Rob Berger

Item: ProjectionLab
Rating: 4.3
Author: Kevin Mercadante

The 7Twelve Portfolio–A Case of Diworsification

December 2, 2022 by Rob Berger

Some of the links in this article may be affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase or open an account. I only recommend products or services that I (1) believe in and (2) would recommend to my mom. Advertisers have had no control, influence, or input on this article, and they never will.

There are several different “lazy portfolios” you can employ if you like the set-it-and-forget-it portfolio concept. One of the less common – and less understood – versions is the 7Twelve Portfolio. It is one of the more complicated lazy portfolios to set up and manage, at least if you plan to do it manually.

In theory it offers a well-diversified portfolio, and one that may perform best in the worst market conditions. Its complexity combined with poor performance over the long-term, however, calls into serious question whether the 7Twelve Portfolio is right for anybody.

What is the 7Twelve Portfolio?

The 7Twelve Portfolio concept was developed by Craig L. Israelson, author of the book 7Twelve: A Diversified Investment Portfolio with a Plan (2010).

The goal of the portfolio is to enhance performance and minimize risk. As we'll see, however, those goals are not always accomplished. Israelson developed the concept in 2008, so the history is a bit limited.

The numbers seven and 12 figure significantly in the 7Twelve Portfolio. It involves the use of 12 different investment sectors, which loosely fit within seven different asset classes.

The seven asset classes are as follows:

1. U.S. Stocks

2. International Stocks

3. Real Estate Investment Trusts (REITs)

4. Natural Resources

5. U.S. Bonds

6. International Bonds

7. Cash

If you break down the asset classes between stocks and bonds/cash, you’ll get a 65/35 split favoring stocks. That is of course very close to the ever-popular 60/40 portfolio split.

The 12 investment sectors that make up the seven asset classes for the 7Twelve Portfolio are as follows (from Portfolio Visualizer):

In looking at the pie chart from the screenshot above, notice that each of the 12 investment sectors has an equal weight of 8% – or, more precisely, 8.33%. When the 12 are added together, it comprises 100% of the portfolio.

(NOTE: For the purpose of creating screenshots, I’ve used precious metals in lieu of natural resources. This is due to the fact that Portfolio Visualizer offers only standard sector descriptions, which does not specifically include the term “natural resources.” I used precious metals because it was the only option that even approximated natural resources. It may somewhat distort the results. However, it’s worth noting that precious metals, gold especially, has generally performed well since 2008 when the portfolio concept was created.)

How to Create the 7Twelve Portfolio

The easiest way to create the 7Twelve Portfolio is to match a single fund with each investment sector.

The funds used are typically index-based exchange traded funds (ETFs). That’s because these funds are specifically designed to match an index of securities within a specific sector or asset class. What’s more, they have very low expense ratios, minimizing the drag on investment returns.

And finally, use of index funds gives a portfolio sector access to a broad cross-section of securities within each sector. If one or two stocks in the group crash and burn, the impact on the fund overall will be minimal.

Example of the Funds in a 7Twelve Portfolio

We’ve put together the table below, matching a popular index fund with each of the 12 investment sectors. Most of the funds presented in the table commonly appear in portfolios managed by both robo-advisors and professional investment advisors.

Allocations	Fund Example
U.S. Large-Cap Stocks	Vanguard S&P 500 ETF (VOO)
U.S. Mid-Cap Stocks	Vanguard Mid-Cap ETF (VO)
U.S. Small-Cap Stocks	Vanguard Small Cap ETF (VB)
Ex-US Developed Stocks	Vanguard FTSE Developed Markets ETF (VEA)
Ex-US Emerging Markets Stocks	Vanguard FTSE Emerging Markets ETF (VWO)
Real Estate Investment Trusts (REITs)	Schwab US REIT ETF (SCHH)
Natural Resources	SPDR® S&P® Global Natural Resources ETF (GNR)
Commodities	Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PBDC)
U.S. Bonds	Vanguard Total Bond Market ETF(BND)
Treasury Inflation-Protected Bonds (TIPS)	Schwab U.S. TIPS ETF (SCHP)
International Bonds	Vanguard Total International Bond ETF (BNDX)
Cash	SPDR Bloomberg 1-3 Month T-Bill ETF(BIL)

If you’re interested in creating the 7Twelve Portfolio for yourself, you can either use the funds listed in the table above or substitute comparable funds you believe will perform better.

Where to Create a 7Twelve Portfolio

You can build a 7Twelve Portfolio using any major investment broker, since now nearly every one of them offers commission-free trading of ETFs.

The two most prominent broker choices are Charles Schwab and Fidelity. Not only do they offer a wide selection of funds, but they also have 24/7 customer service, and plenty of investor tools and resources.

Since the 7Twelve Portfolio is made up of low-cost, index-based ETFs, you can also create the portfolio through a fund family. Vanguard is a primary example, since many of the funds I used as an example of a 7Twelve Portfolio are Vanguard funds.

