Allan Roth had an interesting article at taking a look under the hood of a portfolio he got through Schwab's Intelligent Portfolio which is a free robo adviser. Presumably it can be free because it looks like most of the portfolio is comprised of Schwab ETFs and they make basis points on managing those funds. The program has been successful, with $25 billion in AUM. Roth's portfolio;

Roth devoted most of his post to the portfolio's under performance which he attributed in large part to cash dragging on the portfolio and to a lesser extent the position in gold. I don't know that it is ideal to compare a full asset allocation, stocks,bonds and cash, to something that is not a full allocation, as Roth does, but that's not such a big deal.

I am more interested in the composition of the portfolio. Is there anything to learn, anything to emulate, anything to avoid? The first thing that stands out is the 5.42% in FNDE and 3.72% in SCHE. How different can they be? Looking under the hood, they are different in term of top ten holdings, sector weightings and country weightings but look at the respective charts;

If you buy both funds at Schwab, there would be no commissions but it is not clear why anyone needs both, based on the lifetime returns of FNDE. It is the same story with the small cap funds FNDA and SCHA except there is a lot of sector overlap between those two;

The funds themselves don't strike me as poorly constructed but I think these are examples where more funds don't actually deliver more diversification. It was the same with some of the other equity market segments except for international small cap. FNDC was way ahead of SCHC since inception, way ahead. If this post makes its way to anyone's radar at Schwab Intelligent Portfolios please feel free to share the logic of owning such similar performing funds in this portfolio.

The concept of robo advisers is absolutely valid but they have only been around for ten minutes and I would expect them to evolve. While Schwab doesn't only use its own funds it appears to dominate its portfolios with its own, maybe that is to make it cheaper for customers but its not that much cheaper than using a company whose business is robo advising and can be agnostic about fund issuers.

Better still would be to construct a portfolio on your own. There are countless variations of three-fund portfolios posted at sites like Marketwatch that can get the job done provided there is an adequate savings rate, a suitable asset allocation and an avoidance of self-destructive behaviors. For someone with absolutely no interest in actively engaging in markets and no interest in delegating the work, they can use a three fund portfolio but if you care enough about investing to read a blog about it then you are probably interested in being more engaged than that even if you don't want to make a full time job out it. Maybe you use a robo adviser for your core portfolio, like 75-80% of your portfolio or maybe more with the rest in something more precise or a little narrower than the broad based funds in the Schwab portfolio above.

If you're considering using a robo adviser look through to the portfolio and ask questions. The reasoning for having both FNDE and SCHE might be great, but it is an obvious question. If you are with a robo now, look at what you own and ask questions. Robos are a new thing, they might be learning and maybe you don't want them learning at your expense.