Target Date funds and Robo-advisors all do one simple thing, allocate you between a bunch of different asset classes. They all take a slightly different approach with different amounts allocated to each asset class. This begs a few questions;
Why does the Betterment portfolio have me in 8.6% emerging markets, when the Wealthfront portfolio would have me in nearly 30% emerging markets? Who’s right? Which one is better? What if that schmuck from Merril Lynch (or other advisor) who handed me a fancy report about why their allocation is the best, is actually right?
Quit worrying, it doesn’t matter. Meb Faber analyzed the asset allocations of 40 of the nations leading wealth management firms and found that the difference between the most aggressive and least aggressive allocation was a mere .53%. That’s it!
Even I spent way to much time analyzing asset allocation models back when I first started researching investments. If only this would’ve been posted a few years earlier.
Take a Look