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Ally Invest Managed Portfolios Overview

When Ally Invest took over TradeKing in 2017, the new owner started slashing fees and minimums. Another new feature Ally rolled out is portfolio management. If you would rather let the pros manage your investments, Ally wants your business. Here’s what the brokerage firm has to offer:

Pricing, Minimums, and Details

Ally Invest charges 0.0% (yes, zero) per year for its computerized investing service. The minimum to get started is just $100. Several different account types are eligible for Ally’s robo advisory program. These choices include IRA’s plus custodial, individual, and joint accounts.


Ally Managed Portfolios Price


To give you an idea of how much Ally’s robo service would cost every year, consider these numbers: an account with a $100 balance would pay 30¢ per year in management fees. A $50,000 account would pay $150 annually. Ally Invest actually deducts its fee in fourths every three months.

Another really important note to make here is that Ally Invest does not offer any type of traditional management. Human advisors are not available at any price. The only option in this category is Ally’s computer algorithm, which will make all trading decisions.

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Underlying Investments

The assets traded by Ally’s software program are low-cost ETF’s. No other investments are available. Ally uses both equity and fixed-income funds. Some of the ETF’s in Ally’s robo program include the Vanguard FTSE Emerging Markets ETF (ticker symbol VWO), the iShares Core S&P Small-Cap ETF (IJR), and the Vanguard Total International Bond ETF (BNDX).


Ally Managed Portfolios


Ally Invest’s Questionnaire

To get started with Ally Invest’s robo program, you’ll need to fill out a brief questionnaire during the application process. The answers you submit influence how much risk the robot takes on; so it’s a pretty important step.

The first question the form asks is the motivation for investing. Choices include saving for retirement, generating income, and building wealth. The retirement option asks about time horizon and risk tolerance. Other fields include liquid assets and a goal for the account’s balance.

After we filled out the form, Ally’s website recommended a Core Moderate Portfolio with 39% stocks and 61% bonds. Both foreign and domestic securities were included. It is possible to adjust these percentages.

The results of the questionnaire also show growths of a hypothetical $100,000 investment using the five possible portfolio choices from Ally Invest’s robot: Core Conservative, Core Moderate, Core Moderate Growth, Core Growth, and Core Aggressive Growth. The annualized returns of these portfolios range from 3.92% to 6.98%. These strike us as a little low given that the historical annualized return of the overall stock market is around 8%.

Robot Rebalancing

Ally Invest’s computerized system analyzes portfolios constantly. When an account strays too far from original target allocations, the software program automatically rebalances an account by selling outperforming assets and buying underperforming ones. This method of investing relies on Modern Portfolio Theory, which attempts to maximum an account’s return by maintaining target allocations in various asset classes. Ally’s algorithm will put a certain percentage in mid-cap stocks, another percentage in small-cap stocks, another percentage in foreign bonds, and so forth, in order to spread out risk and achieve a high risk-adjusted return.

Options

Ally Invest has recently launched a new Tax Advantaged Portfolio that provides a higher level of tax efficiency than the standard portfolios mentioned above have. The Tax Advantaged option builds an asset allocation with municipal bonds that reduces tax liability of the portfolio. Tax-loss harvesting is another option managed account customers can choose at Ally Invest.

Another new option is the Income Portfolio. This style of investment attempts to generate near-term income while simultaneously focusing on capital growth. Ally’s computer algorithm accomplishes these goals by investing in fixed-income securities and dividend paying stocks with high yields.

Socially-responsible investing is another choice Ally Invest is now adding to its list of selections for robo customers. Typically, these funds include investments that pass environmental, social, and governance criteria. Alternative energy companies are one common target for these types of portfolios. A common company found in these funds is First Solar, Inc., a manufacturer of solar panels.

Comparison

The first glaring absence with Ally Invest’s portfolio management service is a human advisory option. Several of Ally Invest’s rivals do offer this service.

For example, Vanguard offers a traditional package that costs 0.30% od account balance per year (this is more than 0% for Ally Invest’s computerized service) with a $50,000 minimum deposit requirement. Obviously, the minimum and fee are much higher.

Vanguard’s asset-based fee is on a sliding scale, which means it begins dropping once an account reaches $5 million. It eventually reaches just 0.05% at $25 million. Obviously, this is a great deal for wealthy investors.

M1 Finnace’s robo advisory service is actually free, and this obviously beats everyone in the industry.

Judgment

Ally Invest has tried to build a managed account service at a low price. It has succeeded to offer hard to beat value for many investors.

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Ally Invest Managed Portfolios Reviewed by TopRatedFirms.com on . Rating: 5