Comment by workworkwork71 | Hacker News Reader

Comment by workworkwork71 | Hacker News Reader

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Great feedback!

I'd just argue that even the 0.8% from Schwab is $4,000 on their minimum of $500,000. Where I worked (high networth wealth management at large bank) we had a minimum of 1 million and the starter fee was 1.35% or 13,500 annually. Definitely not a crack pot scam advisor and the portfolio management we did was very similar to what we've built out on this app.

We're doing more advanced portfolio construction at the client level then what you're going to get from Schwab and it's $100 a year vs $4000. If the relationship aspect of the advisory channel is important to you, then totally valid and fair point. This platform is aimed at the middle-market of people who aren't financially able to meet those minimums but want a better service then just automated portfolios.

> Customization

Great point! We would just not consider risk appetite an actual customization. After you've selected your risk, you're placed/bucketed into one of five portfolios that they offer and manage themselves.

What we do is factor in the risk appetite of the user plus the goal itself (whether you have a date you want the funds for or the importance of the goal) and then model it against evolving capital market expectations featuring 30+ domestic & global asset classes, constructing the optimal ETF portfolio to meet your return requirement at the lowest risk possible.

> Investment strategies

Another good point that we need to make more clear. We are modeling these portfolios using an institutional model with a wide range of asset classes and a "glidepath" (target date) structure like the US retirement portfolios. This prioritizes capital accumulation at earlier stages and then de-risks the portfolio gradually to make sure you have the capital you need as you reach your goal. It's a dynamic portfolio that evolves over time.

> you're placed/bucketed into one of five portfolios that they offer and manage themselves.

this doesn't seem to be very different from what robo advisors do... where as they say, group you with the other people that have the same risk profile as you.

> What we do is factor in the risk appetite of the user plus the goal itself

I need some examples, b/c the goals you listed seem weird. Like trying to save $4k for a vacation, or car, seems like investing products aren't the right choice. You should keep that money cash in a HYSA and buy the thing when you have enough. If you're working with people with retirement funds, they probably would just cash out from their existing portfolio when they need to buy the expensive item.

> with a wide range of asset classes and a "glidepath" (target date) structure

I need to experiment more with the tools, but for high networth individuals with modest spending, glidepath models hurt long-term returns. For example, if someone invests $2,000/month for 45 years with a 9% real return, they could end up with $12.6M in an S&P 500 portfolio. At today’s 1.27% dividend yield, that’s $160K/year in passive income, which is enough to cover an 2x the average American lifestyle. So why shift away from an aggressive portfolio like the S&P 500 in retirement? If there is a big draw down in the market at the start of retirement, reducing the portfolio to $6.3m (half!), keeping 1 yr cash, reduce expenses by 20%, and as the market recovers you'd only pull out 1-5 years of money (2.5% per year - dividend payouts). Obviously, not ideal, but you're still not going be homeless at age 90.

1. None of our portfolios are static or bucketed. We run the model on each goal/portfolio and it produces the optimal portfolio for that set of circumstances (goal, time horizon, risk, expected return).

2. You're 100% right, goals like vacation & car are going to be variable depending on the users inputs when creating the goal. We have a confidence question in the goal creation, ie. "how important is this goal to you". If the user selects that they have to have it by their given date, the model is going to opt for money market funds and potentially a small allocation to a return generating asset. This goal would lean heavily on the users contributions and not returns.

On the flip side, if it's something like a vacation fund where you are okay with not having a strict deadline ("nice to have, not certain"), then the model will have access to more return generating assets to help the portfolio generate a return. This is more about financial planning then it is pure investing. You're 100% right, but the user controls their own fate there.

3. Again you are correct that historically, an all S&P500 portfolio will have out-performed a target date portfolio but who's doing that? What institution, advisor or robo would advocate that any client is 100% invested in US equities?

We're not targeting pure performance here, it's risk adjusted returns factoring in for large drawdowns. We can model a portfolio that returns the exact same average 30-yr trailing return as the S&P500 at half the expected volatility (not really a brag, that's what robos and portfolio managers are trying to do as well).

If you're the type of person who can handle the volatility of investing in a 1 ETF portfolio then the product here isn't for you. I'd just recommend that you go and check the capital market expectations for the S&P500 over the next 10-25 years because it's actually trailing behind other global equities.

Blackrock has the following CMAs:

Ex-US equities

5 yr : 9.0% 10 yr: 8.6% 20 yr: 8.0% vol: 16.9%

US equities

5 yr: 6.2% 10 yr: 6.7% 20 yr: 7.4% vol: 18.4%

Forward looking estimates of course, but you can see my point. You're not even getting the optimal 1 ETF portfolio by simply buying SP500.

Can you give an example? I feel like you didn’t answer any of their questions and I am genuinely curious about what these things mean. “Institutional model”? what does customization mean beyond time and risk?

It’s sounding like you you have a bucket of etfs that you call risky (Russel 2000, emerging market) and things that you call safe (bonds, debt, large cap) and depending on my time horizon and risk I start with a certain portfolio and you systematically roll into more “safe” based on my time horizon?

For sure! Let's take a pension fund as an example. When asset managers are looking at getting the returns to meet future obligations they are not simply looking at a simple formula of risk-adjusted returns. What they're actually doing is combining factors such as liquidity, time-horizon, hedging across multiple countries, geographies and (most importantly) asset classes. All of that is to say that they need to be sure that on date "X" they are able to meet forecasted obligation "Y".

That's the approach we've taken here. Pooling capital market expectations for 30+ global asset classes and taking into consideration the risk basis, time horizon, the financial goal (ie. is this a general wealth building portfolio or your retirement fund) and then yes, creating rules & heuristics around the type of asset classes that are appropriate for that unique situation. Then as the portfolio ages and your "path" matures (we use a glidepath structure to maintain a volatility cap over the lifetime of the portfolio), the portfolio dynamically adjusts the risk downwards and into a less volatile portfolio that favors capital preservation over accumulation.

All that is done through publicly traded ETFs that represent the asset classes but it's more granular then the way you typed it out. Rather then just being "large cap" it would be "US Large Cap", "ex-US Large Cap", "European Large Cap", "APAC Large Cap", etc. It's not just about risk though, with the most obvious modern example being crypto. Most advisors in 2025 are saying 2.5-5% of a portfolio can go into the asset class but does that make sense if you're investing for a down payment on a house in 5 years? You're going to want higher returning assets that are less volatile like infrastructure equity or private credit (same return profile, less volatile).

The net result is far greater risk adjusted returns and likelihood of actually achieving your financial goals because you've built your overall portfolio piece by piece with the goals as the building blocks.

Thanks!

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