Ally Bank Savings Account Review

allyreview_logoI’ve banked with Ally for years (checking, savings, and multiple CDs), but I’ve never done a specific review of their savings account until now. Ally has recently raised their rates to be closer to the rotating list of banks jockeying for top spot.

The Ally Online Savings Account has no minimum balance, no monthly fees, and currently pays 0.99% APY (as of 12.19.14). Their interest rates may not be the absolute highest, but they have consistently been within 0.10% of the temporarily top banks, making it not worthwhile to move my money. (See my rate chaser calculator). Let’s go through the important factors.

User Interface. Below is a screenshot of the main page after logging in (click to enlarge). I can see all of my accounts and their balances at a glance. The overall design is clean and practical (with a good dose of purple).

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Customer Service. Ally Bank differentiates itself with their customer service. First of all, they are available 24/7 at 1-877-247-ALLY (2559). When you use their smartphone app or log into their website, you can see the wait time beforehand. Even better, if you don’t want to call them you can just use their Live Chat feature. I have highlighted these with red arrows on the screenshot above.

Awards. Ally Bank has won “Best Online Bank” from Kiplinger’s Personal Finance magazine in 2014 and “Best Online Bank” from Money Magazine from 2011-2014.

FDIC Insurance. Ally Bank is a member of the Federal Deposit Insurance Corporation, FDIC Certificate #57803. As with other FDIC-insured banks, this means your Ally deposits are insured by the FDIC up to $250,000 per depositor, for each account ownership category.

Funds Transfers. With no physical branches, online savings accounts should have maximum flexibility as they are often secondary accounts (given most megabank checking accounts pay either no interest or a sad 0.01% APY). Ally Bank allows you to link any other external bank account using the standard routing number and account numbers. As long as you initiate the transfer before 7:30 pm Eastern Time, the transfer will take 2 business days. You can link up to 20 different accounts (it used to be unlimited; but other banks limit to 3; I have 7 myself).

So if I initiate a transfer on Monday afternoon by 7:30pm ET, the money will be debited first thing on Tuesday, and credited to the destination account first thing Wednesday. But know that if you initiate on a Saturday, you’ll get the same result. Even bank computers really don’t like working weekends, it seems. Overall, free transfers within 2 business days during the week is about as good as it gets for online banks.

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The transfer limits are also relatively high. On my accounts, I see that I have a $150,000 daily limit outbound and $250,000 daily limit inbound, with a total monthly limit of $600,000 outbound and $1,000,000 inbound. Keeping in mind that all savings accounts from any bank are limited to six withdrawals per month.

Mobile check deposit. You can use the Ally smartphone app to deposit checks using your smartphone camera. (This is in addition to using your computer scanner and/or free postage-paid deposit envelopes.) I’m not sure if this is the same for everyone, but my deposit limit is $50,000 which is higher than many other electronic deposit programs. I’ve used the app to deposit multiple checks without issue. Screenshot below.

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Mobile app. Let’s see, other comments about the app (iOS and Android)… you can do all the important stuff – see transactions, transfer funds, deposit checks, pay bills. It can remember your username, but you must type in your password every time. I usually just use my Mint app for checking balances, as that only requires a 4-digit PIN. The overall design is acceptable, and the ATM locator includes places like Safeway stores that offer “cash back with purchase”. (If you have the Ally Checking account, you get free ATM fee rebates so the locator is handy as you can just use the nearest ATM.)

The Stats

  • Current interest rate: 0.99% APY (last checked 12/18/2014)
  • Interest Compounding: accrued daily, compounded daily, credited monthly
  • Minimum to open: $0
  • Minimum requirements to avoid monthly service charge: None
  • Number of external bank account links allowed: Unlimited
  • Routing Number: 124003116

Bottom line. The Ally Online Savings Account is a solid offering with with no monthly fees, no minimum balance requirement, and a historically competitive interest rate. I like that their brand is built around the “no hidden fees” slogan. Additional features like a flexible funds transfer system and solid 24/7 customer service help differentiate themselves from the competition.

You can use this savings account either as a complement to your local bank, but I really like how it works with the Ally Checking account which offers unlimited ATM fee rebates, free online billpay, and the ability to use the savings account as a free overdraft source. Ally also has certificates of deposit which offer competitive rates at times.

