trends so pay attention to the slope of the Jensen.
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It looks like Schrodinger continues to hold the #2 position among the ITA portfolios — I’m impressed.
Lee,
Yes, the Schrodinger generally comes in at #2 or #3. Quite impressive for a portfolio where the investor does nothing except add fresh cash to the account. It is hard to argue against this investing model.
The Schrodinger is a classic example of an asset allocation portfolio, long promoted by investment writers such as William Bernstein. The AA model goes back more than sixty years (likely even older) so it is well established as a strong investing model.
Lowell