Frequently asked questions

When markets fluctuate, it’s easy for your portfolio to drift from its original target allocation. That’s why we monitor your Core Portfolios account daily to see if it needs to be rebalanced, helping you stay even more closely on track toward your goals. Whenever your investment mix drifts at least 10% outside your target allocation, we’ll automatically buy and sell investments to bring it back in line. This is on top of the semiannual rebalancing we also include.

Read our educational article to learn more about portfolio rebalancing and how it can benefit you.

Core Portfolios is a professionally managed advisory program from E*TRADE Capital Management. It helps keep investors on track with their financial goals and is part of Managed Portfolios. Core Portfolios assesses investment objectives, risk tolerance, time horizon, and other considerations to identify an appropriate asset allocation for each investor. It enables clients to invest in a portfolio of exchange-traded funds (ETFs) with a $500 minimum account balance to enroll. Your account is then monitored daily for cash drifts and rebalanced¹ semiannually. We will also review the account for material deposits and withdrawals, and rebalance if it shifts too far from its target asset allocation. Investors have access to a dedicated team of specialists that they can speak with whenever they have a question.

ETFs are typically not actively managed, so they tend to have lower internal operating costs than traditional mutual funds. The bottom line: An all-ETF portfolio may offer an efficient way to achieve broad diversification at a lower cost. In addition, we also offer tax-sensitive ETF portfolios for each investor profile. This can help minimize the taxes of a portfolio in a taxable account.

Most retail E*TRADE from Morgan Stanley Self-Directed accounts with a US address can enroll in Core Portfolios. Eligible accounts include:

Brokerage:

• Individual
• Joint
• Custodial

Retirement:

• Rollover IRA
• Traditional IRA
• Roth IRA
• SEP IRA

Unlike many auto-investing solutions, we:

1.      Provide access to a dedicated team of specialists to answer any questions.

2.      Offer a portfolio of tax-sensitive ETFs to those clients with taxable accounts.

3.      Give clients the option to customize a portion of the portfolio by selecting either a socially responsible or a smart beta ETF.

There is an annual flat fee of 0.30%.

The fee⁵ is charged each month based on the previous month’s ending balance. For example, an account with an ending balance of $50K for the month will be charged $12.50 at the start of the following month. This direct fee is charged at the beginning of each month for services to be provided for the month. It is automatically deducted from the cash position in the account.

Effective on or about April 1, 2021, fees will be calculated as follows:

• Fees will generally be charged monthly in advance instead of quarterly in arrears.
• Deposits and withdrawals made during the month will not affect the fee charged at the beginning of the month.
• Generally, the initial Advisory Fee is due in full on the date you sign the Advisory Agreement (as defined under “Features of the Wrap Fee Programs” in Item 4 “Services, Fees, and Compensation” of the “Wrap Fee Programs Brochure”) and fund the account with the minimum investment. The Advisory Fee is based on the market value of assets in the account on or about that date.

When we designed Core Portfolios, we started with the premise that it should be as easy to use as possible. That's why we boiled everything down to four simple steps:

Step 1: Complete an investor profile questionnaire

We’ll guide investors through a short series of questions about their investment objectives, time horizon, and risk tolerance. It’s the information we need to know to make an investment recommendation.

Step 2: Review your recommended portfolio

Next, we’ll recommend a diversified portfolio that fits the selected investor profile.

Step 3: Customize your portfolio

An investor can further personalize their portfolio with additional investment strategies like socially responsible and smart beta ETF investments.

Step 4: Implement your plan

New clients (External transfer)

You can fund your account by making a cash deposit or transferring securities. Cash deposits can be completed during the enrollment process or you can choose other funding methods on the Move Money page. As an added benefit, all transactions will be processed commission-free and the proceeds will be used to fund your recommended portfolio. Please note that this could result in a taxable event.

Existing clients (Internal transfer)

You can fund your account using cash or existing securities. The intra-firm transfer tool on the Move Money page will allow you to easily transfer a portion or the full value of an existing account into a new Core Portfolios account. As an added benefit, all transactions will be processed commission-free and the proceeds will be used to fund your recommended portfolio. Please note that this could result in a taxable event.

Not seeing an answer to your question? Contact one of our specialists at 866-484-3658.

You can convert any eligible E*TRADE from Morgan Stanley Self-Directed account into a Core Portfolios account. Account eligible for conversion include:

• Individual and joint brokerage account
• Custodial accounts
• Traditional or Roth IRA
• IRA for Minors
• Beneficiary IRA
• Individual or Roth Individual 401(k)
• Rollover IRA
• SEP or SIMPLE IRA
• Profit-Sharing Plan or Money Purchase Plan
• Investment-Only Retirement Plan

To get started, you’ll need to answer a few questions to get a recommended portfolio based on your timeline and attitude towards risk. Then, just fill out your information and select a retirement account when you reach the step where you choose an account type. If your old plan is a Traditional 401(k), you can only move money into a Core Portfolios account that is a Rollover IRA or Traditional IRA. If you want to roll over a Roth 401(k), your Core Portfolios account must be a Roth IRA. Once you have a Core Portfolios account, you can then roll over your former employer sponsored plan at any time. Just go to the Transfer Money page and click “Initiate a Rollover” to get started.