Robinhood App Review: What’s The Catch Behind Free Stock Trades?

robin0Finance start-up Robinhood promises to “democratize the financial markets” by creating a mobile-first brokerage that offers unlimited free trades with no minimum balance requirement. That is a pretty bold move, and I was skeptical when they started getting noticed in late 2013.

A year later, they’ve gathered $16M in venture capital and last week publicly launched their iPhone app (no Android yet). I’ve already been a beta user of their app for ~5 months (thanks to you guys) and here’s my review.

Application process. You must provide your personal information including Social Security number, net worth, income, investing experience, etc. This is the same as any other brokerage firm, but this may also be the first such account for many users. Everything was done online; there were no paper documents that required mailing or faxing.

Core features. Yes, the app gives me $0 commission trades with no minimum balance requirement. That means you could open account, put in five bucks, and buy a single share of Zynga (ZNGA) if you wanted to. You can make market or limit orders. You can open a cash or margin account. Along with all the other legit brokerage firms, Robinhood Financial is a member of the SIPC which protects the securities in your account up to $500,000. Data is encrypted with SSL. Apex is their clearing firm.

Funds transfers. You can link any bank account with your routing number and account number, but you can also directly use your username and password at these 9 banks: Bank of America, Wells Fargo, Chase, Citibank, US Bank, USAA, Fidelity, Charles Schwab, and Capital One 360. Such ACH transfers are free.

What’s missing? Getting free trades is great, but I think it’s also important to know what you won’t get, at least right now:

  • You must access your account via your iPhone, iPad, or iPod Touch. Android and web interface are “coming in 2015″.
  • There is no phone number for customer support, at least that I can find. All their contact links direct you to compose an e-mail to support@robinhood.com. I’d feel more comfortable with a phone number, but customer service agents cost money.
  • No advanced order types like trailing stop-loss or trailing stop-limit.
  • According to their fee schedule, broker-assisted phone trades are $10 each. But again, I can’t even find a phone number to reach a broker.
  • Electronic statements are the default. I don’t even see an option to enable paper statements in the app, but according to their fee schedule paper statements cost $5 a pop.
  • Currently, they do not support ACAT transfers, so you can’t move over your existing assets from an outside brokerage. (Or move out your assets via ACAT either, I’m guessing.)

How do they make money? For now, Robinhood will make money the same way other brokers do: collect interest on your idle cash, charge you interest for margin loans, and sell order flow. The most innovative prospect is to the plan to sell API access to other financial apps.

User interface. Over the last 10 years, I’ve opened an account at the majority of the “discount” brokerage firms. I’ve had $0 trades before, along with $2 trades, $2.50 trades, $4.95 trades and so on. What makes Robinhood special is their modern, app-centric approach. I agree with this quote from Wired:

But the app’s simplicity is meant to be about more than style. Ease of access and understanding is meant to make Robinhood compulsively engaging for a new generation of investors that don’t find the stock market very accessible from the mobile screens at the center of their lives.

Even though I don’t trade frequently and I only hold one ETF in this account, I still check the app all the time. That’s more often than my primary Vanguard account. Why? Because it’s so easy. It takes only 5 taps. One tap on the Robinhood app logo, and four quick taps to type in my PIN. If I had a more recent iPhone, I could use Touch ID and get in with a tap and a thumbprint. I know, security, but I just won’t type in a 16-character password on a tiny keyboard just to check a balance.

Screenshots.

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Recap. Robinhood delivers on their free stock trades with no minimum balance promise. The app-only user interface is clean and intuitive, if a bit minimalist on features like order types. You do give up some traditional brokerage features like phone customer service and paper statements. I’m still skeptical about whether they can make the economics work over the long run, but they do appear to be streamlining wherever they can.

More: Fee Schedule, Official FAQ, Techcrunch, Buzzfeed

Note: If you’re still on the waiting list, they state plans to onboard you within the first two months of 2015. If you’re signing up now, you can set up a stock watchlist on the app, but don’t expect to open an account for a couple of months.