It’s easy to see why. Not only does Vanguard have most of the funds you need to create this portfolio, but their funds are commonly used by professional portfolio managers, including robo-advisors. They represent some of the best index funds in the industry, with some of the lowest expense ratios. If you prefer to create the 7Twelve Portfolio through a fund family, Vanguard is one of the top choices.

M1 Finance

Robo-advisors have been growing in popularity in recent years, due to the combination of completely automated investment management with very low advisory fees and minimum investment requirements. The only problem is the vast majority of robo-advisors create portfolios for you based on your risk tolerance, investment goals and time horizon. Very few will permit designing a custom portfolio, like the 7Twelve Portfolio.

But one prominent exception is M1 Finance. That’s because it’s one of the few robo-advisors that allows you to create your own portfolio. You can do that by creating mini portfolios, referred to as “pies”, and fill each with up to 100 individual stocks and ETFs. You can use a pie to create a 7Twelve Portfolio. You can then choose to create an unlimited number of additional pies within your account.

We've created the 7Twelve Portfolio in M1 that you can check out and use. You'll find it here. Note that for commodities we use the iShares Commodities Select Strategy ETF (COMT) fund based on availability on the M1 platform.

M1 Finance charges no commissions for the stocks and ETFs you select for your pies. And once you create a pie, M1 Finance will provide full automated portfolio management – including periodic rebalancing – with no annual advisory fee.

Historical Returns of the 7Twelve Portfolio

Generally speaking, the success or failure of any investment strategy is determined by its historic performance. By that measure, the 7Twelve Portfolio has been a mixed bag. While it has produced positive returns in the 15-year timeframe from 2007 through 2022, it hasn’t performed as well as other, more popular portfolios.

We’ll cover that comparison in the next section. In the meantime, let’s look at the performance of the 7Twelve Portfolio by itself.

(Once again, all screenshots are courtesy of the Portfolio Visualizer.)

The performance results of the portfolio from 2007 through 2022 are as follows:

Just as has been the case with nearly every portfolio model, the one-year, year-to-date and three-month results have been negative. But the longer term results have been consistently positive, though generally unimpressive.

7Twelve Portfolio vs. 60/40 Portfolio vs. Three Fund Portfolio

Quite honestly, this is where the 7Twelve Portfolio – as brilliant as it may sound in concept – loses its luster. Comparing its performance against other popular investment portfolio models, the 7Twelve Portfolio comes up short on a consistent basis.

We’ve done a head-to-head comparison between the 7Twelve Portfolio, the traditional 60/40 portfolio, and the Three Fund Portfolio.

The 60/40 portfolio employs a simple strategy of investing 60% of your portfolio in stocks and 40% in bonds and cash. The portfolio allocation in this model looks like this:

The Three Fund Portfolio is a simpler version of the 7Twelve Portfolio. And perhaps not surprisingly, it’s had a better long-term performance – you have to love the power of simplicity!

The portfolio allocation in the Three Fund Portfolio is as follows:

Between the 7Twelve Portfolio, the 60/40 portfolio and the Three Fund Portfolio, what do the investment returns look like?

Once again, I’ve used Portfolio Visualizer to produce the screenshots. They cover the timeframe from 2007 to 2022.

The 7Twelve Portfolio has underperformed both the other portfolios over both 10 years and the full 15 years. And while it continued to underperform the 60/40 portfolio for three years and five years, it outperformed the Three Fund Portfolio over both time frames.

If you’re wondering what those percentages translate to in dollars, the results of investing $10,000 in each of the three portfolios from 2007 through the end of October, 2022, look like this:

7Twelve Portfolio: $18,803
60/40 Portfolio: $27,568
Three Fund Portfolio: $ 21,002

And if you prefer a graphic illustration:

When the 7Twelve Portfolio Might Outperform Other Portfolios

The ray of sunshine in the performance comparison above is clearly in the year-to-date and one-year performances. Though all three portfolios have lost money in the past year, the 7Twelve Portfolio has lost a little bit less. Put another way, the 7Twelve Portfolio has outperformed the other two portfolios over the past year.

If the 7Twelve Portfolio has a virtue, it’s that a greater level of diversification provides greater risk reduction during years when the stock market is down – which is exactly what its founder claimed it would do.

It’s also worth noting that at least since 2009, large-cap stocks – as evidenced by the S&P 500 index – have outperformed nearly every other market sector. Since both the 60/40 portfolio and the Three Fund Portfolio have greater allocations in large-cap stocks, they can naturally be expected to outperform the 7Twelve Portfolio in such an environment.

But I do have to caution that the “better” – or less bad – performance of the 7Twelve Portfolio is only over the past year. And that performance is better by only about one percentage point.

That better performance during 2022 may not be enough evidence to prove the greater diversification of the 7Twelve Portfolio will produce better results in down years.

7Twelve Portfolio Pros & Cons

Pros:

The portfolio includes most of the major asset classes in the known investment universe.
Diversification across 12 different investment sectors provides an opportunity to profit if any one sector dramatically outperforms the general market (think of the energy sector in 2022).
There is limited evidence that the 7Twelve Portfolio may outperform other portfolio models during stock market declines.
Equal weight distribution of the portfolio creates greater diversification and balance than typical portfolios and index funds, which commonly rely on market weight allocations.

