Courtesy of MarketRiders
Review
Evaluating new financial products and services.
MarketRiders, the online service that helps you build and manage an investment portfolio, recently sent me an e-mail telling me it was time to rebalance a Roth I.R.A. Since the hurricane kept me indoors for most of the weekend, I figured it was the perfect time to check this task off my to-do list.
But when I entered the MarketRiders’ Web site, I noticed several changes. So when I got back to work this week, I called up Mitch Tuchman, the company’s chief executive, to walk me through them. He also told me about a couple of other improvements in progress, including one that will please Vanguard fans: Starting this week, MarketRiders users can build and track portfolios comprised of Vanguard index funds.
Here’s a quick look at what’s changed:
Portfolios MarketRiders made a couple of tweaks to its recommended investment portfolios, which are largely comprised of exchange-traded funds, the popular investments that are basically index funds that trade like stocks. The company recently decided to alter its recommended investment mix, adding a helping of small-capitalization stocks and high-yield corporate bonds. But this wasn’t a tactical shift in response to market conditions, or anything of the sort. After all, MarketRiders advocates holding a diversified collection of low-cost investments that track broad swaths of the market, namely exchange-traded funds.
Instead, Mr. Tuchman said that after doing extensive research, he decided to incorporate small-capitalization and value stocks because they tend to outperform the broader market over time. This is a view held by Dimensional Fund Advisors, a money-manager and mutual fund company that also believes that few fund managers can pick stocks or other investments that outperform the market over the long haul.
“The bigger story or idea here is that I am trying to use E.T.F.’s to mimic a D.F.A. portfolio for the do-it-yourselfer,” Mr. Tuchman said, adding that he invests his own money, as well has his parents’ and sisters’ savings, using MarketRiders’ recommendations.
He said the company decided to incorporate high-yield bonds because, without them, it wasn’t really fulfilling its goal to index, or track, the entire bond market. He also said he felt it lowered the overall risk of the bond portfolio since high-yield bond funds tend to have bonds with shorter maturities. “To completely satisfy our mission, we needed to add that component,” he said.
If you already have a MarketRiders account and want to incorporate these changes, Mr. Tuchman said, there will soon be a button under the “change my portfolio” link that will ask if you want to update your portfolio with the new allocations.
Vanguard Funds Vanguard diehards will appreciate this new feature: Starting this week, MarketRiders will recommend portfolios using Vanguard index funds. To use this feature, go to “Create a new portfolio,” then “Let me build it,” then click on the tab that says “Use a Template.” There will be nine portfolios — which will range from 10 percent bonds to 90 percent bonds — that mirror its E.T.F. portfolios. (In fact, there will actually be two sets of fund portfolios — one using Vanguard’s regular share class, known as investor shares, and one using its Admiral shares, which are a less expensive share class available to investors with more than $10,000 to invest in each fund.)
But since it will be up to you to choose the template that best suits your situation and goals, you may want to first build a dummy E.T.F. portfolio. That way, you can fill out the MarketRiders questionnaire and see what template it recommends. Once you have that information, you’ll know that, for instance, you want to chose the “growth focus — 30 percent bonds starter portfolio.”
You can also track Vanguard fund portfolios of your own creation. To do that, go back to “Create a portfolio,” then “Let me build it,” and choose the option on the far right that says “Enter my funds.” Then, all you need to do is enter the fund’s (or E.T.F.) symbol, the number of shares and how much you paid for them and when. The portfolio you enter will become your target allocation, and you will receive e-mails when it is time to rebalance your portfolio back to that allocation.
Annual Review Users can now perform a “portfolio review,” something you may want to do each year so that you can update your age, time horizon and risk tolerance as those factors evolve. (This option is located under the “Change my portfolio” tab.) “It effectively allows you to manage your money like a target-date fund, but it’s customized for you,” Mr. Tuchman said, referring to the mutual funds whose mix of investments becomes gradually more conservative as you near retirement. The new button also allows you to customize your portfolio manually, though this option is generally geared for people with substantial investment expertise.
Broker Optimization Last year, after several online brokerages began to waive trading fees on some or all of their exchange-traded funds, MarketRiders added a feature (We wrote about it here.) that allowed users to designate a “preferred E.T.F. provider,” which included Schwab, Vanguard and iShares (the E.T.F.’s offered at Fidelity). By knowing where you keep your money, MarketRiders can recommend a portfolio that emphasizes E.T.F.’s that trade for free.
Over the past year, the service added TD Ameritrade to its lineup, but it has also made this feature more user-friendly. Now, when you ask MarketRiders to build your portfolio, it will automatically substitute in E.T.F.’s that trade for free once you enter the name of your broker.
If you unclick the button that says “Optimize the E.T.F.’s in my portfolio for low trading costs” you will see the standard portfolio recommendation, but it will probably have fewer green tags, which indicate which E.T.F.’s waive their trading fees. And at the bottom of the screen, you can always see how much the portfolios cost to purchase and the total number of E.T.F.’s that waive trading costs.
Mr. Tuchman said that it’s often most cost-effective for MarketRiders users to use TD Ameritrade, since there are only two E.T.F.’s (out of their recommended portfolio of 14 E.T.F.’s) that do not trade for free in an optimized portfolio.
Coming Soon Since I chose to automatically reinvest my dividends in my E.T.F. portfolio, I ended up with fractional shares (since the dividends weren’t enough to buy a full share). MarketRiders doesn’t recognize fractional shares, so one of my I.R.A.’s fell out of sync with MarketRiders’ system. Thankfully, Mr. Tuchman said, the site will soon recognize fractional shares in the months ahead.
I like MarketRiders because it jibes with my investment philosophy, and reminds me exactly what I need to do and when: “Buy 10 shares of this, sell five shares of that.” And it costs me little more than my Netflix subscription.
But there are many other online portfolio management services on the market. Have you tried any of them? Please drop your thoughts in the comment section below.
Article source: http://feeds.nytimes.com/click.phdo?i=2316b7d297e17061f1d6eeff75f7bc37