Schwab's Auto-Invest Feature: A Smart Etf Strategy?

Charles Schwab offers automated investing services through its robo-advisor, Schwab Intelligent Portfolios. This platform helps build and manage a portfolio of ETFs based on an individual's goals, risk tolerance, timeline, and investment amount. However, it does not appear that Schwab offers automatic investing for ETFs outside of its Intelligent Portfolios service. While Schwab does offer automatic investing for mutual funds, this feature is not available for ETFs or individual stocks.

Schwab Intelligent Portfolios®

Here's how it works:

Getting Started

To get started with Schwab Intelligent Portfolios®, you'll need to complete a short questionnaire that covers your goals, risk tolerance, timeline, and investment amount. The minimum amount required to open an account is $5,000.

Diversified Portfolio

Based on your responses to the questionnaire, Schwab Intelligent Portfolios® will provide you with a tailored portfolio from over 80 variations. The portfolio will consist of ETFs selected and monitored by Schwab experts, spanning 20+ expanded asset classes, including stocks, bonds, commodities, and cash.

Automated Rebalancing

The robo-advisor technology monitors your portfolio closely and automatically rebalances it as needed to keep it consistent with your risk profile and targeted level of risk. This means that when an asset class in your portfolio deviates from its allocated portion, the robo-advisor will sell the excess ETF shares and use the proceeds to buy positions that have fallen below their target percentage.

Professional Oversight

In addition to the automated rebalancing, Schwab's team of experienced analysts periodically evaluates the ETFs in your portfolio to ensure they continue to meet stringent selection criteria and align with your risk profile.

Tax-Loss Harvesting

If you have an account with $50,000 or more in assets and choose to activate this feature, the robo-advisor will also track your account daily for opportunities to offset capital gains by strategically realizing losses.

Schwab Intelligent Portfolios Premium®

For investors seeking professional guidance, Schwab offers Schwab Intelligent Portfolios Premium®. This service includes the core features of Schwab Intelligent Portfolios® along with unlimited one-on-one guidance from a CERTIFIED FINANCIAL PLANNER™ professional. With this premium service, you can receive a digital financial plan and interactive online planning tools to help you reach your financial goals.

Costs and Fees

There is no advisory fee or commission charged for using the standard Schwab Intelligent Portfolios® service. However, for Schwab Intelligent Portfolios Premium®, there is an initial planning fee of $300 upon enrollment and a $30 per month advisory fee charged quarterly. It's important to note that investors in both services will pay direct and indirect costs, including ETF operating expenses.

By leveraging the power of automation and human expertise, Schwab Intelligent Portfolios® offers a convenient and low-cost way to build and manage your investment portfolio.

Automatic investing for mutual funds

Charles Schwab offers automatic investing for mutual funds. To get started, navigate to "Trade" and select "Automatic Investing". You can then select the account you would like to use for automatic investing from the dropdown menu. Mutual funds that are eligible for automatic investments will appear in a table, where you can choose to enrol, unenrol or edit their existing automatic investment settings.

Be aware that only mutual funds are eligible for automatic investments, and certain account types, like managed accounts, are ineligible for automatic investments. If none of your currently held positions are eligible, you will see a notice stating that there are no eligible mutual funds in your account. Additionally, you'll need to make sure your account has sufficient funds available on the date of investment to cover the automatic investment amount; to do so, you can manually transfer funds or set up recurring fund transfers.

Once you have selected the mutual fund you would like to invest in, you can enter the dollar amount, frequency and transaction date. When you are ready, select "Continue". Review the automatic investment details on the verification page to ensure that everything is correct, then select "Submit".

Schwab Intelligent Portfolios® is an automated investment advisory service that can help you diversify investments and stay on track for any of your financial goals. The service includes a robo-advisor that monitors and rebalances a diversified portfolio of low-cost ETFs, tailored to your individual needs.

Fractional shares

Charles Schwab does not currently offer auto-invest for ETFs. However, they do offer fractional shares and automatic investment for mutual funds.