Cons:

The 7Twelve Portfolio has underperformed simpler options like the 60/40 and the Three Fund Portfolio over the longer term.
This is a relatively complex portfolio, requiring a minimum of 12 funds. That kind of security allocation belies the whole reason investors turn to index funds in the first place.
The portfolio can be difficult to manage, especially if you’re doing it manually. You would need to rebalance periodically, which will be cumbersome with a dozen funds.
The small allocation in each sector may greatly limit profit potential even if that sector seriously increases.

Who Should Consider the 7Twelve Portfolio?

I’m not sure we can say the 7Twelve Portfolio has proven to be a game-changer in the investment world. Though it does show some potential to outperform other portfolios during years of declining stock and bond markets, that outperformance is only slight. More importantly, it's insufficient to overcome the greater level of underperformance during the long term.

ProjectionLab Review – Financial Planning Software

November 28, 2022 by Rob Berger

ProjectionLab is a financial simulator that will help you work out the mechanics of financial planning. It enables you to enter your current financial profile and future projections, then determine when you’ll reach your goals. But it does more than that. It allows you to change inputs and assumptions to account for contingencies and changes in life.

On balance, ProjectionLab is an excellent tool to help you reach your financial independence or retirement goal.

Since space is limited, and this product has so many different moving parts, I’m going to do this review in something more like a summary fashion. If you’d like a more detailed analysis of the ProjectionLab service, you can check out this YouTube video, ProjectionLab Review | Financial Planning Software.

ProjectionLab QuickTake

Crunches the numbers to help you reach retirement or financial independence
Flexible platform that enables you to run virtually unlimited scenarios
Accounts for the life variables that can have a material effect on your retirement plans
Focuses on both the accumulation and withdrawal of wealth in pursuing your financial goals
Realistic simulations and variables based on real world assumptions

About ProjectionLab

ProjectionLab is a financial planning simulator designed to help you analyze and project your ability to reach financial independence or retirement. It was designed to help you simulate your financial future and run various scenarios to understand the best way to reach your goals.

ProjectionLab was founded by creator Kyle Nolan, under ProjectionLab LLC, based in Boston. The service was initially rolled out in April, 2021, and is admittedly something of a work-in-progress. But Kyle has continued to improve and update the product, both to incorporate a wider range of information and to improve the user experience.

Because ProjectionLab is new and still being developed, no third-party information is available. The company has not been rated by the Better Business Bureau or Trustpilot, and since no mobile app is yet available, there are no user ratings from either Google Play or The App Store.

But even in the absence of third-party information and ratings, my own experience shows this service to be one well worth investigating. It provides comprehensive and useful strategies and projections to help you reach your future financial goals.

Customer service is available by email only, at [email protected]

ProjectionLab Review

How ProjectionLab Works

Setup

If you want to sample ProjectionLab, you can simply click the “Try for Free” link in the text just above the three Pricing & Subscriptions section on the main page of the website. You’ll be given a choice of either a Normal Walkthrough or Sandbox Mode. Normal Walkthrough is the more detailed of the two, enabling you to fill in your own data as part of the tour.

After you click the Continue button, you’ll be brought to the Setup screen, where you’ll enter basic information:

The next screen will ask you the question “Which of these do you have today?” The choices will be savings, investments, real assets, and debt. You can choose whichever apply to your financial situation.

On subsequent screens, you’ll be asked to fill in balances for each of the four categories. You can add multiple accounts within each category.

The investment screen will provide multiple boxes to check that will include taxable investments, various retirement plans, health savings accounts, 529 plans, and even cryptocurrencies. You can click and complete the information for any and all investment accounts that apply to your situation. Note that if you list any accounts as joint, the funds will be divided 50/50 between you and your spouse.

After completing the various financial account inputs, you’ll be brought to the Dashboard page. There you’ll find all the information you’ve entered so far.

Add Plan

Notice at the bottom left-hand side you see the Add Plan box? If you click that, you can begin adding your long-term financial plan. But don’t forget to name your plan in case you want to create more than one (which is exactly what I didn’t do since I’m only doing one plan).

ProjectionLab will ask you to input a plan start date, and then to “set up a few milestones”. That’s when you’ll begin entering the ages at which you expect to retire, the end of plan (your anticipated date of death), and how large your portfolio will need to be to reach financial independence.

The latter is determined by a number multiplied times your expected monthly expenses. In the screenshot, 25 is automatically assumed. This is because multiplying 25 times your expected annual expenses will result in what’s commonly referred to as the 4% safe withdrawal rate. And if you look just below that line, there’s also the capability to add additional milestones.

This is the point at which you are defining the parameters in your journey toward financial independence or retirement. And of course, you can always go in and change the dates later.

In this case, we’re expecting retirement at age 60, and living to age 85.

The next input screen asks you to input the anticipated growth rate of your investments, the expected dividend yield, and anticipated rate of inflation. The screen automatically populates, and I believe the numbers presented are fairly accurate. But you can change them if you like or shift over to actual historical market performance.

