I recently spoke with a friend who was promoting Wealthfront as an easy way of investing for those who do not necessarily want to create their own portfolios. Much of it is automated and it sounded as though the customer just picks a risk tolerance, and the program does the rest. I read into it, and the company appears to make much of its gains from leveraging bonds, so while the expected return may not beat the market, its variance is lower, too. My main concern for him, however, is that for the returns to be maintained in today's bond market, the firm may need to start leveraging junk bonds (or at least lower ratings), which seems dangerous. Personally I didn't like the idea, but what do you think?
It is one of the robo-advisors. They are also available from Fido Go, Schwab SIP, Vanguard PAS, etc. Many have apps. Favorite of younger generation. Better than doing nothing.
My way of thinking is that I do not see any near term future in bonds. If I were young (which I am not), I would look into dividend yielding, indexing, ETF's etc. as a form of robo investing where time is a good friend, now my worst enemy. I think that central banks have figured out that if they keep interest rates lower than inflation and/or the CPI, this becomes a cheap way to pay off debt. Interest rates will not provide a good retirement, go else where.
He's around 30, so I suggested looking more into basic indexes/ETFs. It's easy, and he has little to no sequence-of-returns risk. His argument was that he is more risk-averse than the average investor, but relying on a bond-based robo advisor hardly seems like a good idea with rates so low across the board. Since the yield gap between BBB corporate and US treasuries is so much larger now, what if the algorithm sacrifices bond quality to satisfy a return quota? ...just something that worried me