Schwab's Managed Portfolios: How They Work And If They're Right For You

Charles Schwab offers a range of investment services, including self-directed investing, wealth and investment management solutions, and robo-advisors. Their robo-advisor service, Schwab Intelligent Portfolios, provides automated investing with human help. It builds, monitors, and automatically rebalances a diversified portfolio of exchange-traded funds (ETFs) based on your goals, risk tolerance, and timeline. The service is available with a minimum investment of $5,000 and there are no advisory fees or commissions charged. Charles Schwab also offers 24/7 support from US-based professionals and optional 1:1 guidance from a CERTIFIED FINANCIAL PLANNER professional for an additional cost.

Robo-advisors

Charles Schwab offers a robo-advisor service as part of its Schwab Intelligent Portfolios®. This service simplifies the process of investing by providing automated portfolios based on your goals and risk tolerance. The robo-advisor uses the latest technology and expertise from investment professionals to build, monitor, and automatically rebalance your portfolio.

Here's how it works: First, you complete a short questionnaire to establish your goals, risk tolerance, and timeline. Based on your answers, the robo-advisor will provide you with a diversified portfolio of ETFs chosen by experts. The portfolio is tailored to your needs, with over 80 variations spanning 20+ expanded asset classes and 6 risk profiles.

Once you have your portfolio, the robo-advisor technology monitors and automatically rebalances your investments to help keep you diversified and on track. It does this by checking in daily and selling excess ETF shares when an asset class exceeds its allocated portion, using the proceeds to buy positions that have fallen below their target percentage. This keeps your portfolio consistent with your Investor Profile.

Additionally, the robo-advisor can also provide automatic tax-loss harvesting for clients with invested assets of $50,000 or more. This feature helps to offset capital gains and lower your taxable income by strategically selling ETFs that have declined in value.

With the robo-advisor service, you can also access optional 1:1 guidance from a CFP® professional for an additional cost. This service provides unlimited guidance from a certified financial planner who can answer specific questions about your financial plan.

Overall, the Charles Schwab robo-advisor offers a convenient and automated way to build and manage your investment portfolio, with the added benefit of professional guidance if needed.

Retirement plans

Charles Schwab offers a range of retirement plans for individuals and small businesses. These plans are designed to help individuals and business owners save for retirement and include features such as high contribution limits, tax advantages, and investment guidance.

For individuals, Charles Schwab offers the Individual 401(k) plan, which is available to self-employed individuals and business owners with no employees other than a spouse. This plan allows individuals to contribute both as the employer and the employee, offering higher potential contribution limits than some other retirement plans. Contributions to a traditional Individual 401(k) plan are generally tax-deductible, while contributions to a Roth Individual 401(k) plan are made with after-tax salary deferrals. Qualified Roth distributions are tax-free for individuals over the age of 59½ who have held the account for over five years.

Charles Schwab also offers retirement plans for small businesses, including the Individual 401(k) plan mentioned above, as well as other options such as the Personal Defined Benefit Plan and the Company Retirement Account. The Personal Defined Benefit Plan is suitable for owner-only businesses or those with up to five employees, offering high contribution limits and tax deductions. The Company Retirement Account is an investment-only solution for businesses with an established retirement plan and a record keeper or third-party administrator, providing access to Schwab's full range of investment options.

In addition to these specific plans, Charles Schwab provides resources and tools to help individuals and businesses find the right retirement plan for their needs. They also offer a robo-advisor service, Schwab Intelligent Portfolios, which can help individuals invest for retirement by building, monitoring, and automatically rebalancing their portfolio based on their goals, risk tolerance, and timeline. This service is available for a range of account types, including brokerage, IRA, custodial, and trust accounts.

Investing for college

Understand the Costs and Start Early:

College tuition costs have been increasing at a rate higher than inflation, and if this trend continues, the future costs could be substantial. For instance, based on current rates, newborns may need over $300,000 to attend a four-year public university and almost twice that amount for a private school. Therefore, it's crucial to start saving early and make it a priority.