Investment, Dividend and Inflation Rates

Notice that some of the input lines have an i next to them. By clicking that icon you’ll get detailed information on how the numbers are calculated.

Income

On the next screen, you’ll enter income. 10 different options are provided, and you can check each that apply.

I’ve entered salary, a side hustle, and for retirement, pension income and Social Security. Notice that not only does each contain the expected income, but also the start date and end date. This recognizes for example, that salary will continue from now until retirement, when pension and Social Security will take over. Side hustle is expected to continue for life.

Next is the all-important input screen, Cash-Flow Priorities. This is where you’ll enter specific spending priorities, like adding to specific asset accounts for paying extra for the payoff of debts. In this case, I’ve chosen to add an additional $200 per month to be paid toward the student loan.

Expenses

The next screen is entitled Expenses, and this is where you list some variable expenses. There’s a long list here:

Conspicuously absent from the list is your mortgage. That’s because it’s included when you enter your house as an asset and will already be reflected in your expenses. You can add any other expenses that apply.

You’ll then come to a Real Assets screen, that will enable you to add future purchases. These include another house, a motorcycle, furniture, a car, a boat, or precious metals, among others. You can add any that apply, and ProjectionLab will calculate those into your financial future.

Income Taxes

You’ll be presented with a screen that will give you a predetermined income tax and capital gains tax rates. You can accept those or make changes to percentages that more accurately reflect your tax situation.

Output

With all the above entered, we come to an output screen that’s set up as a graph. Based on the input we’ve provided, it shows we’ll reach $1,248,887 in net worth by retirement at age 60. That number will approximately remain constant until the end of life, which means we are not in danger of outliving our money.

Now, those are just the results from setting up a single plan. Not only can you change the input and assumptions and come up with new simulations, but you can also develop additional plans, and compare them. That will give you an opportunity to choose which strategy will work best for you.

Advanced Options

On the top bar of the Dashboard is the Advanced tab. If you click on that, several options will display that will include Monte Carlo Simulation, Withdrawal Strategy, Cash Flow, Compare, and Notes.

The Monte Carlo Simulation is particularly interesting, because it allows you to do up to 94 simulations, each with different input assumptions. It then provides the rate of success in each scenario. For example, it may show an 89.4 % likelihood a simulated plan will be successful, meaning you won’t run out of money before the end of your life.

This is one of the features of ProjectionLab I find to be most attractive. It gives an opportunity to evaluate the viability of any strategy you run for the simulation, reducing it to a single percentage that makes it easy to compare with other simulations.

Also interesting is the Withdrawal Strategy. You can establish a distribution order outlining which accounts you will begin drawing funds from first. For example, you can set up a hierarchy that includes cash-on-hand first, followed by savings, cryptocurrencies, taxable investments, then finally retirement plans.

PROS

Helps project & prepare for financial independence or retirement
Flexible platform to accommodate multiple scenarios
Flexible low-cost plans + free version
No ads, no calls and no selling of your data

CONS

New service still working out the bugs
Customer support by email only
Tax analysis limited

ProjectionLab Plan Pricing & Sign Up

Plan Pricing

ProjectionLab offers three different plans, Basic, Premium and Pro. There are as many as three pricing levels for each plan. If you pay the subscription fee annually, the monthly cost works out as follows:

You can also choose a straight up monthly payment plan. For the Premium plan, the monthly fee will be $12, and $60 for the Pro plan. Be aware that the Pro plan is designed for financial advisors and coaches, who will use it for multiple client profiles. If you are only going to use ProjectionLab for your own purposes, you can use either Basic or Premium.

It’s important to understand the Basic plan will enable you to create simulations, but it does not save data. You’ll need to sign up for the Premium plan to save data, which makes it a logical choice between the three plans offered.

Note also that both paid versions come with a 7-day trial to give you an opportunity to try out the product. If you cancel your subscription at any time within the first seven days, your credit card on file will not be charged.

The third option is available only on the Premium plan. For a one-time payment of $450, you’ll have lifetime access to the service for your own personal use. (The lifetime payment option is not available for the Pro plan.)

Sign Up

If you want to sign up with ProjectionLab you can do so directly from the website by clicking the Start Now or Start Trial buttons under one of the three plans. Once you do, you’ll be asked to create an account, which you can do either by signing up with Google or with Email.

I went for the monthly Premium plan with Google, and it requested my Google email address. Next, I was asked to supply my ZIP Code.

In the very next screen, I was asked to indicate adding a credit card or PayPal, so it’s clear you’ll need to add a payment method to get the 7-day free trial.

Signing up for the actual service will give you the best and longest free look at the service. If you’re not satisfied, you can cancel your order within seven days and your card will not be charged.

ProjectionLab Alternative

Empower is a wealth management service that also offers a free financial aggregator, where you can connect all your financial accounts in one place. And while it doesn’t provide the depth of financial simulations that ProjectionLab does, it does offer its Portfolio and New Worth trackers, as well as Retirement Planner and a Retirement Savings Planner to help you reach your long-term financial goals. Again, the platform is free to use, and you’ll pay only for the Wealth Management service if you choose to take advantage of it.

