The Best Robo Advisor … For You

September 26, 2014

Tilts

The robo advisors implement some popular strategies, including factor investing, which focuses on small-cap and value, as well as global growth strategies that often involve emerging markets. Let's look at factor exposure first.

The table below shows each firm's 60/40 equity portfolio's weighted average market cap and price-to-earnings multiple (P/E) in relation to Vanguard's VT, with a composite "small/value level" that combines the two equally.

  Wealthfront Betterment FutureAdvisor Covestor WiseBanyan Invessence
Market Cap vs. VT 108% 96% 77% 95% 99% 111%
P/E vs. VT 95% 92% 95% 98% 109% 103%
Small/Value Level 102% 94% 86% 97% 104% 107%

Factor investors who seek small-cap and value exposure should prefer FutureAdvisor, while those who like growth investing should choose WiseBanyan, with its highest-in-class P/E ratio.

Some investors prefer to think geopolitically.

Many are drawn to the emerging market growth story, while others prefer to stick close to home. The table below shows the emerging market and U.S. weights for each of the 60/40 equity portfolios.

  Wealthfront Betterment FutureAdvisor Covestor WiseBanyan Invessence
Emerging Markets Weight 12% 7% 17% 18% 5% 13%
U.S. Weight 63% 50% 47% 58% 65% 80%

Covestor has the strongest emerging market exposure, while Invessence heads up the home-country fan club.

Wealthfront's 60/40 portfolio isn't tilted enough to stand out, but isn't plain vanilla either. It's tilted to large-caps but also emphasizes value. That's because it's the product of a real live investment committee. For folks who want a driver behind the wheel, Wealthfront is the clear choice.

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