E*TRADE Core Portfolios Review 2023: Automated Investing

E*TRADE Core Portfolios is a robo-advisor offered by E*TRADE. It automates investing and is cheaper than their other professionally-managed portfolio options but offers less personal assistance. 

The algorithm-based E*TRADE Core Portfolios relies heavily on low-cost exchange-traded funds (ETFs). It’s great for hands-off and retirement investors who can start investing in an efficient digital portfolio with just a couple hundred dollars seed capital and a reasonable management fee.

This review will provide you with an in-depth look into how E*TRADE Core Portfolios works. We will look at account types, available features, pricing, pros and cons, and who should consider using Core Portfolios. 

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What Is E*TRADE Core Portfolios?

In 2016, E*TRADE started its first robo-advisory service called Adaptive Portfolios. However, the firm redesigned its robo-advisor in 2017 and relaunched it as E*TRADE Core Portfolios. Since then, Core Portfolios remains the entry-level offering for managed accounts and is fully integrated into the E*TRADE Personalized Investments offerings.

While E*TRADE is well-known for active trading for more than 30 years, hands-off investors will find many things to like about this investment solution that will help them reach their financial goals.

See Also: 12 Best Robo-Advisors: Automate Your Investments

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How Does E*TRADE Core Portfolios Work?

Opening an account is easy and investors can choose from various investment accounts. In line with your investor profile, the robo-advisor recommends a portfolio and lets you personalize it to a certain degree. From there, E*TRADE Core Portfolios monitors your portfolio daily and does all the investing and rebalancing, so you stay on track to reach your goals. Unfortunately, tax-optimized strategies like tax-loss harvesting are not enabled.

Investing Account Types

E*TRADE Core Portfolios offers multiple brokerage as well as retirement accounts to its investors. The most common types of accounts that are used for robo-advisors are included. These account types include: 

• Individual taxable brokerage account
• Joint taxable brokerage account
• Custodial brokerage account
• Traditional IRAs
• Roth IRAs
• SEP IRAs
• Rollover IRA

Opening an Account

E*TRADE Core Portfolios wants to be easy to use and its account opening process reflects that. Investors only have to go through four simple steps to open an E*TRADE Core Portfolios account.

In the first step, new clients must complete a thorough investor profile questionnaire. Like most robo-advisory services, E*TRADE asks you a series of short questions about you, your investment objectives, time frame, and risk attitude.

From your answers, the E*TRADE robo-advisor will recommend a portfolio that is diversified and fits your financial goals and profile. Steps two and three are reviewing the suggested portfolio and editing your investment details.

Overall, opening an account only a few minutes. After you complete the three steps we covered above, you will create an ID and fund your account.

See Also: 12 Best Roth IRA Accounts

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E*TRADE Core Portfolios Features

While the robo-advisor from E*TRADE doesn’t come with many bells and whistles like some competitors do, it has a solid offering. It is cost effective and offers a diversified portfolio mix and additional portfolio customization options. Existing E*TRADE customers will also like the optional integration of the Core Portfolios investment solution into the E*TRADE site.

Low Account Minimums

The E*TRADE Core Portfolios solution shines with a low account minimum of just $500. This number is lower than the multiple thousands of dollars most competitors require for using their robo-advisory service. Although some competitors don’t have an account minimum, $500 is on the lower end of the spectrum and attainable for many investors. Existing E*TRADE customers can also convert their accounts to Core Portfolios.

Low-Cost ETFs

The portfolios built by E*TRADE Core Portfolios are comprised of low-cost exchange-traded funds with expense ratios ranging between 0.06% and 0.12%. This range is considerably lower than the industry’s average expense ratios of around 0.50%. Exchange-traded funds with such low expense ratios are the perfect choice for long-term investors because more money goes all the way into the chosen assets and not to the index provider.

Portfolio Rebalancing

If you want to stay on track with your financial goals, always choose a robo-advisor that rebalances your portfolio periodically for you so your risk exposure remains consistent.