Final Thoughts

ProjectionLab is an excellent service to help you if your goal is retirement, early retirement, or financial independence. And since the cost is no more than $96 per year for the Premium version, it won’t take a big bite out of the funds you’re trying to save to help you reach your goal.

ProjectionLab is fairly numbers-intensive, and best designed for those who like to crunch a lot of numbers when it comes to finance. If this doesn’t describe you, the service may be a bit overwhelming, and you may be better served using the free version of Empower as an alternative.

ProjectionLab Review Rating

ProjectionLab

Kevin Mercadante

Ease of Use

Cost

Customer Support

Functionality

User Interface

Summary

Financial planning simulator to assist you with planning for financial independence or retirement.Free Basic version, $8/month for the Premium plan, $40/month for the Pro plan.

4.3

Series I Savings Bond Rates Now Stand at 6.89% (Updated November 2022)

November 10, 2022 by Rob Berger

Series I Savings Bonds rates fell from historic levels this month. The Labor Department released Consumer Price Index (CPI-U) data last month that showed prices rising by 8.2% for the 12 months ending Marcy 2022 and 2.34% over the past six months. As a result, the Inflation Rate on I Bonds fell to 6.48 in November 2022 (the rate was 9.62% annualized). While a significant drop, it still represents one of the best rates you can find on any risk-free investment. And, Treasury announced a Fixed Rate on I Bonds of 0.40%.

How I Bond Rates Are Set

Two factors determine the interest rate on an I bond: A Fixed Rate and an Inflation Rate. Combining these two rates gives us what is known as the Composite Rate.

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Fixed Rate

The Fixed Rate is set based on the date of purchase. Today the Fixed Rate is 0.40%. The Fixed Rate was above 3% in the late 1990s and early 2000s. It's been at 0% for much of the past decade until now.

The Treasury announces the Fixed Rate on I bonds every six months, on the first business day of May and November. The Fixed Rate is an annual rate that compounds every six months. The big question is whether the Treasury will increase the fixed rate more next year.

Inflation Rate

Unlike the Fixed Rate, the Inflation Rate changes every six months over the life of an I bond. The rate is set based on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy. As with the Fixed Rate, the Inflation Rate is set on the first business day in May and November.

Keep in mind that the date new rates apply to a specific I bond depends on the month in which you bought it. Here's a table of when new rates will take effect:

Issue month of your bond	New rates take effect
January	January 1 and July 1
February	February 1 and August 1
March	March 1 and September 1
April	April 1 and October 1
May	May 1 and November 1
June	June 1 and December 1
July	July 1 and January 1
August	August 1 and February 1
September	September 1 and March 1
October	October 1 and April 1
November	November 1 and May 1
December	December 1 and June 1

Composite Rate

The Composite Rate is the annualized rate based on adding the Fixed Rate to the Inflation Rate. Through April 2023, Composite Rate is 6.89%.

How I Bonds Work

There are several features of I bonds to keep in mind before investing.

First, you can only buy I bonds directly from the Treasury. They are not bought and sold on the secondary market. This means, among other things, that you won't find I bonds in an ETF or mutual fund portfolio.

Second, the government imposes a limit on the amount of money that you can invest in I bonds each year. You can invest $10,000 a year per social security number through Treasury Direct. You can also purchase up to $5,000 through your federal tax refund.

Third, you must keep your investment in an I bond for at least one year. You can't sell the bond back to the government during this time. If you sell before holding the bond for five years, you also lose three months of interest.

Fourth, if you own a business, the business entity can also invest in I bonds. This is something I just learned. My business will be buying $10,000 in I bonds this month.

Finally, you can defer paying income tax on interest until you sell the bond. In addition, you'll owe no state income tax.

I Bonds vs CDs

Given the current and upcoming yields on I bonds, they are significantly better than even the best CD rates. That's true even if one plans to sell the I bond after one year and incur the 3-month interest penalty. The key difference is that with I bonds, you cannot liquidate for the first year. With a CD, you can always withdraw your money, subject to an interest penalty.

I use Personal Capital to track all of my investments. The free tool shows me my asset allocation, total costs, and even retirement projections. Check out my Personal Capital Review and User’s Guide to learn how it can help you, too.

I Bond Resources

Treasury Direct: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm
TIPS Watch: https://tipswatch.com/tracking-inflation-and-i-bonds/
Deposit Accounts: https://www.depositaccounts.com/blog/inflation-treasury-series-i-savings-bonds/

7 Best Short-Term Investments to Save Money (2023)

August 1, 2022 by Rob Berger

There are a lot of good reasons to hold cash. An emergency fund is a must. Then there's saving for a home or vacation. Whatever the reason, the big question is where are the best short-term investments to park your money.

With the rise in inflation, savings rates have risen, too. Here are 7 of the top short-term investments for your money.

Best Short-Term Investments for Saving Cash

1. No-Penalty CD

This has been my choice lately. As the name suggests, a no-penalty CD doesn't charge a penalty for early withdrawal. You get the higher yields of CDs with the flexibility to pull your money out at any time.

