Issue #95: Robots are taking over the world… and my portfolio

plus Long Boi duck + the Olsen twins
Dollar Scholar
Hi y’all —

I’m not a particularly competitive person. 

Sure, I get aggressive when, say, looking for a table in a crowded bar, but otherwise I tend to let things ride. When I played soccer as a kid, I was the goalie because it let me avoid conflict (also it was the position that required the least running). In Settlers of Catan, I take advantage of the “friendly Robber” rule. If there’s anyone I’m in competition with, it’s myself. 

So when I learned recently that people are setting up different robo-advisor accounts just to watch them fight, I was bewildered. It seems like an unnecessary contest. Why would someone do that? Are they just bored? (If so, do they want to come play Catan?)

Seriously, though. Is having multiple robo-advisors running at once a good idea?

As a reminder, robo-advisors are automated investing services. They’re a relatively new invention, and they’re not super popular: Only about 8% of American households have money in one, according to a 2020 report from Hearts & Wallets. They generally have a reputation for being user-friendly and high-tech, collecting info about my preferences and investing on my behalf to achieve my goals.

David Goldstone, manager of research and analytics for Backend Benchmarking and The Robo Report, told me it's become increasingly common for him to encounter people who are using a robo-advisor in conjunction with a traditional financial advisor as a way to keep costs down. It's also not unheard of to have several robo-advisor accounts within a single service. (Betterment, for example, allows users to set multiple goals, each with their own portfolio.)

The biggest reason an investor might open multiple robo-advisor accounts with different companies, though, is to slim down a big list of options.

"It can be pretty difficult from the outside to really determine what's going on inside a robo-advisor, both with the portfolio and with the services offered," Goldstone says. If you're deciding between three robos, he adds, "you may want to try out all three services before you make a final decision for the majority of your assets."

I built a great robo-advisor. All it ever says is "don't."
Doing this with intention is fine. But opening accounts with separate robo companies just for the fun of it is a different animal altogether.

"In general, it may be adding unnecessary complexity — especially if you're picking providers that are similar in how they manage portfolios," Goldstone says.

Even if I’m technically splitting my assets among five robo-advisors, I’m not really diversifying. And according to Anna Goodman, a financial coach in California, it kind of goes against the core concept of robos.

"It's not what robo-advisors were created to do, which is to simplify this picture — centralize your accounts, give you access to set it and forget it while making sure your portfolio diversification is consistent over time," she adds.

One of the advantages of robo-advisors is that they automatically rebalance. For example, say I want a 60/40 allocation of stocks and bonds, and the market changes. Most robos will recognize this and buy and sell to maintain my desired split. But when I have multiple robo-advisors running, they don't know about each other unless I tell them. 

This situation requires active oversight, meaning I’m losing the hands-off perk of robos, Goodman says.

"They could be doing things they individually think are helpful but canceling themselves out," she adds.

This robo battle could also end up giving me a major tax headache. 

I have to be particularly careful about wash sales, which happen when I sell a security at a loss and buy a substantially similar one within 30 days. The IRS doesn’t allow investors to claim losses on wash sales.

"When you're working within the context of one robo-advisor, they are keeping track of their own house," Goldman says. With several robos running simultaneously, “they could potentially be trading the exact same securities on the exact same days, incurring losses but not accounting for that in the reporting on your tax statements at the end of the year,” she adds.

I need to pay close attention or run the risk of misreporting.
(but please don't tell me you scrolled past all of my hard work)

Using multiple robo-advisors to run an A/B test of sorts can be helpful for some investors. However, there are drawbacks if the various robos aren’t aware of each other. It could also make my taxes messy.

If I end up in a situation like this, Goldman says to contact a financial professional who can work with me to figure out my taxes. Above all, I shouldn’t lose sight of the fact that investing is about the long game.

“When you’re thinking about investing in a blended portfolio over time, you're not necessarily looking to optimize on a one-year, five-year, time horizon. You’re looking to invest your money to grow over time,” Goldman says. “And there’s really no way to A/B test that in a way that's going to be totally painless for you.”

Star Wars
check out this crazy celebrity purchase
Olsen Twins
via Instagram
Actress Ashley Olsen was recently seen in Manhattan walking around in a plain pair of black flip flops… that cost $760. The sandals are from her own fashion line, The Row, which she runs with her sister Mary-Kate. Despite the price, I’d say the shoes are perfect for a New York Minute.
five things I'm loving online right now
1 Have you ever wondered to yourself, “what if the entire Earth was instantaneously replaced with an equal volume of closely packed but uncompressed blueberries?" So did Anders Sandberg, an Oxford University researcher who explored that very topic in a 2018 physics paper. Read it here.
2 Screens from Gumby, served up once an hour.
3 If a reality show in space sounds like a bad idea to you… well, yeah. But despite years of failed pilots, Who Wants To Be An Astronaut? is going ahead anyway.
4 A spa in Belgium just opened with a specialty offering: a bath in beer. For $139, two people can book a private Jacuzzi filled with hops, yeast, malt and beer and drink all the on-tap booze they want for 45 minutes. “I heard that it really rejuvenates the skin so, who knows, it might make me look 10 years younger,” one customer told Reuters. Drink it in.
5 I’m both impressed and intimidated by Long Boi, the Instagram-famous mallard/Indian runner duck at the University of York in England. I can only dream of being so tall.
send me cute pictures of your pets, please
via Chelsea Griffin
Meet Pegasus, nickname Peggy. A retired racing greyhound, she likes to consider herself a robone advisor.
Did you like this email? If so, forward it to a friend or make them sign up at! There are big things coming for Dollar Scholar in the next few months, and you’re not gonna want to miss them. That’s all I can say for now.

See you next week.


P.S. Do you have any robo-advisors? Would you go on a reality show in space? How much would you pay to take a bath in beer? Send astronaut ice cream to or @SuperJulia on Twitter.
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