With fractional shares, investors can purchase a portion of a share of a company's stock, rather than having to buy a full share. This allows investors to own a piece of a company even if they don't have enough money to buy a full share. Fractional shares are a great way for beginners to start investing and to diversify their portfolios without needing a large amount of capital.

Schwab Intelligent Portfolios is an automated investment advisory service that helps investors diversify their investments and stay on track to meet their financial goals. The service includes a robo-advisor that monitors and rebalances a diversified portfolio of low-cost ETFs based on individual needs.

While Schwab does not offer auto-invest for ETFs, they do provide other automated investment options such as the ability to automatically invest a portion of your funds into eligible mutual funds within your brokerage account. This can be set up by navigating to Trade and then selecting Automatic Investing. From there, you can choose the account you want to use for automatic investing and select the mutual funds you want to enrol. It's important to note that only mutual funds are eligible for automatic investments, and certain account types like managed accounts are ineligible.

Additionally, investors can set up recurring investments in ETFs through other brokerage firms such as Fidelity, which offers fractional shares and auto-invest for ETFs.

Robo-advisors

Charles Schwab's robo-advisor, Schwab Intelligent Portfolios, is an automated investment advisory service that helps investors diversify their investments and stay on track to meet their financial goals. The service offers a diversified portfolio of low-cost ETFs that are monitored and rebalanced automatically by the robo-advisor, paired with 24/7 live support.

Here's how it works:

• Complete a questionnaire: First, you'll need to answer questions about your investment goals, risk tolerance, timeline, and how much you plan to invest.
• Get a diversified portfolio: Based on your answers, Schwab Intelligent Portfolios will provide you with a tailored portfolio from more than 80 variations, consisting of ETFs spanning 20+ expanded asset classes.
• Monitor and rebalance: The robo-advisor technology will monitor your portfolio daily and automatically rebalance it as needed to keep it consistent with your risk profile and investment goals.

One of the benefits of robo-advisors is that they can provide investment advice and portfolio management at a lower cost compared to traditional financial advisors. They also offer convenience and accessibility, as you can access and manage your investments anytime through an online platform or mobile app.

However, it's important to note that not all robo-advisors are the same. Some key differences to consider include the investment fees charged, the level of personalisation offered, and the availability of human support. When choosing a robo-advisor, it's essential to compare different providers and ensure their offerings align with your specific needs and goals.

While robo-advisors can be a useful tool for automated investing, they may not offer the same level of personalisation and customisation as a human financial advisor. Additionally, they may not be suitable for more complex financial situations or those requiring specialised advice.

In summary, robo-advisors like Schwab Intelligent Portfolios can be a convenient and cost-effective option for investors seeking automated investment advice and portfolio management. By leveraging technology, robo-advisors simplify the investing process, providing tailored portfolio recommendations and ongoing monitoring and rebalancing to help investors stay on track towards their financial goals.

Tax-loss harvesting

Charles Schwab does not offer auto-investing for ETFs. However, they do offer auto-investing for mutual funds.

The ability to realize significant tax benefits from tax-loss harvesting depends on a variety of factors, and no assurance can be offered that a particular investor will realize significant tax benefits.

The goal of the Schwab Intelligent Portfolios algorithm is to maintain a portfolio that closely tracks the investor's strategic asset allocation and captures tax-deductible losses while generally preventing wash sales in your account.

When an investment declines in value, the automatic tax-loss harvesting feature can help you offset the taxes on investment gains. It does this by automatically selling an ETF that has fallen enough below the price you paid for it and replacing it with an alternate ETF in the same asset class to keep your portfolio's allocation consistent.

Benefits of tax-loss harvesting

• It can help reduce investment taxes.
• It can leave you with more money to reinvest.
• It can be automated for accounts with at least $50,000 in investable assets.
• It can help you offset capital gains and lower your taxable income.

Frequently asked questions