Typically you pay for this no-penalty feature with a slightly lower APY. Right now, however, Sallie Mae is offering a 14-month no-penalty CD that pays 4.40% APY. This offer is only available through a service called SaveBetter. It's the best deal I've been able to find, and I'm moving my cash to this account now.

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2. U.S. Government Treasury Bills

Treasury bills are U.S. government bonds that mature in one year or less. The government issues them in terms of 4, 8, 13, 26, and 52 weeks. They are zero coupon bonds. You buy them for less than face value, and receive the face value when the bond matures. The difference represents your interest.

You can buy Treasury bills via Treasury Direct, but I wouldn't recommend it. The website is a mess. A better approach is to buy them through your broker of choice. Fidelity, Schwab and Vanguard are all reasonable options.

Current yields range from about 4% to nearly 5%. These yields change daily, so be sure to check out current yields here.

3. High-Yield Savings Account

For those who want a straight up savings account, there are several today that pay north of 2.00% APY. The highest APY I can find on a savings account available nationwide without savings caps is My Banking Direct (4.35% APY). Let me know if you find a better offer.

4. High-Yield Money Market Account

When it comes to saving cash, there really is no difference between an FDIC-insured savings account and an FDIC-insured money market account. Sometimes, however, you'll find that one or the other pays a slightly better rate.

The best MMA rate I can find comes from the Redneck Bank (4.25%).

5. High-Yield Checking Account

If you want to keep your money in a checking account, there are some high-yield options. One of the best rates out there is from M1 Plus (3.30% APY). The rate applies to both the SoFi checking and savings account, but does require direct deposit to qualify.

6. Business Checking

For small business owners and freelancers that have a business, Bluevine is an excellent choice. Bluevine is very similar other neobanks except it's for small businesses. It pays 1.50% on balances up to $100,000. There is no interest earned on balances over 100,000.

7. Fitness Bank

The last one on our list is called Fitness Bank. They tie the interest rate you can earn by how many steps you walk each day. Seriously. They pay up to 4.10% APY. You have to average 12,500 steps a day to earn this rate and have both a checking and savings account (4.00% with just a savings account). If you get at least 10,000, you can earn up to 1.25%. Even if you sit in a barcalounger all day you'll earn 0.50% APR

If you're a senior citizen at least 65 years of age they cut you a break. You get the top rate at 10,000 steps. You do have to download their app and wear an approved fitness tracker, which include Garmin, Fitbit, Google Fit and Apple Health.

Bonus Tip

If you can wait at least 12 months before accessing the money, I Bonds are the best risk-adjusted return you can get today.

A List of Low Cost Financial Advisors (Say NO to 1% Advisors)

March 29, 2022 by Rob Berger

Investment advisors charging one percent of the investments they manage for you is the industry norm. Many charge more than that.

Not sure how fees may affect your wealth over time, then check out this report.

In an effort keep more of your money in your pocket, I've created this list of low cost financial advisors. It includes both flat-fee advisors as well as those who charge 50 basis points (1/2%) or less.

Please understand that I am not recommending these advisors. You'll need to do your own due diligence to determine whether they are a good fit for your financial needs and goals.

Mark Zoril

Fees: $239 the first year, then $8/month
Services: Financial planning, investment management
Website: https://planvisionmn.com/

Rick Ferri

Fees: $450/hour
Services: Hourly advice for DIY investors
Website: https://rickferri.com/

Jack Zarinsky

Fees: Charges a one upfront flat fee and annual flat fee (details here)
Services: Financial planning, investment management and tax preparation
Website: https://mysafebridge.com/

Asset Builder

Fees: 0.35% (on average)
Services: Investment management using DFA funds
Website: https://assetbuilder.com/

Vanguard Advisor Services

Website
Fee: 0.30% ($50,000 minumum)
Services: Financial planning, investment management

Andrew Dressel, CFP®, APMA®, CRPC®

Abundo Wealth
Fee: $375-$450 start-up fee, then $89-$139/month
Services: Financial planning

Michael T. Powers, CPA, PFS, CFP®

Manuka Financial
Fee: $950 initial fee + an ongoing flat fee of $1,250 – $6,250 per quarter
Services: Retirement planning, investment management, tax preparation

Jon Luskin, CFP

Website
Fee: For a one-time financial review, you pay a one-time fee: $1,725. Additional in-depth work (many clients don’t need this) and returning clients are billed at $350 an hour.
Services: Hourly advice for DIY investors.

Lorne Abramson, CFA, CFP®, EA

Website

Fee: Flat fee based on services provided
Services: Financial review, Comprehensive retirement plan, hourly consultation

Here's a list of flat-fee planners put together by Cody Garrett, CFP.

Here's a list of flat-fee and advisors put together by Sara Grillo.

If you know of other advisors who should make this list, please let me know.

3 Best Robo-Advisors in 2023 (Out of 23 Evaluated)

March 22, 2022 by Rob Berger

Robo-Advisors promise to make investing easy at a very low cost. Investors have taken notice. According to one estimate, automated investing platforms will manage nearly $1.5 trillion by 2023. With dozens of options, however, picking the best robo-advisor can be overwhelming.

