2Q2019 Robo Report: Best Performance, Retirement Accounts

Posted on September 10, 2019

Top Performers*:

1-Year Trailing Top Performers

  • Fidelity Go IRA – 6.55%
  • TD Ameritrade IRA – 5.87%
  • WiseBanyan IRA – 5.61%

2-Year Trailing Top Performers

  • Fidelity Go IRA – 8.25%
  • WiseBanyan IRA – 8.07%
  • TD Ameritrade IRA – 7.45%

*Based on Total Portfolio Return above/below Normalized Benchmark

Our Fidelity Go, TD Ameritrade, and WiseBanyan IRA portfolios continue to show strong performance over one- and two-year time periods, when evaluating the total return of their retirement accounts above/below the Normalized Benchmark.  Our Fidelity Go portfolio does not yet have a three-year return but has managed to lead over the one and two year periods for total returns above the Normalized Benchmark. It also has the strongest equity performance over both one and two years. Given that our retirement accounts are more aggressively allocated to equity, this performance has propelled Fidelity to the top of the rankings. Fidelity Go has also had the best total portfolio performance over the one- and two-year time frames at 6.55% and 8.25% annualized, respectively. Despite having the third-lowest allocation to equity at 85%, 70% of that equity was allocated to domestic stocks, which drove their equity and total portfolio performance to the top of the leaderboards. In fact, Fidelity’s fixed income allocation actually helped them over the one-year trailing period, during which fixed income posted better returns than equity on average within our portfolios. This has been due in large part to trade disputes and soft economic growth around the world. This uncertainty has pushed investors out of stocks and into more stable bonds. Bond prices have surged as a result.

WiseBanyan has also emerged as a consistent leader,  posting the third-best returns above the Normalized Benchmark over the one-year trailing period and the second-best performance over the two-year trailing period. They placed in the top three for equity performance in the one-, two-, and three-year periods. WiseBanyan keeps its equity allocation simple, using a single domestic and two international equity funds. Their equity holdings are heavily allocated to large-cap companies, which have outperformed both mid- and small-cap companies in the two-year trailing period. Additionally, they have an allocation to a REIT, which outperformed domestic equities YTD and over the trailing one-year period.  WiseBanyan’s fixed income portfolio holds a large allocation to an investment-grade corporate bond fund that has helped strengthen their fixed income and total portfolio returns. 

This straightforward, low-cost strategy has helped WiseBanyan achieve strong performance. WiseBanyan’s neutral weighting in domestic equities and across the value growth spectrum has benefited them while a weighting towards large-cap equities drove outperformance.

WiseBanyan does not have higher-than-average allocations to domestic or growth stocks, both of which have outperformed their international and value counterparts. Instead, it’s allocation to large cap stocks and its low fees have done little to drag down performance. 

TD Ameritrade filled out the top three performers above/below the Normalized Benchmark with the second-best performance in the one-year period and the third-best performance in the two-year period. Similar to WiseBanyan, TD had allocations similar to the average in terms of domestic and growth exposure. Its heavy large-cap tilt boosted equity performance, leading its equity holdings to post the third-highest returns over the two-year trailing period. 

Schwab’s performance was less desirable. Its retirement portfolio had the worst performance above/below the Normalized Benchmark, total portfolio performance, and equity performance over the two-year trailing period. This was driven by high exposure to underperforming equity segments. Schwab invested heavily in international and value stocks. These two segments underperformed their domestic and growth counterparts over the one- and two-year trailing periods. The portfolio’s equity posted an annualized return of 6.14% for the two-year period ending June 30th, 2019.  Our IRA universe is invested in aggressive portfolios and while Schwab, like many of our IRA portfolios, holds no fixed income, it also holds the highest allocation to cash at 6% of the portfolio This cash allocation has contributed to underperformance of the portfolios during recent periods of positive returns in both fixed income and equities markets. 

On the fixed-income side over two years, Ally led returns at 4.35% annualized, followed by SigFig at 4.20%. Ally’s fixed income holdings were primarily mid-maturity bonds and all were investment grade. SigFig is more evenly spread out across maturity, with a tilt towards long-term. They also held non-investment grade bonds. The combination of these two factors returned 12.53% in the one-year trailing period, significantly outpacing other portfolio’s fixed income returns and even equity returns over the period. However, our retirement accounts have small portions of fixed income and the strong performance was not enough to push SigFig into one of the top three spots in the rankings. 

Over the one- and two-year trailing period, our retirement portfolios posted strong returns. Performance above/below the benchmark and total portfolio performance were driven largely by equity performance, which in turn was driven by allocation to large-cap and domestic stocks. Over the one-year trailing period, fixed income returns were much stronger than equity returns. If concerns over trade disputes and softening economic growth materialize, portfolios with some allocations to bonds will likely benefit during more volatile or falling markets.

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