SigFig Archives - Lazy Man and Money

One of the great pastimes of investing is comparing performance. The standard comparison is usually with S&P 500, or worse, the Dow Jones Industrial Average.

For example, I signed up with SigFig years ago. Now that I use Personal Capital, I rarely look at SigFig, but they do send me weekly emails. Here’s part of this weekend’s email:

I’d like you to take two things away from this chart:

I’m clearly a superb stock picker… even if most of my investing is in Lazy-approved index funds.
This shows the typical DJIA and S&P 500 comparisons that I’m referring to

What’s wrong with comparisons to the DJIA and the S&P 500? The DJIA consists of 30 of the largest stocks in the United States. The S&P 500 consists of 500 of the largest stocks in the United States. That means that the DJIA is a subset of the S&P 500. There’s 100% overlap in that very small data sample. The S&P 500 is better, but again, it only covers stocks of large US companies.

Here are my performance results from Personal Capital:

(I’m going ignore this week’s performance and pretend that didn’t happen. I’m more interested in long term averages in general.)

I like Personal Capital’s update better. They decided that one large US stock index is enough and kicked the DJIA to the curb. Good choice in picking the more diversified index.

They make another wise decision and provide two new index comparisons, foreign stocks and bonds. This is particularly useful because every diversified portfolio I’ve seen recommended includes at least one, but usually both of those. Maybe there is someone out there who advocates to just put your money in the S&P 500, but I haven’t come across him/her yet.

That’s the problem with all these comparisons: A well-constructed, diversified portfolio shouldn’t be compared to any single index.

Let’s look at the Personal Capital chart again. Did you notice the words at the bottom? My “holdings fell… underperforming the S&P 500.” That feels like shaming to me. It seems to imply that I should have just put all my money in the S&P 500 and done better. (Am I alone in feel this way?)

I’ll let you in on a secret: I don’t invest in the S&P 500. I prefer to invest in the the Wilshire 5000 because it includes midsize and small companies. The market tends to move together so it isn’t a big difference, but I don’t see a compelling reason to avoid around 4500 companies just because they are smaller. I choose index funds because they are diverse. More diversity is better.

In other words, if you are going to use US stocks as a comparison, why not choose the most inclusive index?

Let’s move on from the US stock indexes. My portfolio consists of so many things. Here are just a few examples: Europe/Asia companies, emerging markets, frontier markets, oil, monkey butlers, bonds, REITS, and cash. (We hold real estate, P2P lending, and other things as well, but those don’t fit in a normal brokerage account framework).

[Note: I’m considering selling my monkey butler holdings as Amazon ramps up their home robot business.]

Comparing my holdings to the S&P 500 is nonsensical. I’m not looking to perform like the S&P 500. If I was, I’d just invest in the S&P 500. Instead, I’d like my investments to grow over time, while not losing as much money if/when the US market goes south.

Sometimes when I’m critical of something, people ask, “So how do you suggest we change and do better?” I think an easy stopgap measure is for companies to switch to the Wilshire 5000 instead of the DJIA or the S&P 500. I’m hopeful that’s just a few lines of code for the software engineers at the company.

Longer term, I’d like to see companies ask about people’s risk tolerance and create a blend based on those preferences. One simple example could be the common 60/40 stock/bond portfolio. Imagine the Personal Capital chart above with a “Target” that gives the YTD performance of a portfolio with a 60% Wilshire 5000 index and a 40% broad bond index. In this case, the “Target” would be down around 1% for the year. (This can be more complex to include foreign stocks and monkey butler investment performance if necessary.)

That seems like an improvement, right? Let me know what you think in the comments.

We have an affiliate relationship with one or more of the companies linked in this article.

With a title like that, combined with what I’m going to write in the review, you probably are thinking that this is a sponsored post or that Sigfig has paid me. They haven’t. They just blew me away with a great product/service.