To help, I examined about two dozen robos and narrowed them down to what I think are the top three choices. Note that I have used all three robo advisors that made this list. I continue to test other services and will update this list in the future.

Best Robo-Advisors

Betterment–Best Overall Robo-Advisor

I've helped family members and friends set up their first investment account. After explaining the pros and cons of traditional brokers and robo-advisors, they have all chosen Betterment. There are several reasons why Betterment is such a popular choice.

Ease of Use: With Betterment, you select your account type, answer a few questions about your goals, and fund your account (check or bank transfer). From there, Betterment does the rest. It invests your money in a several low cost ETFs that give you a diversified portfolio of stocks and bonds.

In addition to the core portfolios above, it also offers several socially responsible investing portfolios.

Betterment Socially Responsibly Portfolios

Account Types: Betterment offers a wide range of account types, including:

Roth and Traditional IRA
SEP IRA (single participant only)
Inherited IRA
Individual taxable accounts
Joint taxable accounts with rights of survivorship
Trust accounts

Beyond investment accounts, it also offers deposit accounts:

Cash Reserve (a high-yield cash account)
Checking account provided by nbkc bank, Member FDIC.

Features: Apart from its easy of use, Betterment's long list of features earn it the top spot as the best robo-advisor:

Rebalancing: Automatically rebalances your investment accounts.
Automated Investing: Set up recurring deposits to your account and automatically reinvest dividends and interest.
Tax Tools: Betterment offers several features to reduce your taxes, including tax loss harvesting, tax efficient rebalancing, and asset location.
Planning: Track any number of financial goals, including retirement or saving for a child's education.
Financial Dashboard: See all of your finances in one place, including assets held at other financial institutions.
Advisor Help: Unlike most robo-advisors, Betterment has Certified Financial Planners available to help you.

Low Fees: Betterment offers three fee levels:

No Fee: You can open a no-fee checking account (comes with a free Visa debit card) or a Cash Reserve account.
0.25%: Digital investing with no minimum balance (comes to about $2.50 a year for every $1,000 invested).
0.40%: Premium investing that includes unlimited calls and emails with Betterment's team of CFPs (requires a $100,000 minimum balance).

Finally, Betterment is ideal for every stage of an investor's journey. It's easy to open up your first account, with no minimum requirements. And betterment offers a wealth of tools for those entering retirement who need to start withdrawing money to live on.

Try Betterment

M1 Finance–Best No-Fee Robo with Ultimate Flexibility

For those that want the automation of a robo-advisor, no fees, and complete control of your investment strategy, M1 Finance is without question the top choice. It blends the benefits of traditional brokers with the automation of robo-advisors.

M1 enables investors to create what they call Pies. Each pie can hold individual stocks, ETFs or both. For each investment you add to a Pie, you also indicate how big each slice is. For example, you could create a Pie with the following investments:

VTI (50%): Vanguard's Total U.S. Stock Market ETF
VXUS (30%): Vanguard's Total International Stock Market ETF
BND (20%): Vanguards Total U.S. Bond ETF

The above is what is called the three fund portfolio.

Where M1 really stands out is how easy it makes investing in the Pies of your choice. Using the three fund portfolio above as an example, M1 will automatically allocate your investments based on the percentages you set.

As markets cause your balances in each ETF to vary from your plan, M1 takes any new contributions and investments as necessary to bring your investment Pie back in line with your plan. And if your contributions aren't sufficient, you can rebalance a pie with the click of a button.

In addition to investing, M1 offers a high-yield checking account and an excellent cash back credit card.

Try M1 Finance

Wealthfront

Finally, Wealthfront rounds out my list of the best robo-advisors. Similar to Betterment, it provides a wealth of investing automation for a fee of just 25 basis points. Its list of features is similar to Betterment, with some notable differences.

Before getting those features and differences, however, it's important to point out that Wealthfront announced in January 2022 that it had agreed to be acquired by UBS. How this will affect Wealthfront is unclear.

Wealthfront offers a Classic, Socially Responsible and Direct Indexing approach to investing. With a Classic portfolio, you get diversification across U.S. stocks, international stocks, and bonds. You can also chose among socially responsible ETFs.

Unlike Betterment, Wealthfront also offers what is called direct indexing for accounts with at least $100,000. With direct indexing, Wealthfront invests in 100 to 600 stocks, rather than a total U.S. stock ETF such as VTI. The idea is to get the returns of an index, but with tax loss harvesting and asset location flexibility.

On the negative side, Wealthfront does not offer the help of a CFP, as Betterment does.

Try Wealthfront

Why Vanguard Digital Advisor Didn't Make the Cut

At first glance, Vanguard Digital Advisor checks all the boxes. It offers automated investing using Vanguard ETFs. Generally Vanguard uses four ETFs to implement its investment strategy on your behalf:

VTI: Total U.S. Stock Market
VXUS: Total International Stock Market
BND: Total U.S. Bond Market
BNDX: Total International Bond Market

Vanguard automatically rebalances the portfolio periodically to keep the portfolio in line with your investment goals. In addition to investing, Digital Advisor can also help you achieve other goals, such as getting out of debt.

