Building An Ally Investment Portfolio: A Guide

An Ally Investment Portfolio is a brokerage account that uses computer software and algorithms to build a diversified portfolio based on your goals. The service, Ally Invest, is designed to be an easy way to start investing. It offers a range of investment options for all budgets and experience levels, including self-directed and managed accounts. With a minimum investment of $100, you can use a robo-advisor to help you handle the rest. The robo-advisor will automatically manage and monitor your investments daily and rebalance when necessary to keep your progress in line with your risk tolerance and timeline. You can also view your portfolio performance and update your goals at any time.

What is a Robo-Advisor?

A robo-advisor is a digital platform that provides automated, algorithm-driven financial planning and investment services with little to no human supervision. They are called robo-advisors because they are almost completely digital, with human advisors behind the scenes offering digital investment advice and account management services.

Robo-advisors use online surveys to ask questions about your financial situation and future goals. They then use the data to offer advice and automatically invest for you. They are best suited for traditional investing and are not the best option for more complex issues, such as estate planning.

Robo-advisors are often inexpensive and require low opening balances, making them available to retail investors. They are efficient, convenient, and easy to access. However, they have been criticised for their lack of empathy and complexity.

Ally Invest is an example of a robo-advisor. It offers an easy way to start investing, with a minimum of $100 to get started. It offers a diversified portfolio, fee-free rebalancing, and 24/7 access to monitor your performance.

How to choose an automated investment portfolio

Choosing an automated investment portfolio, also known as a robo portfolio, can be a daunting task, especially if you are new to investing. However, with a little research and consideration, you can select the right portfolio to help you achieve your financial goals. Here are some key factors to consider when choosing an automated investment portfolio:

• Investment goals: Define your investment goals, such as building wealth, saving for retirement, or funding your child's education. This will help you establish a timeline, target date, and risk tolerance level.
• Risk tolerance: Understand your risk tolerance, which is often correlated with your investment horizon. Different portfolios offer different levels of risk, from conservative to aggressive. Choose one that aligns with your comfort level.
• Fees: Pay close attention to monthly or annual fees, advisory fees, and rebalancing charges. Some portfolios may also charge a percentage of your assets or earnings. Be sure to read the fine print to avoid unnecessary fees.
• Minimum investment: Consider the minimum investment required to open an account. Automated portfolios typically have lower investment minimums compared to working with a financial advisor.
• Asset allocation and diversification: Understand the make-up of your portfolio in terms of asset allocation and diversification. Asset allocation refers to the balance of different asset classes, such as stocks and bonds. Diversification involves holding a variety of different investments to reduce the potential risk.
• Rebalancing: Markets fluctuate, and your portfolio mix may get out of sync with your goals over time. Choose a portfolio that offers automatic rebalancing to keep your investments in line with your targets.
• Socially responsible investing: If you want your investments to align with your values, look for portfolios that offer socially responsible or environmentally conscious investment options.
• Tax optimization: If you are in a higher tax bracket, consider a tax-optimized portfolio that includes municipal bonds or other tax-advantaged investments to help lower your tax liability.
• Customer support: Look for a provider that offers robust customer support to answer any questions or concerns you may have about your investments.

When choosing an automated investment portfolio, be sure to compare different providers and read reviews to find the one that best suits your needs. Take advantage of tools and resources available online to research and select the right portfolio for your financial goals.

Benefits of an automated investment portfolio

An automated investment portfolio is a type of brokerage account that uses computer software and algorithms to build a diversified portfolio based on an individual's goals. For example, at Ally Invest, users need a minimum of $100 to begin funding their account, and a robo-advisor will manage and monitor their investments daily.

Time Efficiency

Automated investment portfolios are quick to set up and require minimal oversight, making them a more time-efficient option compared to self-directed investment accounts. They are ideal for busy individuals who want a hands-off approach to investing.

Accessibility

Robo-portfolios are more accessible than traditional financial advisors as they have lower investment minimums. For instance, at Ally Invest, the minimum investment required to work with a dedicated advisor is $100,000 in managed assets, while an automated investment portfolio can be opened with a $100 minimum investment.