What is Sigfig? They are like Mint for investments, but built for the serious investor. I know that Mint does investments, but it is very basic. SigFig gives you a lot more data and to analyze your total portfolio.

The easiest way to show you is to give you a little tour. For this I set up my retirement accounts, so this post does double-duty… you get a view into my retirement savings and investments as well. SigFig has four areas of focus, Analytics, News, Holdings, Recommendations. A fifth area, the default view, is an overview of the other areas.

SigFig Analytics View

Here’s what the Analytic’s View looks like (click for larger view):

As you can see on the left side, I have $148,713 in my retirement accounts and I made $367 today (woo hoo!). It then shows my brokerages: Fidelity (my SEP-IRA), TD Ameritrade (my Roth IRA), and USAA (my Rollover IRA from previous 401k plans). In the center, I get a total performance view where I can see that my investment decisions are under-performing compared with the S&P 500 (there are other benchmarks to compare to against if that’s your thing).

Below the performance, you can see my asset allocation. In my opinion, this is the single most valuable section of SigFig. A couple of things stand out here. One of them is the large cash holding. That’s a relatively recent development. I worry that the markets are going head down with the Dow Jones crossing 13,000 while the national debt is at astronomical levels. You may also note the foreign equities. I’m a big believer in diversifying beyond the United States. It is increasingly a global economy and if we fall on tough times in the United States, I’m going to want my investments elsewhere to help me through that. You’ll also note the commodities. I’ve written more than a few times that I’m hedging food and gas prices with ETFs.

I can’t tell you what the 7% Other category is. I wish SigFig would allow me to look inside it and see what investments make up the percentages.

It looks like my dividend yield is 2.0%. I’m not making investment choices based on dividends, so I’m not interested in this information. Others will find it helpful though.

The Geographical Allocation map doesn’t really look like much to me. However, when I click on the “Table” instead of “Map”, I get a much more helpful view. Specifically, I find that my allocations are:

United States	59.05%
Europe	20.68%
Japan	6.38%
China, Hong Kong, Korea, Singapore	5.42%
Australia	2.53%
Canada	2.22%
South America	1.79%
Africa	0.65%
India, Sri Lanka, Nepal, Pakistan, Bangladesh	0.57%
Russia	0.40%
Middle East	0.32%

Now, I know not only what I’m invested in, but I also know where I’m invested. This is chock full of “Epic”-ness, “Winning” or any other outdated way to express greatness.

The last part of the middle column is the Risk section. I think this area requires more explanation. It says that my equities are 9% more volatile than the S&P 500. That might be if you look at them individually. For example, I realize that the Foreign Equities part of my portfolio may carry more risk. However, look at the portfolio as a whole, with a balance in U.S. equities, foreign equities, cash, and commodities. Are you really going to tell me that I’d have less risk if I sold off all that diversification and just plunked my money in 500 U.S. stocks? Something is wrong with SigFig’s analysis here.

The right column gives some key stats against other SigFig users. I’m not sure what to make of it. Maybe if there were bell curves the ranges and if an age range was provided, I could see how I stack up to my peers.

SigFig News View

The News area isn’t unique or exciting. In fact it is so unexciting that I’m not even going to give you an image. You can get this information from just about any financial site. It is convenient to have it one place. In SigFig’s defense, there isn’t much you can do with news other than just display articles for people to read.

For me the News view is particularly useless. It doesn’t seem to include mutual funds. This left me with a view of Google news as that is the only individual stock I own.

SigFig Holdings View

Here is the SigFig Holdings View (click for larger view):

The holdings view gives you what you’d think, a list of all your investments in one place. One thing you’ll see is that I have Vanguard’s Total Market Index VTI as a core holding in all my accounts. That’s my default “invest in the US” equity. Vanguard has very low expenses and this particular ETF follows the Wilshare 5000 giving it more diversity than the S&P 500.

