| Thanks, Bradley. Tutorial explanation comment is noted - we have some ideas on that front. There are a few themes that we're playing on with regards to the advice, and we'll try to express them more clearly on the site as we move forward. These are: 1) Most of the investment options available to participants are really a mix of a number of market sectors...for example, Vanguard Wellington (http://www.kivalia.com/assets/vwelx/vanguard-wellington-inv). The name tells me nothing, but if one evaluates it, it looks like the mix of assets shown at the bottom right of the page referenced above...a mix of stocks and bonds. So we do a good job of mapping what various investments look like. 2) Getting the overall allocation right is the most important aspect of investing...and explains maybe 80% or more of one's overall returns. How much do I want in large cap growth, small cap value, international, etc.? That's incredibly hard for an individual to do when you have a bunch of vaguely named funds. Of course it's much easier to do when one has a list of sector-based index funds to work with. 3) Philosophically we're indifferent between active and passive funds...they're each just combinations of asset classes with a fee tacked on. What's most important to us is the exposure to various sectors a particular fund provides you, after fees. 4) Yes, our algorithms take into account each fund's respective management fees; so all else being equal we'd be biased towards the lower cost (better performing) alternative. 5) Past performance is definitively NOT a predictor of future performance. We simply show results for transparency sake in an effort to allow users to see whether or not we're adding value to the process. 6) We do build in "tilts" to our advice based on expected returns over a substantially long time horizon. These tilts are intended to bias portfolios towards sectors that look more attractive at any point in time, and away from sectors that are less attractive in our view. That said, it is a simple process to tighten down our algorithms to force the recommendations to a more benchmark-y look and performance. |
re: actively managed funds
Even beyond price, it is hard to know exactly what you are getting. A fund may be in the large cap value segment generally, but what if the fund manager hates financials or loves energy? Or even worse what if he hates financials this year, but loved them last year? Trying to diversify properly with such idiosyncratic building blocks seems a frustrating excise.
Re: overall allocation
I noticed that you have three model portfolios based on risk tolerance (conservative, moderate, aggressive) and you measure them versus target date funds as a benchmark. Are those different models intended to account for personal risk tolerance as well as time to retirement?