Utilize Automated Investing:

Charles Schwab's automated investing service, Schwab Intelligent Portfolios®, can be a great option for investing for college. This service offers a robo-advisor that builds, monitors, and automatically rebalances your portfolio based on your specific goals, risk tolerance, and timeline. With a minimum investment of $5,000, you can benefit from a diversified portfolio of exchange-traded funds (ETFs) tailored to your needs.

Explore Other Investment Options:

In addition to automated investing, Charles Schwab provides a range of investment products to help you build a diversified portfolio. This includes mutual funds, exchange-traded funds (ETFs), and separately managed accounts. You can also consider opening a tax-advantaged individual retirement account (IRA), such as a Roth IRA, which offers tax-deferred growth and tax-free withdrawals in retirement.

Take Advantage of Gift Ideas:

If you're looking to help a college graduate get started with investing, Charles Schwab suggests several gift ideas:

• Match savings contributions: Encourage savings by offering to match a portion of their contributions.
• Give stocks with youth appeal: Pique their interest by gifting individual stocks in companies they like or shares in mutual or exchange-traded funds (ETFs) that align with their interests.
• Automated investing: Fund an automated investment advisory account, which can build a diversified portfolio based on their goals and risk tolerance.

Prioritize Retirement Savings:

While investing for college is important, Charles Schwab recommends prioritizing maxing out your retirement accounts first. This ensures that you're taking care of your long-term financial goals before contributing to other savings goals, such as college expenses for relatives.

By following these steps and utilizing the tools and services offered by Charles Schwab, you can effectively invest for college and give yourself or your loved ones a strong financial foundation for the future.

Tax-loss harvesting

Charles Schwab offers a robo-advisor service that can help build and manage your portfolio. This service is called Schwab Intelligent Portfolios.

If you have an account with $50,000 or more in assets and you've elected to automate tax-loss harvesting, your account will be tracked daily for opportunities to offset capital gains by strategically realizing losses. The number of tax-loss harvesting trades across Schwab Intelligent Portfolios accounts that are enrolled in the service has historically surged when markets turn turbulent.

For example, during the bear market of 2022, the total number of tax-loss harvesting trades across Schwab Intelligent Portfolios rose sharply along with market volatility during the first three quarters of 2022 as the U.S. stock market tumbled. Clients enrolled in tax-loss harvesting were able to capture the losses for tax purposes by selling the ETFs in their portfolio that had declined enough below their purchase price.

It is important to note that tax-loss harvesting does not eliminate tax liabilities. Taxes will need to be paid based on the cost basis of the replacement security whenever it is sold at a later date.

Wealth management

Charles Schwab offers a range of wealth management services, including self-directed investing and wealth and investment management solutions.

Self-Directed Investing

Self-directed investing is a service that provides clients with easy-to-use tools for buying and selling stocks, ETFs, and more. It also offers resources to help build a portfolio, research investments, and discover new ideas. Additionally, clients can access tools to track performance and plan for their future, such as the award-winning thinkorswim® platforms and an extensive library of trader-focused educational resources.

Wealth and Investment Management Solutions

Charles Schwab's wealth and investment management solutions offer comprehensive wealth management with a dedicated advisor backed by an experienced team. This service provides a personalized approach for a competitive fee, as well as professionally managed portfolio solutions tailored to meet specific needs.

Robo-Advisor Services

Charles Schwab also offers a robo-advisor service, which builds, monitors, and automatically rebalances a diversified portfolio of ETFs based on individual goals and risk tolerance. This service is available for a minimum investment of $5,000, and there are no advisory fees or commissions charged.

Human Support

While the robo-advisor service does much of the work, human support is also available. 24/7 live support is provided by U.S.-based service professionals, and optional one-on-one guidance from a CERTIFIED FINANCIAL PLANNER™ professional can be added for an additional cost.

Automatic Investing

Charles Schwab also provides the option to set up automatic investments, allowing clients to automatically invest a portion of their funds in eligible mutual funds held within their brokerage account.

Frequently asked questions