Cost-Effectiveness

Automated investment platforms generally have lower fees than traditional human advisors, making them more affordable. Additionally, robo-portfolios do not charge for services like rebalancing, which may be included in a human financial advisor's fees.

Consistency and Efficiency

Algorithms used in automated investing execute trades and rebalance portfolios quickly and accurately, often in real-time. This process follows predefined rules and strategies, reducing the potential for human bias or emotional decision-making.

Diversification

Automated investment portfolios offer diversification across different asset classes, helping to spread out risk. For example, at Ally Invest, portfolios are constructed using exchange-traded funds (ETFs) that track the performance of an index, such as the S&P 500.

In summary, automated investment portfolios offer a convenient, accessible, and cost-effective way to invest, particularly for those who prefer a hands-off approach and want to benefit from the efficiency and diversification that algorithmic investing provides.

Cash-enhanced vs market-focused portfolios

When it comes to investing, there are two main types of portfolios to consider: cash-enhanced portfolios and market-focused portfolios. Both types have their own advantages and are designed to meet different financial goals and risk tolerances.

A cash-enhanced portfolio is ideal for those seeking added security in an inconsistent market. In this type of portfolio, a significant portion of the funds, typically around 30%, is set aside as cash to act as a buffer against market volatility. This cash reserve earns annual interest, providing a stable source of income. The remaining funds are invested in a diversified portfolio of exchange-traded funds (ETFs). This approach offers a balance between capital preservation and market exposure, making it suitable for those who want to mitigate risk while still participating in the market.

On the other hand, a market-focused portfolio is designed for investors who want the majority of their money actively invested in the market. In this case, nearly all the funds, approximately 98%, are invested, with only a small percentage, about 2%, held as cash. This strategy maximizes the potential for higher returns by allocating almost all resources to market opportunities. The annual advisory fee for this type of portfolio is typically 0.30%, and any cash holdings earn annual interest. Market-focused portfolios are ideal for those who are comfortable with higher levels of risk and want to pursue more aggressive growth strategies.

Both cash-enhanced and market-focused portfolios offer distinct advantages depending on an investor's goals and risk appetite. Cash-enhanced portfolios prioritize stability and security, making them suitable for more conservative investors. On the other hand, market-focused portfolios aim for more aggressive growth by allocating almost all funds to market investments. Ultimately, the decision between these two types of portfolios depends on an individual's financial objectives, risk tolerance, and investment horizon.

Ally Invest offers a range of investment options, including automated investing through their Robo Portfolio service. With a minimum investment of $100, investors can choose between cash-enhanced and market-focused portfolios, each providing a unique approach to achieving financial goals.

How to switch to a different investment portfolio type

An investment portfolio is a collection of invested assets such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs). When building an investment portfolio, it is important to consider your personal risk tolerance and time horizon.

• Decide how much help you want: If you want to be hands-off with your portfolio management, you can outsource the task to a robo-advisor or financial advisor.
• Choose an account: Select an investment account that aligns with your financial goals. For example, if you are investing for retirement, consider a tax-advantaged account like an IRA.
• Select your investments: Choose investments that match your risk tolerance and goals. This could include stocks, bonds, mutual funds, or ETFs.
• Determine your asset allocation: Decide how much of each asset class to include in your portfolio based on your risk tolerance. A common rule of thumb is to subtract your age from 100 or 110 to determine the percentage of your portfolio allocated to stocks.
• Rebalance your portfolio: Over time, the allocation of your assets may shift. Rebalancing involves restoring your portfolio to its original makeup or adjusting it according to your current goals and risk tolerance.

If you are using Ally Invest and want to switch to a different investment portfolio type, follow these steps:

• Visit your Investment Profile.
• Select "Make Changes."
• Adjust your investment using the provided form, then select "Submit."
• Review the recommended portfolio type based on your input. If you want to accept the recommendation, choose "Select." If you want to keep your current portfolio, select "Keep."
• To explore other options, select "Explore Other Options."
• After choosing your preferred portfolio type, select "Confirm" to keep your current profile or "Accept Change" to proceed with the new one.

A rebalancing will occur if you select a new portfolio type, and your new portfolio will take effect within a few days.

Frequently asked questions