Zmodo All-in-One sPoE DIY Security Camera System Review

I’ve always been intrigued by those multi-camera home security systems that you see walking around Costco and Sam’s Club, so when I was asked to review a similar unit I took the opportunity. Here is my review of the Zmodo 4 Channel Complete sPoE NVR Surveillance System w/ 1TB HDD, done from the perspective of a mainstream consumer who wants an affordable, DIY-installed security camera setup at home. I will not be nitpicking camera specs or exploring hacking options.

Cost

My specific package model is ZP-KE1H04-S-1TB, which currently has a list price of $349.99 with free shipping on Amazon. Note that this package comes with a 1 TB hard drive pre-installed, whereas other Zmodo packages do not include a hard drive so that you can size it as you like. (There are many grouchy online reviewers who didn’t notice this fact.) This budget-friendly version has 4 channels (4 cameras recording at once), while more expensive models come with 8 channels or more.

What’s In The Box

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  • 4-channel security NVR with a 1TB hard drive (ZP-NE14-S) with USB mouse
  • 4 720p bullet IP network cameras (ZP-IBH15-S)
  • 19V 3A power adapter, 3′ CAT5e network cable, two 50′ camera sPoE cables, two 80′ camera sPoE cables

What You Need To Supply Yourself

  • External display with VGA input and VGA cable.
  • A wireless router with one empty port (for remote viewing).
  • Always-on High-speed internet connection with minimum upload speed of >256kbps (for remote viewing).
  • Android (v.2.3 and up) or iOS (v.5 and up) mobile device (for smartphone app viewing)
  • Windows XP, Vista, or 7 + Internet Explorer 6 thru 11 (for desktop viewing).

Setup & Installation

If you buy this unit with the hard drive pre-installed, setting everything up is literally plug-and-play. (Of course, installing the hard drive just takes a screwdriver.) You simply connect everything according to the diagram below. Make sure everything is connected first and then turn on the unit, and the unit will automatically recognize the cameras and display them on your monitor. I was up and running (with the cameras on my coffee table) in under 10 minutes.

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sPoE stands for simplified power over ethernet, which means that both power and video signal travel through one cable to the camera. You’ll still need to drill holes and such for cable installation, but you don’t need to route an additional power cord to every camera. Definitely easier, and many budget systems don’t have this feature. Included are two 50 ft cables and two 80 ft cables. If you need more, you can use standard Cat5 ethernet cable. The only hard part is deciding where to position your cameras and installing the cables, which for me required crawling through the attic. I am also simply pointing one out the window.

The NVR (network video recorder) is like a simplified computer with a hard drive, mouse, ethernet port, and monitor port. You view live streaming video on your connected monitor, desktop computer over internet, or smartphone app via internet. You can only view stored video when on your home network. You can make backup copies to a USB flash drive. The NVR must connect physically to your router via ethernet cable.

More Impressions

I personally barely met the minimum requirements as the only VGA-capable monitor I have currently is our living room HDTV bought in 2007. Also, I have no Windows computers either, so I am restricted to either viewing on my home’s only TV or via smartphone app. I wish they allowed more control via web browser.

I primarily use their iPhone app, which thankfully works fine on work WiFi or cellular 3G/4G data. You can link up your app via a quick QR code scan, but if your smartphone is already on the same WiFi network it also finds your cams automatically. Both are simpler than the traditional method of setting up port forwarding. I can enable motion detector alerts via the app as well as through e-mail. The motion detection is rather sensitive, and you’ll get a lot of alerts if you aim it at windy trees. You can adjust the sensitivity on the main box, but not via app.

The 720p camera video quality is significantly better than my previous Samsung Smartcam indoor WiFi cameras. Daytime video has good colors and night video is crisp. Each camera as 24 infrared LEDs which improves illumination and are quite noticeable at night with a red glow (good for scaring off criminals?). Again, I can’t compare directly with other HD cams but the picture is more than satisfactory. You can also toggle between high and low definition streaming.

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The IP cameras have an outdoor “weatherproof” casing that feels durable and high quality. They are IP-rated 65, which means it is dust-tight and can withstand low-pressure water jets from any direction. The box says the camera’s rated operating temperature is 14 F to 122 F so I’m not sure about extremely cold climates. You mount the cameras with screws, so the only real tool you need is a drill and screwdriver.

With a 1 TB hard drive, I can keep 30+ days of past footage from all 4 cameras using their “intelligent” setting which increases the video quality when motion is detected but maintains a lower quality when there is no motion detected. The recorded footage is marked with times of motion detection, so that you can go directly there without viewing the entire thing.

