By Mick Weinstein
An interesting debate sprung up recently in the investment blogosphere around this question: Is an individual investor better or worse off today, versus 15-20 years ago, given the plethora of new online services? Tadas Viskanta finds that in principle there’s never been a better time to be working your own portfolio:
one could argue that we are in the golden age of the individual investor… never before have investors had access to data, analysis, opinion and social tools that are commonplace today
But market veteran David Merkel points out the downside of this surge in new data, analysis and services. Merkel’s glad he began investing before the internet age – so much so that “if I were considering starting now, I would likely not do it.” Among his reasons why:
Too much data. There are too many factors to consider in investing. That there is a wealth of data to consider is certain, but what are the right factors to look at? …
ETFs affect the market as a whole. They allow average people to speculate on broad trends, without telling most of them that they are noise traders, and are getting taken for a ride. Dollar-weighted returns are far less than that for buy-and-holders in ETFs. The traders are getting creamed…
Social media leads to groupthink, which lowers overall returns, at least for those that get there late… In general, I think most individual investors are cows for the institutions to milk.
Merkel is really just referring to pitfalls facing the individual do-it-yourselfer, but one of the other new growth areas Viskanta points to is broader access to portfolio management, citing Covestor as an example alongside Wealthfront, Personal Capital and Betterment.
As a followup to these two posts, I thought it would be helpful to visually present the various managed portfolio options available today. If you choose not to crunch all this new data and opinion on your own, what are the managed services available to you today?
Of course, a visual like this necessarily reduces some of the complexity in this field. For example, Vanguard – best known to do it yourselfers for its indexing products – also offers managed accounts (over on the right column). And there are other services available for some of these approaches.
But given the fact that for many investors the key question is how active they want to be in the process, this is the fundamental lay of the land at this point as I see it. There are really just three main options, illustrated in the three columns here.