And if all that weren't enough, the cost is about 0.15%, which includes the cost of the underlying ETFs.

So why doesn't it make the cut?

Well, it wasn't until I used the service that I experienced its many shortcomings.

First, there have been a number of technology issues. Do you see the pretty graph in the image above showing the investor's progress? Here's what mine looks like:

Vanguard tells me they are working on it.

For a week I couldn't even enroll in the service. I kept getting this message:

Problems enrolling in Vanguard Digital Advisor

These issues may be temporary, but it gets worse.

Unlike other robo-advisors, you are limited to just five initial asset allocations. Once selected, you are limited in the changes you can make to the asset allocation. And, similar to a target date retirement fund, Vanguard will change your asset allocation as you near your retirement goal.

What's more, you can't tell Vanguard to leave your asset allocation alone. It changes whether you like it or not. The result is that Digital Advisor is not well suited for taxable accounts.

And even if you want to use the service in an IRA, you'd be better off with a Vanguard Target Date Fund. These funds use the same funds and cost just 8 basis points. Why pay 15 basis points for effectively the same thing. (A Vanguard rep told me that one can customize the glidepath with Digital Advisor a bit more than with a TDR fund, but the differences seem minimal at best).

In short, Vanguard's Digital Advisor fails to make the grade.

The True Cost of “Free” Robo Advisors

There are two “free” robo-advisors that did not make my list of the top four–SoFi and Schwab Intelligent Portfolios. In both cases it's because they have “hidden” fees. Let me explain.

SoFi

SoFi is best known for its student loan business. Several years ago it began to broaden its financial services offerings, including SoFi Automated Investing. While it doesn't charge a management fee, they get their money another way. Let me explain.

Here's the portfolio that SoFi suggests for me (I assumed a $1 million contribution, but the amount isn't important):

When you click in the View details link, here are the specific funds SoFi uses:

Notice that the selected funds include two SoFi ETFs. That's how SoFi makes its money. And those funds are expensive and not what you might think they are.

For example, the SoFI Select 500 ETF is NOT an S&P 500 index fund. It doesn't track that index, instead tracking something called the Solactive SoFi US 500 Growth Index. And it costs 19 basis points each year. While not outrageous, solid S&P 500 index funds typically cost less than 5 basis points.

Does this make SoFi a “bad” robo-advisor. I wouldn't go that far. But its pricing isn't as transparent as it should be in my opinion, and I have no interest in tracking a SoFi index with my investments. For these reasons, it didn't make the list of the best robos.

Schwab Intelligent Portfolios

Schwab entered the robo-advisor market with its Intelligent Portfolios. Like SoFi, there are no management fees charged by Schwab. Investors just pay the fees of the underlying ETFs. Unlike SoFi, Schwab doesn't force you to invest in ETFs that track a proprietary index.

So what's the problem?

Schwab forces you to keep at least 6% of your portfolio in cash. And that's how Schwab makes its money. The amount of cash you must keep goes up as your portfolio becomes more conservative.

For example, a Moderate Growth portfolio requires 9% in cash:

I would much prefer for Schwab just to charge a management fee rather than requiring a significant cash position. At least then the costs would be transparent.

Methodology

My first step in creating this list was to identify a complete list of automated investing platforms. In addition to those listed above, I considered the following:

Etrade Core Portfolios: https://us.etrade.com/what-we-offer/our-accounts/core-portfolios
Axos Managed Portfolios: https://www.axos.com/invest
Acorns
Fidelity Go: https://www.fidelity.com/managed-accounts/fidelity-go/overview
Morgan Stanley Access Investing: https://www.morganstanley.com/what-we-do/wealth-management/access-investing/my-goals
Merrill Edge Guided Investing: ttps://www.merrilledge.com/guided-investing
Wells Fargo Intuitive Investor: https://www.wellsfargoadvisors.com/services/intuitive-investor/how-it-works.htm
Zacks Advantage: https://www.zacksadvantage.com/
UBS Advice Advantage: https://adviceadvantage.ubs.com/
FutureAdvisor (Blackrock): https://www.blackrock.com/futureadvisor
Stash: https://www.stash.com/smart-portfolio-investing
Ally Invest Robo Portfolios
SigFig
Ellevest
Interactive Advisors

I then considered the following factors:

Cost
Ease of Use
Account Types
Underlying ETFs used in portfolios
Additional features (particularly as it relates to planning and retirement)

Note that just because a robo-advisor didn't make the list of the best doesn't mean the service isn't worth considering. For example, Acorns is a solid option for those looking for a round-up app.

How to Choose the Best Robo-Advisor for Your Needs

Robo-Advisor	Best for
Betterment	Best overall robo-advisor
M1 Finance	Best free robo-advisor
Vanguard Digital Advisors	Best for Vanguard fans
Wealthfront	Best for large taxable accounts

Final Thoughts

Robo-advisors can simplify the process of investing for your future. Not all automated investing services are the same, however. It's important to understand how a service works, its fees, and its portfolio construction before investing.