If you compare this with the popular Dropcam Pro, that only comes with one indoor camera and costs $200. Dropcam also has easy installation and live streaming to smartphone, but no storage option unless you pay at least $10 a month for cloud storage. The video data travels via WiFi, but you still need a power cable so that’s still one cable going to the camera. So the Dropcam offers cloud storage capability and easier portability, but this Zmodo package offers four indoor/outdoor cameras and 30 days of hard drive storage for no ongoing cost. I think the Zmodo is ideal for small business owners that want an affordable security option and the ability to review lots of past video, and also for homeowners who want permanent, outdoor surveillance and are willing to perform a DIY installation.

Pros

  • Quick setup and easier installation with power through ethernet cable.
  • Past 30+ days of video stored on included 1 TB hard drive.
  • Access live video feed from PC or smartphone.
  • Free in-app motion alerts.
  • Can connect with traditional alarm system.
  • Competitive pricing.
  • No ongoing monthly fees which add up to $100+ a year with other cameras.

Cons

  • Doesn’t interact with other home automation protocols.
  • Can’t remotely reposition cameras.
  • No Mac OS X support (iOS app available).
  • No cloud storage option.

I received this unit for free to review with no editorial restrictions and no other compensation. All opinions expressed are my own. You can interact with Zmodo and enter periodic contests via their Facebook page.

OBi200 Adapter + Google Voice Installation Review

obi200After the announcement that Obihai VoIP adapters were officially supported by Google Voice, I bought one of their discounted Obi200 adapters. I wanted to learn more about this cheap alternative to landline phone service, and also compare the voice quality with my Ooma device.

Obihai adapters have been around since 2011, but this is the first Obi product I have purchased. I don’t know that the installation procedure was in the past, but I believe the official integration has made the installation even easier than before. Supposedly the authentication method is also more secure and your Google password is no longer stored. I thought about making a video, but it really wasn’t necessary.

  1. Open the box and plug in the cables. AC adapter, telephone line, and ethernet cable to router. All ports are clearly marked. All the cables are included except the phone cable which you should already have. The image below says it all:

    obi200a

  2. Write down your unique Obi number. This is clearly printed on the bottom of the Obi200 box. Mine was 9 digits like “123 456 789″.
  3. Go to your computer and visit ObiTalk.com. Click on the link that says “Register” in the top right corner. Then just follow the directions. Dial a test phone number when it asks. It is easiest to use the “Sign in with Google Account” button since you already have one if you use Google Voice. I didn’t even have to type in my password. They didn’t require name, address, or credit card number. A few confirmation clicks, and that was it.

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  4. Use your phone. I turned on my phone, listened to the dial tone, and called my cell phone. Success! Traditional phone service with unlimited calls within the US and Canada for the great price of $0 a month. The voice quality was fine, but I’ll test it out more over the next couple of weeks.

Total set-up time was under 10 minutes. If for some reason my directions don’t work, check out the official Obi200 Starter Guide [pdf] or their extensive set of tutorials. You can also add e911 service for $15 a year.

The Obi200 is currently $49.99 at NewEgg and $48.89 at Amazon, both with free shipping options. The newer Obi200 supports T.38 faxing and has a USB port which can be used to connect to your router over WiFi using an OBiWiFi adapter. If you want to save some money you can buy the OBi100 for $37.99 at NewEgg and $37.99 at Amazon (prices often change). NewEgg works with Shoprunner which many people have for free, giving you free 2-day shipping. Here is a comparison of the OBi100, OBi110, OBi200, and OBi202.

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Schwab Personal Choice Retirement Account (PCRA) Review – 401k Brokerage Window

Tax-advantaged 401k and 403b plans can help you save for retirement, but did you know that you’re probably paying for all the costs of this “employee benefit”? 76% of large employers have workers pick up all the costs of 401(k) administration, according to a recent Forbes article Creative Ways to Cut Your 401(k) Fees. The tab is often quietly paid via high-fee mutual funds (which in turn kick back money to the administrator). The article also focuses on brokerage windows, an “escape hatch” that allows employees to move their funds into a self-directed account with a many more investment options. Their availability is growing:

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What is the catch? These self-directed plans have their own set of fees, notably annual maintenance fees and transaction fees. While regular 401(k) plan options may be limited and more expensive on a percentage basis, they usually don’t charge transaction fees each time you buy or sell. For this reason, brokerage windows tend to work better people with larger account balances. With bigger trade sizes, a flat commission is only a small percentage of the total amount involved.

