Inside Robo Advisor Asset Allocation

August 22, 2014

The humans behind the robo advisors seem to be tilting away from the market.

This is the third blog in a multiple-blog series by’s Director of Research Elisabeth Kashner on the new “robo advisory” industry. The first was titled ”Which Robo Advisor For My Teen?” and the second was titled ”Ghosts In The Robo Advisor Machine”.


“`I wonder what makes us build inefficiently shaped human robots instead of nice streamlined machines.’

`Pride, sir,’ said the robot.”

—Terry Pratchett (“The Dark Side of the Sun”)

The humans behind the robo advisors have reason to be proud of their work. They build broad-based portfolios for a range of risk levels and offer them at low-cost, often with rebalancing and tax-loss harvesting.

But are these portfolios truly streamlined, or are they a touch humanoid?

As I mentioned in my previous blog, robo portfolios reflect the philosophies of their human creators. As part of my due diligence for investing my son’s bar mitzvah money, I did a deep dive into each one, to see how these philosophies came to life.

Good news: These guys pretty much practice what they preach, though a few who promised downside protection are are a bit light on its delivery. Some are evangelical, following strong convictions, while others use a lighter touch.

The resulting portfolios offer plenty of choice. All take bets, but in very different ways. Let’s dig in, and see what our choices are.

Robo-Portfolio Tilts

In the tables below, the black type shows the weights from a 60 percent equity-40 percent fixed-income/commodities allocation, while the blue type shows the weights from a 90 percent equity version. The first table assesses risk; the second shows notable portfolio exposures.

Robo-Portfolios Risk Vs. Benchmarks
  Equity Weight Equity Risk Vs. VT Fixed Income Risk Vs. AGG
Wealthfront 60% Low High
90% Moderate High
Betterment 60% Moderate High
90% Moderate High
Future Advisor 60% High Low
90% High Low
Covestor 60% Moderate Moderate
90% Moderate Moderate
WiseBanyan 60% Moderate High
90% Low High
Invessence 60% Low Very high
90% Low Very high

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