December 14, 2021
You love the idea of having a Robo-advisor take control of your entire financial well-being, allowing you to just kick back and relax while your money works for you. Rather than pay a financial professional large amounts of money to pick out your investments, you prefer to rely on Wealthfront’s PassivePlus investment strategy which follows a rule-based method to maximize your expected return on investment.
It sounds like the perfect plan for you to avoid all the troublesome hard work involved with planning your financial future – phew!
While robo-advisors can be an advantage for a novice lacking financial knowledge or for those who lack time to follow up on their finances, it most certainly is not the only option. If you possess even the most basic knowledge of finance and investing, you do not need to rely on a middleman to invest your money into index funds or ETFs.
Wealthfront may offer the advantage of selecting your investments using an algorithm, but they most likely will only offer average returns that fail to beat the market. Robo-advisors will invest your money in a mixed basket of instruments, which is great to diversify your risk, but will often lead to disappointing returns.
The idea of taking control over your finances, of having to go through every detail on your bank statements, expenditures followed by computing your savings and allocating your funds to a great investment, may sound scary to begin with, but believe me, it is essential for you to grow your wealth.
At Passiv, while we understand the benefits associated with passive investing, we also understand its pitfalls. Apart from robo-advisors' inability to beat the market, there were other shortfalls to passive investing such as determining the allocation of new contributions and dividends to meet your target allocation. This single task can take several hours of manual data entry and spreadsheet calculations which Passiv is determined to resolve and make your life easier.
Passiv is not a robo-advisor or an algorithmic trading platform, but a tool that allows DIY investors to maintain a balanced portfolio and build a passive investment strategy that eliminates the need for spreadsheets, having to login to your broker to place trades and helps you stick to your portfolio’s target allocation.
For individuals who prefer to manage their own retirement portfolio and hate to lose their money in high management fees, Passiv is a fantastic tool allowing you to ease your life through automatic portfolio management, allocating new contributions and dividends as well as rebalancing your portfolio.
Let us explore these advantages in greater detail.
While Passiv will not provide any tips or suggestions on where and how to invest, it will allow you to create your target portfolio. DIY investing is all about being aware and making informed choices, and instead of using the one-size-fits-all approach, Passiv relies on your best judgement to choose your target portfolio.
Your target portfolio is a percentage allocation of a mix of instruments to maintain a balanced portfolio. This percentage is dependent not only on the amount of money you invest but on various factors such as age, years before retirement, risk appetite, etc.
Passiv will allow you to add as many securities as you want in your portfolio and assign a percentage allocation to each to maintain your balanced portfolio. Once set up, Passiv will show all actions required to maintain your target portfolio. This target allocation can always be adjusted or edited at any time you want.
Let us say you only wish to allocate a maximum dollar amount of investment towards a particular instrument to take advantage of dollar-cost averaging or you always wish to have at least a minimum cash retained in your portfolio.
Passiv allows you to manage your cash in either case using two options – “Allocate at most” and “Retain at least”.
For dollar-cost averaging, you can allocate a maximum dollar amount to your trades using the allocate at most option while you can retain a minimum dollar amount of cash in your account using the retain at least option provided by Passiv.
The market isn’t always going to remain stable and there will be volatile times when your target portfolio will drift out of alignment. These drifts, if not monitored regularly, can lead to potential losses.
Therefore, Passiv provides its users with drift notifications which help assess the accuracy of their target portfolio. If the target portfolio has fallen below a given threshold, drift notifications will alert the user to take necessary action.
Many of us have multiple brokerage accounts and managing them can be tedious. For example, you may have a retirement portfolio using a long-term strategy or another portfolio targeted towards your short-term goals or one with tax saving benefits.
Passiv allows you to organize these multiple portfolios into groups, with each group having its own target portfolio. This feature can help you ease the burden from managing your accounts in various places and maintain a balanced portfolio all in one place.
If you hate checking your investments on a regular basis, trying to figure out if it is the right time to rebalance your portfolio, Passiv can help you. Rebalancing your portfolio is the act of buying or selling your assets to maintain your target allocation and requires your attention periodically.
Passiv notifies its users via email when their portfolio needs attention. By default, Passiv is set to allocate new cash to your underweight targets and not sell overweight assets.
For example, if your target allocation is 70% in equities and 30% in bonds and your equity stocks rise, your allocation in riskier assets would increase. To maintain the risk tolerance associated with your portfolio allocation, you would need to purchase bonds and/or sell some equities.
If your portfolio drifts from your target allocation, Passiv gives you an opportunity to purchase discounted assets utilizing the power of dollar-cost averaging.
Passiv establishes a secure connection with your brokerage without storing any of your login information.
Once Passiv has calculated the trades needed to rebalance your portfolio, instead of placing your trades manually, you can have Passiv do it for you. Passiv can allocate all available trades at the click of a button and provide detailed information about any estimated trading commissions and the amount of cash left over after processing your trades.
By default, Passiv places market orders, but users also have the option to place a limit order.
Managing all your investments and maintaining your target portfolio will consume several hours of your time only to create and update a spreadsheet with all this information. Passiv will help you build and maintain these spreadsheets, saving you the most valuable asset – time.
While Wealthfront’s PassivPlus may have its advantages to create a one-size-fits-all investment strategy, the true way to build and grow your wealth is by educating yourself and being aware of your financial decisions. Spend some time learning through the basics of finance and investing and allow Passiv to help you build the portfolio of your dreams.
Automatically calculate trades
Get notified of cash & dividends
Connect multiple brokerages