We recently gained access to Schwab’s brokerage window, called the Personal Choice Retirement Account (PCRA). The mechanics were pretty simple. After completing a special application, you could sell a portion (or all) of your existing investments and transfer them into a “Schwab PCRA” bucket. That money then shows up into your linked account at Schwab.com, where you do all your trades.

Commission Schedule and Available Mutual Fund List. Here is the PCRA fee schedule and PCRA mutual fund availability list that was provided to me by Schwab. (I am assuming these documents are the same across all PCRA plans, but I could be wrong. As I’ll explain shortly, just because something is listed does not mean it is available to everyone.)

The commission schedule is pretty similar to what is available in their standard brokerage account. $8.95 ETF and stock trades, $0 trades for Schwab ETFs. No commission on their No-Transaction-Fee mutual fund list (funds have to pay to be on the list), otherwise $50 to buy and $0 to sell. Schwab PCRA does not charge any annual account or maintenance fees, but your Retirement Plan Service Provider may charge account maintenance fees or some form of “recordkeeping fees”. In our case, there is a $50 annual account fee.

The mutual fund list is quite extensive. Let’s say I was trying to buy the Vanguard REIT ETF (VNQ). I searched and found two results:

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The big caveat in my particular case: ETF and stock trades were not allowed at all. I still tried to make a purchase but got this message:

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From the fee schedule, I assume that some PCRA plans will offer this feature. But in my case, I had to be satisfied with buying the Vanguard REIT mutual fund (VGSIX) and paying $50 per buy trade. The good news is that I was able to buy Admiral Shares (VGSLX) which has the same expense ratio (0.10%) as the ETF version ($10,000 minimum).

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Should I use my brokerage window? According to this Money article, just 5.6% of 401(k) investors opt for a brokerage window even with it is offered. The Schwab PCRA has worked out well for me as an alternative to my standard 401k investment options, but only because a few things aligned:

  • My balance was big enough. Paying $50 a year and $50 per trade is only worth it when your balance is big. Let’s say my balance is $100,000. $50 is only 0.05% of $100,000. If I am saving over 0.05% in expense ratios every single year in exchange, that is a great deal. But $50 is a full 1% of a $5,000 balance.
  • There was a better option in the brokerage account. For example, the S&P 500 index fund in my 401k standard menu charges 0.30% annually, while I can access a Schwab S&P 500 index fund at only 0.09% annually. In my case, I wanted cheap access to the REIT asset class which I didn’t have otherwise. Only about 25% of 401k plans offer access to an REIT fund.
  • I don’t trade too frequently. $50 a pop adds up, so I intend to accumulate money in the normal account, and then transfer over a chunk of money once a year to my Schwab PCRA. This way my bi-weekly contributions are invested for free, and I limit my $50 Schwab trades to once or twice a year.

Viggle App Review: Surprise, You Can’t Make Good Money While Watching TV

vigglescreenPapa John’s sent me a code for a free song download the other day. It was really a way to introduce me to the Viggle, a smartphone app which allows users to “check in” when listening to songs or watching TV shows. Similar to Shazam, the app listens for a few seconds and figures out what is on. When you match a show or song, you get Viggle points that can be redeemed for rewards. For example, you get 25 points for a song match and 60 points for watching a standard hour-long TV show. Certain promoted TV shows will offer bonus points.

The standard rewards structure breaks down to getting a penny for matching a song, and 2 cents for watching an hour of TV. A song download is 3,500 points and a Redbox 1-day DVD rental is 4,000 points. This means 25 points is worth a little less than a 1 cent. Even if you watch tons of TV you still have to keep checking in on your phone (exposing yourself to even more ads) so they know you didn’t just leave your phone by the TV all day. The rewards won’t even be cash as the only gift cards offered are to Redbox, Windows Store, and 1-800-Flowers.com.

