May flowers in the backyard.
Schrodinger is a small test portfolio I started for a friend a number of years ago to answer the question, “Who will manage the family portfolio when I die?” It is not unusual for one member of a family to handle the finances – at least the investment side of the finances. The Schrodinger classifies as a passive portfolio in that the owner does not manage the portfolio. Everything is done by computer. I refer to these as Robo Advisor portfolios, but they go by a variety of names. Schwab refers to them as Intelligent Portfolios. The Schrodinger happens to be housed at Schwab as they do a good job and there is no management fee. They make their money by using the cash to run their bank. At least that is my understanding.
Of the portfolios I track, the Schrodinger consistently ranks in the top third when measuring both return and risk.
Schrodinger Investment Quiver
Below is the current investment quiver for the Schrodinger and the number of shares held in each ETF. This particular worksheet, taken from the Kipling spreadsheet, is not used to manage the Schrodinger. With the Schrodinger, all the owner does is save. Schwab computers do the rest. When new money is added, the computer will purchase shares in a manner that will keep the portfolio in balance according to a specified asset allocation algorithm.
It is my understanding that once this portfolio reaches $50,000, Schwab will then manage the portfolio with taxes in mind. That is a significant advantage when the portfolio is held in a taxable account.
Schrodinger Performance Data
We are approaching 17 months of activity with the following data. As readers can see, the Schrodinger holds a nearly 3 percentage point lead over the S&P 500 (SPY) when annualized. Due to the makeup of the Schrodinger, the portfolio tends to do better than the benchmark in bear markets, but lags the benchmark in bull markets.
Schrodinger Risk Ratios
Over the past year of operation the critical risk measurement, Jensen’s Alpha, declined in value and that is why we see a negative (-0.31) slope.
The Information Ratio is consistently above zero, a remarkable record for this passive portfolio.
The Schrodinger serves as a useful benchmark for the other ITA portfolios.
Schrodinger Interim Update: 19 October 2022
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Schwab recently rebalanced the Robo Advisor (Schrodinger) portfolio. As a result, I will update the portfolio early next week to account for the addition of new shares.
Lowell