Investing for the first time can make your head spin. From the jargon to the time-consuming market research to the nerves you have, it’s natural that you might feel apprehensive. But investing doesn’t need to be scary or overwhelming — and you should feel good about taking control of your financial goals and growth.
That’s why we created a cash-enhanced Managed Portfolio with no advisory fees. It’s a way for you, the beginner investor or merely the hesitant investor, to invest in the market while taking on less risk. Curious to learn more? Read on.
What is a managed portfolio?
A managed portfolio is an investment account that is professionally created, monitored, and — you guessed it — managed on your behalf, typically for a fee. Some, like Ally Invest’s Managed Portfolio, are referred to as a robo-advisor, which combines human expertise with technology to automate the investment process. This approach takes the tough, confusing, or stressful decision-making off your plate and allows expert advisors to consider your goals, risk tolerance, and time frame in order to guide your investment strategy.
What is a robo-advisor?
Don’t worry — it’s not a futuristic humanoid doling out financial advice or controlling which investments make up your portfolio. A robo-advisor simply refers to the practice of taking a more automated approach to your managed portfolio. Robos use technology to make the more time-consuming aspects of the investment process more efficient. They diversify a basket of ETF investments based upon your risk tolerance and time horizon and automatically rebalance your portfolio based upon the ups and downs of the market. Add to that the human experts that work on our Managed Portfolios and you get the best of both worlds guiding your portfolio and keeping your wealth-building on track — but without the high fees.
Are there benefits of robo-advisors?
Robos have plenty of benefits. You’ll save on advisory fees due to automation. (In fact, our new cash-enhanced Managed Portfolio has no advisory fees!) Plus, robos typically have a much lower barrier-to-entry compared to human advisors — we’re talking minimum investments of just $100.
Robos can also help you avoid emotional investing behaviors, like making gut decisions based on news headlines, recommendations from friends, or dips (or upturns) in the market. While those emotionally-triggered choices often feel right in the moment, they can cause you to lose money in the long run. Because robos automatically rebalance your portfolio during market volatility, you can take on a “set it and forget it” mentality, knowing your financial assets are under professional care.
Related: Expert Take — Lule Demmissie on Market Disruptions
What is the cash buffer element?
Our cash-enhanced Managed Portfolio has a permanent 30% cash buffer built in — meaning that 30% of your portfolio remains in cash, instead of invested in stocks, bonds, or other securities.
That buffer has a number of purposes. In your portfolio, your cash earns interest at a rate similar to a savings account, meaning it will continue to grow even if the market fluctuating.
It also helps you gain confidence and peace-of-mind in the investment process because it prevents losses from being as harsh. While returns in our cash-enhanced Managed Portfolio may not be as high during a market upswing as they could be in a more aggressive, fee-based portfolio, the decline won’t be as steep during a market downturn.
A cash-enhanced Managed Portfolio can take a lot of the heavy-lifting (and guesswork) out of investing. With a cash buffer that protects you against market volatility, no advisory fees, and portfolio management that is tailored to your goals, it’s an option that can save you time, money, and stress.
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FDIC I. on November 4, 2019 at 5:11pm
Is any portion of this product / specifically cash balance is FDIC insured? Up to $250k.
Ally on December 6, 2019 at 9:24am
Our accounts have SIPC coverage, which is $500k and cash is limited to $250k. Here is a link to learn more: https://www.ally.com/invest/managed-portfolios/
Jeff H. on January 7, 2020 at 3:49pm
The way I read it your managed accounts keep either 3% or 30% in cash. How about offering a mid point option? 15% or 18% cash.
Bryan on January 7, 2020 at 6:52pm
I like the idea of having a cash buffer, especially sitting at all time highs, but I think there needs to be an option to get more aggressive when called for and choose a 10% cash buffer.
Ally on January 15, 2020 at 3:28pm
Hi Jeff, if you’ll give us a call at 1-855-880-2559, one of our team members will be more than happy to discuss your options.
andrew on September 14, 2020 at 8:43pm
Read between the lines ...could be in a more aggressive, fee-based portfolio. The cash buffer is there for Ally to lend to people and make money since you can't access it quickly like you can in a bank account. This is how Ally gets their cut for managing the investments, instead of charging you .3% fees like the old version of their managed accounts. Is the trade off worth it? Maybe. You get more gain for the amount of money you risked this way, but you must tie up cash in an inaccessible, but safe account (cash in investment accounts is SIPC insured).
Joe on October 16, 2020 at 11:32pm
How often is the portfolio re balanced?
Ally on October 17, 2020 at 8:21am
Hi Joe, if you’ll please give us a call at 1-855-880-2559, or chat with us online at ally.com, one of our team members will be more than happy to help answer your questions.