Here’s my lightning review: Don’t bother. I try to keep an open mind about some of these programs, but this one just sounds awful. From reading various reviews, even the loyal users say the rewards have gotten steadily worse over time. Make money while sitting on the couch and watching TV? Honestly, how did you think it would turn out?!

Acorns App Review: Automatically Invest Your Spare Change

acorns_screenLast week I wrote about WiseBanyan, which lets you invest in a basket of ETFs with no minimum opening balance. I remarked that it allowed starter investors to open a complete portfolio with as little as $100. Well, what about investing just 57 cents at time?

Acorns is a new smartphone app that lets you invest your “spare change” into a diversified ETF portfolio of stocks and bonds. For example, if you bought something for $10.43, the Acorns app will “round up” your purchase to $11 and invest $0.57 into a brokerage account. The idea is that these small investments will make it simple and easy for folks to start saving and investing. Thanks to reader Steven for the tip.

How does it work? You’ll need to provide them:

  • Your personal information (name, address, SSN) because this is still a real SIPC-insured brokerage account underneath.
  • Your debit or credit card login information (so they can track your transactions and calculate round ups)
  • Your bank account and routing number (so they can pull money into your investment account)

The app scans your transactions, calculates the round-ups, pulls that money from your checking account, and automatically invests it for you. You can also make one-time deposits or schedule recurring deposits on a daily, weekly, or monthly basis. The app also tries to identify “found money” like rebates and rewards which it encourages you to also invest. YouTube video demo:

Fees. There is an account fee of $1 per month and a management fee of 0.25% to 0.50% of your investment annually. (Specifically 0.5% annually for your first $5,000 and then 0.25% annually for anything over that.) No fee on $0 balances. See fee estimator for detailed calculations.

Withdrawals are free, but you may incur capital gains on which you’ll owe income tax. I don’t know if they will support asset transfers via ACAT.

Portfolio details. You can choose one of five target portfolios, ranging in risk level from conservative to aggressive. Mostly standard Modern Portfolio Theory fare, not surprising as their “Nobel Prize-winning economist advisor” is Harry Markowitz, who is a paid consultant.

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All portfolios are constructed using the following six index ETFs:

  • Vanguard S&P 500 ETF (VOO)
  • Vanguard Small-Cap ETF (VB)
  • Vanguard FTSE Emerging Markets ETF (VWO)
  • Vanguard REIT ETF (VNQ)
  • PIMCO Investment Grade Corporate Bond ETF (CORP)
  • iShares 1-3 Year Treasury Bond ETF (SHY)

Fractional shares are used. Dividends are reinvested. Rebalancing happens automatically. Their asset allocation has much in common with most other automated portfolios, although it is probably one of the more different ones that I’ve seen in that you have no exposure to any stocks from Developed European and Asian countries like the UK, Japan, or Australia.

Availability. Currently available on iOS 7 or higher. iTunes download link. Android and web application “available soon”.

My thoughts. My first reaction was… that it was a great idea. I used to participate in Bank of America’s Keep The Change program, which is similar in that it also rounds up your BofA debit card transactions to the nearest dollar but instead moves the money into a BofA savings account paying essentially zero interest. Acorns takes it further by letting you use any bank and any debit or credit card, and also lets you invest it for potentially higher returns.

In addition, I agree that Acorns will lower the psychological barrier to investing because you don’t even have to commit to $25 a week or $500 a month. You know if you can afford a gizmo or meal at $15.66, you can afford it at $16, so why not invest that spare change? The hurdle can’t get much lower than that.

At the same time, we have to be realistic. With this model how much you save depends entirely on how many purchases you make, with a theoretical average of 50 cents saved per transaction. Even buying five things a day times 50 cents is $2.50 a day or $75 a month. It’s good as a kickstart, but not nearly enough to fund a retirement.

If you want to look at it purely mathematically, a monthly fee of $1 taken out of a $75 investment ends up being like a front-end load of 1.3%, in addition to the ongoing 0.25% to 0.50% management fee. Or you could just look at a buck a month as something you’d otherwise blow on some Candy Crush Saga app.

It bugs me when people call it a “piggy bank” when it isn’t. A piggy bank means you put in a quarter, and you can take out a quarter later on. A piggy bank is a bank savings account. Acorns on the other hand is a long-term investment account that you have to be ready not to touch for at least a decade. Sure the “expected” return is 4-9% but you have a good chance of a permanent loss of money if you withdraw within the next few years.

