Adaptive Portfolios: Managed Investment Portfolio

Founded in 1991 with $100,000 in startup money and a handful of investors, E*TRADE has grown to 3.5 million investor accounts and nearly $50 billion in assets.

The online brokerage revolutionized investing, allowing individuals to have more control over their investment accounts and offering lower fees than traditional brokerage houses. The company has continued to thrive when many other dot.com-era investment companies have failed.

E*TRADE offers both adaptive portfolio management, so-called robo-advisors, and more hands-on service with its online brokerage accounts.

E*TRADE’s adaptive portfolio management combines automation with limited guidance from human advisers. The company claims that its system offers the best of both models.

E*TRADE Adaptive Portfolio at a Glance

• Management fee: 0.30%
• Account minimum: $5,000
• 2017 promotion: E*TRADE will waive the management fee for the first six months in the program when an adaptive portfolio is funded with at least $5,000 by December 31, 2017. This offer is valid for U.S. residents only.

Unlike traditional brokered accounts, E*TRADE’s adaptive portfolio accounts work with automated programs to rebalance the account daily based on set parameters. There is no per-trade fee. Instead, a quarterly management fee is assessed based on the value of the entire portfolio.

Adaptive portfolio investors fill out a profile when they sign up for the program. This profile is used to estimate their risk tolerance, and they are assigned one of six risk models. Human advisers are available to adaptive portfolio customers via telephone from 8:30 a.m. to 8:30 p.m. Monday through Friday, and via online chat 24/7.

Customers for E*TRADE Adaptive Portfolio

E*TRADE’s adaptive portfolio is well-suited for current E*TRADE account holders who want to maximize their return without having to be tied to their iPad, PC or tablet all day, every day. This product is also beneficial for mutual fund investors and investors who want their money to work well for them without a lot of personal input. The relatively low ($5,000) minimum investment makes this program available to the majority of investors.

E*TRADE adaptive portfolio is best for:

• Fee-conscious investors
• Investors with low, medium and high net worth
• Hands-off investors (This fits the millennial profile)
• Mutual fund investors

E*TRADE Adaptive Portfolio Pros and Cons

Pros:

• Offers a variety of risk portfolios
• Requires a low minimum investment
• Offers a choice of a hybrid or totally automated account
• Provides daily automatic rebalancing (compared with monthly and quarterly balancing with other robo-advisor platforms)
• Offers access to customer service 24/7
• Is accessible via mobile devices

Cons:

• Doesn’t provide tax-loss harvesting
• Management fee is high compared to other robo-advisors. Betterment charges are 0.015 percent for accounts of $100,000 or more, and Wealthfront charges are 0.025 percent for all accounts.

E*TRADE Adaptive Account Tools

E*TRADE offers adaptive portfolio account holders access to the company’s full library of investment tools. These include market news, market trends, stock suggestions and basics for beginning investors. All of these tools are accessible on the E*TRADE platform at no additional charge.

E*TRADE Adaptive Account Tax Strategy

Automatic tax-loss harvesting, which can potentially reduce your tax obligation by matching sales with losses, is not offered with E*TRADE’s adaptive account.

How to Open an E*TRADE Adaptive Portfolio Account

E*TRADE makes opening an adaptive portfolio account easy. Simply visit E*Trade, complete the application, and fund or transfer your account. You’ll then be asked to complete a jargon-free questionnaire about your risk tolerance, and E*TRADE will send you an investment proposal.

All you have to do is agree to the proposal, or request a modification, and activate your account.

E*TRADE Online Brokerage Account

The majority of E*TRADE accounts are still online E*TRADE brokerage accounts. Investors with these accounts can make online trades, choose from a full menu of investment products and take advantage of personal guidance if desired.

Like E*TRADE adaptive portfolio accounts, the platform is available via most electronic devices.

E*TRADE Online Brokered Accounts at a Glance

• Account minimum: none
• Online Stock per-trade fee: $0
• Broker-assisted trade fee: $25
• Fees for bonds, mutual funds, futures and options: varies
• Current promotion: unlimited free trades for 60 days and $600 for new accounts of $10,000 or more

About E*TRADE Online Brokered Accounts

E*TRADE’s adaptive portfolio is not right for every investor. Some people need, or want, a little more control and personal advice. For those investors, E*TRADE offers its regular online brokerage accounts. This platform allows investors to manage their own portfolios and execute their own trades in exchange for a fee structure that’s much lower than traditional hands-on brokerage houses. This is the model on which E*TRADE built its business.

E*TRADE’s online brokerage accounts allow investors to be as active as they like with their accounts. However, it provides human advisers when investors need a little advice from an investment professional.

E*TRADE online brokerage accounts are ideal for those investors who want to be very active in their investments, who have a moderate to high risk tolerance, and who want to do a lot of their own research and save high full-service brokerage fees.

E*TRADE’s online brokerage accounts are best for:

• Active traders
• Investors interested in doing their own research
• Investors who want a hands-on, low-fee approach

Pros and Cons of E*TRADE Online Brokered Accounts

Pros:

• Low fee structure when compared to full-service brokerage houses
• Low account minimum (currently $500 for a non-IRA account and $0 for an IRA account)
• Human investment advisers available if desired
• 24/7 customer service
• Extensive suite of research, tools and online education modules

Cons:

• Per-trade fee is higher than some bare-bones online brokers, such as TradeKing.
• E*TRADE Pro tools are only available to active traders.

E*TRADE Online Brokerage Account Tools

E*TRADE offers online brokerage account holders access to the company’s full library of investment tools. These include market news, market trends, stock suggestions and basics for beginning investors.

All of these tools are accessible on the E*TRADE platform at no further charge. Additional online tools are available to E*TRADE Pro investors — those who make at least 30 trades each quarter.

In addition, investors with online brokerage accounts can work with financial advisers to set retirement goals and work toward them in partnership with an adviser, so portfolio investment selections are not simply left to the discretion of a technology-powered robot.

E*TRADE Online Brokerage Account Tax Strategy

Unlike E*TRADE’s adaptive portfolio accounts, human investment advisers are available to help you match your trades with your capital gains and minimize your tax obligation.

However, this service is not automatically offered, as it would be with a full-service brokerage. You have to request and pay for it.

How to Open an E*TRADE Online Brokerage Account

Opening an E*TRADE online brokerage account is even easier than opening an adaptive portfolio account. All you have to do is visit the website, complete the application, and fund or transfer your account.

E*TRADE Adaptive Accounts Versus Online Brokerage Accounts

Which type of E*TRADE account is right for you depends on a number of factors, such as how much time you want to spend managing your investments, your skill at picking those stocks that will beat the market and your risk tolerance.

E*TRADE’s adaptive portfolio accounts are well-suited for those clients who what their money to work well for them with minimum effort on their part, but who what to have a human adviser available if and when they have questions or concerns.

E*TRADE’s regular brokerage accounts are for those active traders who want to do their own research, execute their own trades and track their own progress without a lot of help from human advisers. E*TRADE offers a full menu of research tools and access to a variety of investment products, not just stocks.

All E*TRADE accounts are protected by the Securities Investment Protection Corporation (SIPC), which provides protection against brokerage failure of up to $500,000 per account, including $250,000 in cash.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.