Small boy waiting for mother to sell all her goods in the square in Lhasa, Tibet.
Schrodinger is the portfolio up for review this morning. As long-time readers are aware, the Schrodinger is an Intelligent Portfolio housed at Schwab. I think of it as a Buy-Hold-Rebalance portfolio managed by a computer or computer algorithms. These portfolios are also known as Robo Advisor Portfolios. Regardless of the title, all one does is invest money and set up a stock/bond ratio. Computers do the rest. When it comes to investing, it does not get easier than this.
My only complaint is that the portfolio holds too high a percentage in cash. It is currently 7.9%. Schwab has been sued over this issue, but it is either hold cash or charge to manage the portfolio. I prefer the free computer management as cash can work both ways. When the market declines cash works to the benefit of the portfolio holder. When the market is on the rise, cash is a drag on performance.
Schrodinger Investment Quiver and Recommendations
The following screenshot shows both the ETFs held in the Schrodinger and the number of shares in each security. Checking in on VOO and VB, it makes little sense to me to hold those two ETFs in the portfolio as there are too few shares to impact performance.
While I include the Tranche worksheet in this review, it is not used to manage the Schrodinger as this portfolio is on “automatic computer” pilot.
Schrodinger Performance Data
How is the robo portfolio performing. With and Internal Rate of Return (IRR) I would say – rather well. To get a fuller picture we need to examine the Risk Ratios.
As you can see from the Investment Account Manager data, the Schrodinger is handily outperforming the AOR benchmark as well as VTTVX and VTHRX. This data include information from the last 14 months.
Schrodinger Risk Ratios
As explained many times before, I am using 11/30/2020 as the launch date so the Franklin (a young portfolio) is measured over the same time frame. It is so early in the month the February data is meaningless. While the lower (8.65) Jensen Alpha value pulls down the slope average, it is still a robust 0.56.
If one looks back to February of 2021, the values are holding up quite well as they should since 2021 was a banner year for U.S. Equities.
I forgot to point out the modest beta (0.75) the Schrodinger carries. This bodes well when calculating both the Jensen and Treynor risk values.
Lowell
Lowell,
What is the actual equity/bond ratio that you entered for this portfolio at Schwab.
Bob
Robert,
I wanted to end up with a 70/30 stock/bond ratio. Since I know Schwab holds approximately 7% to 8% in cash, I requested an 80/20 ratio. The 20% in bonds plus the ~10% in cash provides something closer to the total of 30% in none equity holdings.
The ratio ends up around 72% in stocks and 28% in bonds-cash.
One other request from Schwab is that I recommended they go heavy on U.S. Equities and light on International Equities. This suggestion was passed on to me by one of the ITA readers. Before this suggestion to Schwab, they were allocating too high a percentage to International Equities.
Lowell
PS Your comment did not show up immediately as I need to approve the first comment posted by a user.