E*TRADE Core Portfolios automatically rebalances your portfolio twice per year or if your portfolio drifts off too far from the target allocation. To maintain your initial asset allocation, withdrawals and deposits will also be considered for rebalancing purposes. 

The robo-advisor monitors your account daily and if you withdraw cash from the portfolio, E*TRADE uses the portfolio’s cash portion to satisfy the client’s needs. In case the cash portion isn’t sufficient, Core Portfolios sells investments across all your assets.

Portfolio Mix

E*TRADE Core Portfolios uses your initial investor profile and financial goals to recommend a suitable portfolio. To build your portfolio, E*TRADE’S robo-advisor uses one of three categories: core, which is the default portfolio, smart beta, and socially responsible. These three categories incorporate slightly different exchange-traded funds and change your portfolio’s overall look.

The investment options used for portfolio creation are ETFs as well as bonds, and a portion is also held in cash. The cash allocation depends on how aggressively you want to invest with E*TRADE Core Portfolios. 

Stock ETFs consist of large caps, mid-caps, small caps, international markets, and emerging markets. The bonds selection includes Treasury Inflation-Protected Securities (TIPS), high-yield bonds, and municipal bonds alongside short-term and intermediate-term bonds. 

Core Portfolios (Smart Beta)

The smart beta feature is an option for personalizing your portfolio further. This approach is a more active portfolio strategy where E*TRADE Core Portfolios allocates a portion of your assets to a smart beta ETF.

A smart beta exchange-traded fund is a type of ETF that prefers assets with particular characteristics that can lead to higher returns over time. Factors that have worked well in the past are favored over other asset characteristics. By following this strategy, E*TRADE aims to enhance returns or minimize risk and tries to outperform benchmark indices.

The only downside is that a smart beta strategy might lead to higher portfolio turnover and higher transaction costs than investing in benchmark indices.

Core Portfolios (Socially Responsible)

The second option to personalize your portfolio is socially responsible investing (SRI). This option is perfect for investors who want their portfolios to align with their personal values.

When you choose SRI, E*TRADE includes ETFs in your portfolio that focus on companies following environmental, social, and governance (ESG) practices. Consequently, industries or companies that don’t meet specific ESG criteria will be excluded from the portfolio or have only limited exposure.

Again, choosing such an investment option may outperform or underperform compared to benchmark indices without an SRI focus.

See Also: How to Invest in ETFs: A Step-by-Step Guide

Integration with Other E*TRADE Accounts

If you are using E*TRADE Core Portfolios, you can integrate with other E*TRADE accounts you might have. You can also get access to the direct investing platform and see all your accounts in one place. Keep in mind that every E*TRADE account can be converted into an E*TRADE Core Portfolios account. 

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E*TRADE Core Portfolios Pricing and Fees

Investors wanting to invest with E*TRADE Core Portfolios will face two types of fees. The first type is an annual flat account management fee of 0.30%. You will pay this fee to E*TRADE for your assets under management which translates into $1.50 per $500 invested. The second type is the already mentioned expense ratios your portfolio’s exchange-traded funds carry. However, these expense ratios are very low compared to the industry average. 

While the management fee is on the higher end of the spectrum, the ETFs’ expense ratios are priced competitively. Adding the costs together, you won’t be overspending on fees, but they aren’t the best bargain either. Consider E*TRADE’s fee structure to be in the fair middle. 

Except for these two types of fees, investors only have to pay $75 when transferring the investment account to another broker. Other fees such as setup, inactive, or account fees aren’t charged. 

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E*TRADE Core Portfolios Security

E*TRADE’s Core Portfolios accounts are protected by the Securities Investor Protection Corporation (SIPC), which covers up to $500,000 for every account, including $250,000 in cash claims. This insurance only covers you if your broker fails in any way and not if your account loses value because of market fluctuations. 

In addition, investors can benefit from E*TRADE’s additional brokerage coverage. E*TRADE carries coverage from London insurers with an aggregate limit of $600 million in addition to the SIPC protection.