Clients can open a new Core Portfolios account and request to transfer vested unrestricted shares from their stock plan account into their Core Portfolios account, subject to any limitations set forth in the account.

Please note: Shares held in an E*TRADE Securities stock plan account may be subject to certain sale and/or transfer restrictions and may be ineligible to be used to fund an account for the Core Portfolios Program. Please consult a stock plan administrator regarding eligibility of certain holdings.⁸

Once you open a Core Portfolios account, you will need to fund your account with $500. Once funded, all the investments are typically made within three business days. You'll receive a consolidated confirmation statement letting you know when we make trades on your behalf.

Your account is then monitored daily and rebalanced semiannually or if your portfolio drifts too far from your target allocation and when material deposits and withdrawals are made. In addition to being able to track your performance anytime online, we’ll keep you informed about key market events and trends that may be impacting your portfolio as well as provide you online statements with information on your holdings, any trades we made in your account, dividends you may have received, and other account activity.

Once you fund a minimum of $500, you can expect to see the initial portfolio holdings purchased within three business days of accepting the Advisory Agreement. Additional deposits into the Core Portfolios account are also invested within three business days.

Yes, that’s a really good idea to help stay disciplined with saving and investing. Clients can use the online Transfer Money service to set up recurring deposits into their account based on the amount and schedule that works for them. Deposits will be invested automatically into their Core Portfolios accounts and can help build assets without ever lifting a finger.⁴

Yes, you can deposit or withdraw cash from your account at any time by logging on and selecting "Add/remove funds." If you need additional cash, we will strategically sell investments from across the portfolio in an effort to maintain the portfolio's target allocation.  Please note that this could result in a taxable event and buying and selling in your account could impact portfolio performance.

We will continue to manage your account if it falls below $500. If the balance remains under the initial investment minimum for an extended amount of time, a client may eventually be asked to add funds to bring the account back to Core Portfolios' initial minimum. Since it is hard to maintain an adequately diversified Core Portfolios if the account balance is less than the initial portfolio minimum, we may not rebalance the account on a semi-annual basis.

No. Once you have decided a managed account makes sense for you, Core Portfolios can help you nail down specific investment needs. Please consult Customer Relationship Summary (Form CRS).

When we designed Core Portfolios, we started with the premise that we don't start until we get to know you. In a few easy steps, you can get an efficient digital portfolio that is guided by you.

Plus, you'll be able to stay in control of your investing strategy and track your performance 24/7 through our digital dashboard. If your financial circumstances change, you can update your investor profile at any time, to keep you on track to meet your goals.

E*TRADE Capital Management follows a disciplined investment strategy based on principles of Modern Portfolio Theory (MPT). MPT is a widely utilized framework for building diversified investment portfolios. The underlying philosophy of MPT is to contrast a portfolio with a combination of asset classes (e.g., US equity, international equity, fixed income) based on the expected returns and volatility that these asset classes have displayed over time. Combining different asset classes may help limit risk and increase returns of the investment portfolio as the classes have varying levels of correlation to one other. Many of the assumptions made in MPT rely on historical data, which may not be representative of the future, potentially leading to unexpected outcomes.

All portfolio holdings will be selected by E*TRADE Capital Management's investment strategy team based on multi-stage due diligence. 

Here’s how the investments are managed: 

• E*TRADE Capital Management’s Investment Policy Committee, with the support of the investment strategy team, develops model portfolios. 
• The team utilizes an investment analysis methodology that incorporates various quantitative criteria, including historical return, risk, expenses, manager tenure, performance and style consistency, and asset size and growth, to select securities held in the investment portfolios.
• E*TRADE Capital Management uses an algorithm to determine your recommended portfolio of ETFs based on answers to your Investor Profile Questionnaire. The goal is to select the appropriate investment portfolio based on an investor’s investment objectives, risk tolerance, and time horizon.
• Core Portfolios is checked daily and rebalances semiannually or if your portfolio drifts too far from your target allocation  and when material deposits or withdrawals are made, to help keep the account on track.
• Access to a dedicated support team is just a phone call away.³

For additional information, please see the Wrap-Fee Programs Brochure.

And finally, we’ll send monthly market commentary, along with timely insights during major market events, to help keep clients informed about their investments and the market. 

For each asset class (such as equities or fixed income), E*TRADE Capital Management selects investment holdings that, when combined in broad-based asset allocation strategies, seek to provide a high level of return potential for a given level of risk over the long term, generally three years or longer. That’s called risk-adjusted return potential.

Each investment selection is made by analyzing a spectrum of key data points, such as historical performance, expenses, tracking error, and liquidity. E*TRADE Capital Management reviews and evaluates the investment holdings in a portfolio on an ongoing basis to see if any material withdrawals or deposits are made, and rebalances the account semiannually.

E*TRADE Capital Management uses technology to rebalance an account semiannually in order to align it with the target asset allocation. Your account is then monitored daily for cash drifts and rebalanced¹ semiannually. We will also review the account for material deposits and withdrawals, and rebalance if it shifts too far from its target asset allocation.  Although we monitor the account daily, it does not mean we will trade in the account daily. There could be some periods of time where the allocation does not shift, and no trades are required.

We would first try to use the cash balance in the account to satisfy the withdrawal. If the client needs additional cash, we strategically sell investments from across the portfolio in an effort to maintain the portfolio’s target asset allocation.