Finally, will people will keep large amounts of money in this little smartphone app for years and years? Maybe. My bet is that they are eventually bought out by a larger firm in the future (or someone just straight-up copies the idea).

Bottom line: Neat idea, very nicely-designed app. Worth a try for those that need a nudge to invest.

More: Wired, Techcrunch

WiseBanyan Review: Free Portfolio Management Experiences & Screenshots

wblogoEarlier this year I wrote about WiseBanyan.com, an online portfolio advisory service similar to Betterment and Wealthfront. WiseBanyan charges no advisory fees, no trading commissions, and have no minimum opening deposit. They will design, buy, hold, and rebalance a basket of low-cost ETFs for free, and all you are left with are the ETF expense ratios which you’d have to pay anyway.

Thanks in part to your interest as readers, I was able to get off their waitlist and open an account with $10,000 of my own money in March 2014. (Current wait is reportedly less than a month.) Here is my review as an actual user for roughly 6 months.

Application process. The account opening process was similar to other discount brokers and online portfolio managers. You must provide your personal information including Social Security number, net worth, income, investing experience, etc. No credit check. They do check identity, so they may ask for supporting documents if you just moved or something.

There is then a risk questionnaire. The questions can seem mundane but take it seriously, as the 10 answers you provide will directly determine the portfolio asset allocation that they choose for you. There will be no follow-up surveys, e-mails, or phone calls. Here is a screenshot and example question:

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Side notes: As a start-up, there are temporary restrictions. They currently do not accept joint, trust, or custodial accounts. They do not accept IRA or 401k rollovers at this time. They also do not accept inbound brokerage account transfers.

Funding. You can fund your deposit electronically, using your bank routing and account number. (They only accept bank wires as an alternative, no paper checks.) The money gets sucked from your bank and the portfolio is bought immediately when they get the money.

I didn’t track this closely, but according to their site the initial deposit takes between 4-5 business days total (3-4 business days for funds transfer, account verification, and ETF purchases, plus one day for data upload). That sounds about right. Future deposits will take 1-2 business days to process.

Fractional shares. WiseBanyan uses FolioFN as their broker-dealer (separate company that hold your assets in the background) which means they can use their ability to keep track of fractional shares. Most discount brokers and other online portfolio managers require you to own whole shares, so you’ll often have something like $57 sitting in cash.

Recall that WiseBanyan has no required minimum deposit or portfolio balance. If you really did open account with $100, they will actually buy less than one share of several low-cost diversified ETFs and you’ll own tiny, tiny portions of thousands of companies with no idle cash. With a normal discount brokerage, that might not even buy you one share of anything (VTI is over $100 a share on its own).

Portfolio asset allocation. I was assigned a portfolio risk score of 7.7, which corresponded to a stocks/bond ratio of 70%/30%.

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Here is the target asset allocation that I was assigned:

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All portfolios are constructed using the following seven ETFs:

  • Vanguard Total Stock Market ETF (VTI)
  • Vanguard FTSE Developed Markets ETF (VEA)
  • Vanguard FTSE Emerging Markets ETF (VWO)
  • iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
  • Vanguard Intermediate-Term Government Bond ETF (VGIT)
  • Vanguard REIT ETF (VNQ)
  • iShares TIPS Bond ETF (TIP)

My opinion is that the ETF allocations from all “robo-advisors” are at least 80% the same, and with the remaining 20% you can’t really tell who’s going to win performance-wise anyway. They are all backtested using some form of Mean-Variance Optimization (MVO) and Modern Portfolio Theory (MPT).

While not exactly what I would have chosen for myself, I personally think the portfolio above is fine. The ETFs have low costs and come from large, respected providers in Vanguard and iShares. All of the major asset classes are covered. There are no commodities futures or natural resource ETFs, which some experts think are useful and other experts think are useless. Note that REITs are considered to be in the bond category.

Website user interface. It feels very “Web 2.0″ which means it is clean and functional, but won’t win any design awards. The site is not mobile-responsive (they say they are working on it). Here is a screenshot from my personal account:

wisebanyan3

Smartphone app. There is no smartphone app (also working on it). Considering their young client base, my suggestion is that even a really simple one that just pulls up your updated account balance and positions would be nice. It doesn’t have to include all the functionality of the website. We like to be able to check the balance at any time of day!

