Core Portfolios

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 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.^d1

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. 

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.

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.

Once you have selected your portfolio, you can further customize your strategy by choosing from Smart Beta or Socially Responsible Investing strategies.

Core Portfolios (Smart Beta): Want a more active portfolio strategy? We’ll allocate a portion of assets to smart beta ETFs – a type of ETF that favors equities with certain characteristics which may help enhance 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 will adjust your portfolio to include ETFs that focus on companies known for incorporating socially responsible investing criteria, sometimes referred to as “environmental, social, and governance (“ESG”) investing; screening for companies that adhere to ESG standards; or fixed income ETFs focused on community impact securities. This strategy may limit or eliminate exposure to investments in certain industries or companies that do not meet specific ESG criteria. As a result, the ETF may underperform or outperform other funds or an appropriate benchmark that does not have an SRI or ESG focus and may forgo certain market opportunities available to strategies that do not use these criteria.

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.

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.

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.