The other investment I should talk about is Google. It is the only thing that isn’t a mutual fund. However, in a lot of ways it is a mutual fund. I realize that Google is just a single company and much of its financial welfare is dependent on its advertising business. However, in buying Google, I feel that you get dominance in many areas: mapping, email, search, mobile and probably a few dozen areas that I can’t think of off the top of my head.

What I’m not showing in this holding view, is the tabs at the top. If I click on the Performance tab, I get information like, day’s gain, total gain, number of shares, and basis. I’m excited about the basis, because I always have to hunt for it in my brokerage’s website.

The Fundamental tab shows you things like Price/Earnings, Price/Book, Revenue Growth, etc. Since most of my investments are mutual funds and ETFs, this information isn’t available. However, it does show up for my Google holding.

Perhaps the most interesting thing in this view will get overlooked by most users. The Add a Tab section gives you the ability to customize a view of various attributes from the Stock Summary, Positions Summary, Valuation (12 months), Income Statement (12 months), and Balance Sheet (recent quarter).

You also get a Watchlist, which is an extra nice touch.

SigFig Recommendations View

Here is the SigFig Recommendations View (click for larger view):

SigFig does more than just aggregate and categorize your investment portfolio. It gives recommendations on what you can do. Of course the recommendations come with the Doublethink-ish disclaimer bar at the top that says that it shouldn’t impact your investment decision.

As you can see it gives you information on underperforming investments, hidden fees, and trading fees.

The underperforming investment area is interesting. I won’t get into the specifics of top suggestion because that is going to be the focus of tomorrow’s article. The second example criticizes my choice of Fidelity Spartan (FSIIX) and suggests PowerShares International Dividend (PID). This is similar in its international focus, but it isn’t the same. Also, since it is my Fidelity account, I don’t believe I pay the fees that it thinks I do (I need to double check this). The rationale of PID outperforming FSIIX is that it had a 7.7% better return over the last three years. SigFig seems to be suggesting that past performance is indicative of future results and that is dangerous ground to trend. It also suggested Vanguard International Equity (VEU), which I hold in other positions. Again, my decision to go with FSIIX was based on the Fidelity account (which was based on the ease of opening a SEP-IRA and low expenses), so I politely reject their recommendation.

The hidden fees area is pretty straight-forward. It makes me want to call up Fidelity and ask them for my $10 for that late settlement. Sigfig is right, that’s their own bad execution. Kudos to SigFig the watchdog (errr… pig)

The eliminating trading fees area isn’t very helpful. It says that I have a couple of holdings (VEU, VTI) that I could eliminate trading fees if I traded elsewhere like TD Ameritrade. Ironically, I own both those holdings in my TD Ameritrade account. I presume they suggest that I shouldn’t do business with USAA, but this is an area where their recommendations need updating. I perform very few trades as evidence from the holding screen. The account had $86,000 making $27 a drop in the bucket. Lastly, USAA’s exceptional and unparalleled customer support should earn it an exemption.

Realistically, I’m too rough on the recommendations. For the average person, there’s probably quite a few actionable items. I like to think that a personal finance blogger probably looked into many of the things they would suggest and chose not to take them for good reason.

Conclusion

It isn’t all rainbows and puppy dogs with SigFig. I found I have to be careful to not look at it too much. In the time it took me to write up this review I went from making $367 on the day to losing $969. It’s easy to get caught up in those kind of fluctuations when they are in big numbers right in front of you. Also, if I could make one more suggestion for SigFig, it would be to have a tool that looks at the individual holdings in a mutual fund. This could be used to report overlaps in equities due to mutual funds that are just too similar.

In the end, this is just me being nit-picky with a great product. SigFig has become my one-stop source for investing. As long as you are fine with the typical privacy concerns of allowing third parties access to your financial information (same as Mint and/or other services), I think SigFig should be at the center of your investment universe, too.

Now for the bad news. SigFig is in beta and it is invite only at this stage. However, I didn’t use any special personal finance blogger connections with them to get my invite. Maybe if you request an invest, you’ll get a response right away.

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