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E*TRADE Core Portfolios Pros

• Low account minimum of just $500 to start investing
• E*TRADE uses low-cost ETFs for portfolio creation
• Investors can further personalize their portfolio with smart beta ETFs
• Socially responsible investing is available
• The portfolio’s underlying ETFs have low expense ratios
• Automatic rebalancing is done twice a year or when the allocation drifts off too far
• Integration with other E*TRADE services is possible
• Excellent customer service

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E*TRADE Core Portfolios Cons

• The management fee of 0.30% is on the higher end of the fee range 
• E*TRADE doesn’t offer tax-loss harvesting
• No access to certified financial advisors, which some competitors offer
• The broker lacks additional features such as a cash account and a dividend reinvestment plan

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E*TRADE Core Portfolios Alternatives

With more brokers launching robo-advisory services, hands-off investors have more alternatives to choose from. While E*TRADE Core Portfolios may offer everything you need from a robo-advisor to reach your financial goals, other solutions may be suitable for you as well. Therefore, have a quick look at the two alternatives below to see if one of the two catches your eye.

Betterment

Betterment, as well as E*TRADE, offers automated passive investing services and socially responsible investing and charge management fees. 

However, Betterment’s digital entry-level robo-advisor has a lower annual management fee (0.25%) and doesn’t require an account minimum. This is even better than the already low minimum at E*TRADE Core Portfolios. Moreover, Betterment further includes tax-loss harvesting, dividend reinvestment, and a high-yield interest-earning cash account which aren’t available at E*TRADE.

Read our full Betterment review to learn more.

SoFi Automated Investing

Make sure to check out SoFi Automated Investing because its robo-advisory service doesn’t require an account minimum, and investors don’t face a management fee for their assets under management. This fee structure beats E*TRADE and even Betterment. 

E*TRADE Core Portfolios’ and SoFi Automated Investing’s robo-advisors rebalance your portfolio for you but don’t support tax-loss harvesting. However, SoFi Automated Investing offers unlimited access to certified financial advisors, which E*TRADE does not. 

Read our full SoFi Automated Investing review to learn more.

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Who Is E*TRADE Core Portfolios For?

E*TRADE Core portfolios is a natural choice if you already have an E*TRADE account and want to use a passive investing solution to reach long-term financial goals. Due to the integration with the E*TRADE site, this service is also an excellent extension of E*TRADE’s broker services.

If you are looking for additional ways to personalize your portfolio through smart beta or socially responsible investing, E*TRADE Core Portfolios is a solid choice. The reason is that you get the flexibility to incorporate your personal values into your portfolio.

Investors who want to invest on autopilot and have their portfolios managed by someone else will also like the offering. With just $500 as the account minimum, the robo-advisor is available to nearly every investor. 

If you don’t need the help of a human financial advisor or don’t worry too much about tax-optimized strategies, E*TRADE Core Portfolios will be a great investment solution.

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E*TRADE Core Portfolios FAQ

New investors looking for an automated passive investment solution often have additional questions that are not about specific features. Therefore, we answer one of their most burning questions in this section.

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Final Thoughts

Potential clients, as well as existing E*TRADE customers, will find a solid fit with E*TRADE Core Portfolios. Using the entry-level investment offering is very straightforward, and the thorough profile questionnaire aims to look at you from multiple angles to suggest the perfect portfolio for your current situation.

Low account minimums, management fees, and expense ratios for the underlying exchange-traded funds make this robo-advisor a viable option for cost-conscious investors as well as investors with small account balances. The main benefit is that a more significant percentage of their money will be invested into the chosen assets.

While the portfolio mix lacks international bonds, the portfolio is still diversified and lets you give it a personal touch through smart beta or socially responsible investing. A feature that is missing is tax-loss harvesting. Applying this strategy could significantly reduce an investor’s capital gains taxes. Besides, some of E*TRADE’s competitors offer this service for free.

All in all, E*TRADE provides most of the features beginner investors are looking for in a robo-advisor.

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