With a recognized financial company's low-cost Robo-advisor, it's hard to argue against it. However, to have your money completely invested in the stock market, you must hold 30% of your portfolio in cash or pay a 0.30 percent yearly charge. As a result, if you're not looking for a one-stop-shop with Ally, you may be better off seeking elsewhere for your Robo-advisor.
Why Use Ally Invest Robo Portfolios?
The Ally Invest Robo Portfolios service is best suited for current Ally clients who want to get into automatic investing with minimal effort. With the added benefit of being part of the Ally ecosystem, Ally Invest Robo Portfolios offer a basic diversified portfolio of low-cost exchange-traded funds (ETFs).
Ally's parent business, Ally Financial, offers a wide range of services that may allow you to consolidate your finances under one roof. Robo portfolios are great in theory, but they have one fundamental flaw. Almost a third (30%) of your wealth is kept as cash in this account.
How Ally Invest's Robo Portfolios Work
Ally Invest Robo Portfolios, like other Robo-advisors, begins by asking you a few questions about your investment goals and timetable. It also considers your liquid assets and the amount of money you've already invested.
Although Ally presents risks in terms of potential profits and losses in a certain risk level's portfolio, they do so with a level of volatility and risk you're signing up for that is communicated. You can then choose from one of four investment styles:
· Core
Your money is invested in a diverse U.S. and foreign stock and bond portfolio by default in Ally Invest Robo Portfolios.
· Income
For investors who prefer a constant stream of income rather than an increase in the value of their assets, this method is ideal.
· Tax optimization
This portfolio is designed for innovators with higher tax rates who want to reduce their tax burdens. Tax-advantaged portfolios rely heavily on municipal bond funds rather than tax-loss harvesting tactics in taxable brokerage accounts.
· Socially accountable
Investing in ESG-oriented funds, which focus on socially responsible firms and impact investing, is the goal of this strategy. A proposed portfolio then follows each investment approach from Ally, including asset allocation and selecting ETFs (ETFs).
The program even provides anticipated portfolio returns and the best and worst-case scenarios as a bonus. As always, keep in mind that these estimates are not promises.
Ally Invest Robo Portfolio Fees and Costs
An annual management charge of 0.30 percent and a zero-annual management fee option are available for Ally Investment Robo Portfolios. To avoid paying the yearly administration charge, you must agree to keep 30 percent of your balance in an interest-bearing account.
A cost ratio of 0.06 percent is a suitable standard for ETF funds. ETF returns are automatically subtracted from these costs, so you will never receive a separate bill for this. But it would help if you kept this in mind because high fees might harm your long-term investment performance.
How Ally Invest Robo Portfolios Invest Your Cash
Like the vast majority of other robots, Ally Invest Robo Portfolios constructs investment portfolios using low-cost ETFs like Vanguard or iShares. There are eight to ten funds in each portfolio option.
One of the reasons that more minimalist platforms like Vanguard Personal Advisor Service took first place in our evaluation of the best Robo-advisors is that they offer good diversity with just three to four funds.
The Big Drawbacks of Fee-Free Cash Allocation
Because Ally currently offers 0.55 percent interest on cash balances, the 0.30 percent fee version of Invest Robo Portfolios offered by the company may cost you far more than the 0.55 percent interest rate.
For the "free" account, the platform expects a 4.23 percent average return, with best-case and the worst outlooks of 17.69 percent with -16.47 percent, respectively, for such platform.
Ally Invest Robo Portfolios Benefits
Robo portfolios from Ally Financial are well-integrated with the rest of the company's suite of products. Customers of Ally Bank or Ally Invest may find it handy to utilize Ally Invest Robo Portfolios to place some of their money under automatic management.
The low-cost ETF options on the marketplace provide good diversity. There are advantages to having phone customer support personnel available around the clock. In contrast, several other robot advisors only provide phone customer assistance during regular business hours, while some don't even have a phone number.
Disadvantages of Ally Invest Robo Portfolios
The Ally Invest Robo Portfolios account option with a 30% cash allocation is an inefficient and too cautious choice for most investors. When the market isn't in a bear market, having a sizable portion of your portfolio in cash is a huge drag on results.
Clients should be aware that portfolios with a high cash component are invested significantly more cautiously than their titles may imply. To pay greater fees than Betterment and Wealthfront, users who choose the 0.30 percent annual charge account choice obtain a fair automated investing portfolio.
