A friend just sent me the Morningstar ETF Managed Portfolios Landscape Report for Q2, 2017. I was flabbergasted and overwhelmed. I had no idea that portfolio managers were offering these vehicles in such quantities. There are more than 2000 portfolios of ETFs in the Morningstar report. As is Morningstar’s forte, the report identifies categories and reports on the best and worst in each. But I found myself wondering what these portfolios can do that I can’t do on my own? My first answer is market timing, but not many of these funds try to do that.
What can portfolios of ETFs actually do?
Portfolios of ETFs can provide very low cost implementation of an asset allocation decision, but then these managers add their fees on top of the ETF fees and you’re back to some expensive choices.
Why pay management fees when you can do this on your own? For example, the Age Sage Robo Analyst that we are building provides very broadly diversified multi-asset portfolios of easy-to-buy ETFs that cost less than 6 basis points in total. These portfolios include US stocks, foreign stocks, real estate, US bonds, foreign bonds, TIPS and cash. Age Sage also helps investors identify an age-and-risk appropriate asset allocation.
So why take the time and energy to sort through a list of 2000 funds of ETFs looking for a fit to your needs when you can easily build your own very customized portfolio for a very low cost? I think the answer is marketing. These funds of ETFs are aggressively sold.
Good chance some of you own these portfolios of ETFs, and I hope you will comment. Thanks.
If you’d like to know when Age Sage is released please follow me.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.