What is Core Portfolios?
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 E*TRADE Personalized Investments. 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. The portfolio is rebalanced1 semiannually, and when material deposits or withdrawals are made. Investors have access to a dedicated team of specialists that they can speak with whenever they have a question.
Why are Core Portfolios made up of ETFs?
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.
Which account types are eligible for Core Portfolios?
Most retail E*TRADE Securities brokerage and retirement accounts with a US address can enroll in Core Portfolios. Eligible accounts include:
- Rollover IRA
- Traditional IRA
- Roth IRA
- SEP IRA
What makes Core Portfolios different from other auto-investing or robo solutions?
Unlike many auto-investing solutions, we:
1. Provide access to a dedicated team of specialists to answer any questions.
2. Do not offer our own proprietary exchange-traded funds (ETFs).
3. Offer a portfolio of tax-sensitive ETFs to those clients with taxable accounts.
4. Give clients the option to customize a portion of the portfolio by selecting either a socially responsible or a smart beta ETF.
How much does Core Portfolios cost?
There is an annual flat fee of 0.30%.
Each quarter, we calculate the fee5 based on the average daily market value of the account. For example, an account with an average daily balance of $50K for the quarter will be charged $37.50 for that quarter. This direct fee is charged at the beginning of each new quarter for services provided the previous quarter. It is automatically deducted from the cash position in the account.
|Account Market Value6||Annual Flat Fee|
$500 and over
How do I get started?
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:
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
How do I fund my Core Portfolios account?
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.
Can I convert my existing E*TRADE Securities account to Core Portfolios?
You can convert any eligible E*TRADE Securities 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 (Non-Custodial) Retirement Plan
How do I move my old 401(k) or former employee sponsored plan into Core Portfolios?
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.
Can E*TRADE stock plan assets be used to open a Core Portfolios account?
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
What happens after enrolling?
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 and when material deposits and withdrawals are made. In addition to be able to track your performance anytime online, we’ll keep you informed about key market events and trends that may be impacting your portfolio. Plus, when you have questions, you can always get help and support from our dedicated team of specialists at 866-484-3658.
Finally, every quarter, we will provide you with your online brokerage account statement which will give you information on your holdings, any trades we made in your account, any dividends you receive, and all other account activity. Finally, based on the activity of your account, you may also receive monthly statements including any advisory fees that were deducted from your account.
After I fund my account, how long will it take to be invested?
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.
Can I set up a recurring deposit?
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
Can I add more funds or make a partial withdrawal from my account?
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 would 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.
What happens if my account falls below the initial investment minimum?
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.
How does it work?
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.
What is the investing approach of E*TRADE Capital Management?
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 non-proprietary investment portfolio based on an investor’s investment objectives, risk tolerance, and time horizon.
- Core Portfolios rebalances semiannually 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 E*TRADE 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.
What criteria do you use to select investments for a portfolio?
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.
How do you rebalance an account?
E*TRADE Capital Management uses technology to rebalance an account semiannually in order to align it with the target asset allocation. It 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.
How does E*TRADE Capital Management choose which investments to sell when a client withdraws funds?
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.
How can I further personalize my Core Portfolios account?
Once you have selected your portfolio, you can further customize your strategy based on your investing preferences.
Core Portfolios (Smart Beta): Want a more active portfolio strategy? We’ll allocate a portion of your assets to a smart beta ETF – a type of ETF that favors equities with certain characteristics which may help enhance your overall returns. Factors, or specific characteristics of stocks that have performed well historically, are utilized to select stocks. This strategy also combines elements of active and index investing.
These strategies seek to outperform a benchmark index and typically aim to enhance returns or minimize risk relative to a traditional market-capitalization-weighted benchmark. An ETF employing a smart beta strategy may have higher portfolio turnover which may indicate higher transactions costs relative to its benchmark. Utilizing smart beta strategies does not guarantee against underperformance relative to a more traditional market-capitalization-weighted benchmark.
Core Portfolios (Socially Responsible): Looking to align your investing with your personal values? We’ll adjust your portfolio to include an ETF that focuses on companies known for their environmental, social, and governance practices. Socially responsible ETFs invest to a specific mandate, including incorporating SRI criteria into investment analysis; screening for companies that adhere to environmental, social, or governance standards; or fixed income ETFs focused on community impact securities.
SRI strategies may eliminate or limit exposure to investments in certain industries or companies that do not meet certain environmental, social, or governance criteria. As a result, the ETF may underperform other funds or an appropriate benchmark that do not have an SRI focus.
Can I select a different portfolio than the one recommended?
Yes. You have the ability to select a portfolio with more or less risk than the recommended portfolio. Plus, if your financial situation or goals change, you can easily update your portfolio or retake the questionnaire at any time. Changes that result in an updated risk profile will automatically trigger reallocation of the portfolio.
Does Core Portfolios offer cash management features, such as free checking?
Core Portfolios is managed with a long-term perspective in mind. Frequent cash withdrawals might make the portfolio hard to manage and cause it to deviate from its objectives. To avoid this problem, Core Portfolios doesn’t offer features such as check writing, debit cards, and Bill Pay. However, we don’t want to stand between clients and their cash. If a client needs to make a withdrawal, Customer Service can be reached anytime at 866-484-3658, and we’ll send a check or wire. A client can also transfer money online to another account and withdraw it from there.
Can self-directed trades be placed in a Core Portfolios account?
No, Core Portfolios is designed for investors who want ongoing help and professional guidance to manage their account. Please keep in mind, Core Portfolios is a discretionary program and only E*TRADE Capital Management can place trades in a Core Portfolios account. Of course, if investors would like to do some investing and trading on their own, they can open a regular E*TRADE Securities brokerage account at any time.
How much cash is in my account?
We have a 1% target cash allocation in all portfolios. This target 1% allocation is invested in interest-bearing money market funds or cash alternatives.
Do you provide help with tax reporting?
We provide resources like the E*TRADE Tax Center to help clients understand how their investments may be taxed. All taxable account activity will be reported on the annual IRS Form 1099, which is typically available in February of each year. We encourage clients to contact their tax advisor for any tax reporting questions.7
What tax-efficiency features are offered by Core Portfolios?
Core Portfolios provides a tax-sensitive investment strategy that utilizes municipal bond ETFs that may help reduce taxes incurred on interest and dividends associated with those portfolios. All brokerage accounts are automatically enrolled in a tax-sensitive portfolio. Once enrolled in Core Portfolios, you can update this feature at any time. IRAs and other tax-advantaged account types are also eligible for Core Portfolios.