Statements and ongoing communication. You might be afraid that with a free service, your information is going to be sold or you’re at least going to be bombarded with e-mail newsletters with some sort of upsell opportunity. Actually, I hardly get any ongoing e-mails from WiseBanyan at all. I did get one e-mail and one tweet from their CEO and co-founder, Herbert Moore (must be a small company!). I also can’t find anything in their privacy policy about them selling your information.

Electronic statements are free, but paper statements will cost $10 each or $150 a year their fee schedule. To view your online statement, you actually have to log into the broker-dealer site at FolioClient.com with a separate username and password. It is a bit clunky and another work in progress.

Customer service. I have not had a need to contact them, but I did anyway for the purposes of this review. Calling their customer service phone number at 646-593-8361 during their stated hours of 9am – 7pm EST reached an individual’s voicemail box. I didn’t leave a message. An email sent to support@wisebanyan.com was answered courteously in two hours by “Vicki” whom I suspect was the co-founder Vicki Zhou.

Future concerns? According to this ETF.com interview, the average client is 34 years old and opens with a $4,000 deposit, much younger and of more modest means than those of their competitors. WiseBanyan is running off venture capital while it grows assets, so it will be interesting to see if it can make it with a bunch of smaller accounts while others target Silicon Valley millionaires. They plan on making money with add-on premium features like tax-loss harvesting or selling covered calls.

Bottom line. WiseBanyan is fully functional and delivers on its promise of free automated portfolio management. However, it is not a finished product and you’ll have to pardon their dust. It is a lean startup and it feels that way; your e-mails and calls may be answered by the CEO and/or co-founder. You may like that or you may prefer more polish, but remember that polish costs money. They are aggressively priced (at zero, ahem) and unique in that they are targeting all investors including the young and those with smaller balances. You could open with $100 and set up an auto-transfer of $10 a week and get a diversified portfolio set up with no commissions and no management fees. Where else can you do that?

Walmart Savings Catcher: Automated Low Price Guarantee Now Nationwide

(Update: Walmart’s new automated low price guarantee appears to be nationwide now. While still in “beta”, their FAQ has been scrubbed of any geographical limitations. Their inclusions list was changed to add the phrase “most fruits and vegetables.” You must submit receipts within 7 days. Via nicemann of FW. More details below.)

wmcatcherMany stores offer a “low price guarantee” but in reality nobody actually uses them. You have to find the competing price yourself, wait in the returns line, all for the opportunity to argue with the cashier about the validity of your claim. Who wants to do that?

Walmart is has a new feature called Savings Catcher that automates their low price guarantee. Thanks to reader Doug for the tip. Here’s how it works:

  1. Enter the TC Number from your Walmart receipt at walmart.com/savingscatcher or scan the barcode using the Walmart smartphone app.
  2. Savings Catcher compares the prices of the items you bought at Walmart to the advertised prices at the time of your purchase from the print and online versions of weekly print ads of top retailers in your area.
  3. If Savings Catcher finds an advertised price that is lower than what you paid for the same exact item at Walmart, you can get a Walmart Rewards eGift Card for the difference.

This program appears to be available nationwide now. Just for reference purposes, here were the initial test markets and the local competitors they checked against:

  • Atlanta, GA– Aldi, Food Depot, CVS, Food Lion, Dollar General, Dollar Tree, Family Dollar, Ingles, Kroger, Publix, Rite-Aid, Kmart, Target, Walgreens, IGA, Wayfield Foods and Piggly Wiggly.
  • Charlotte, NC– Aldi, Bi-Lo, CVS, Dollar General, Dollar Tree, Family Dollar, Food Lion, Harris Teeter, Ingles, Kmart, Lowes (Food), Target, Rite-Aid, Publix, and Walgreens.
  • Dallas, TX– Albertsons, Aldi, Brookshires, Dollar General, Dollar Tree, Family Dollar, HEB, Kroger, Target and Tom Thumb.
  • Huntsville, AL Market– Aldi, Belle/Food World, CVS, Dollar General, Dollar Tree, Family Dollar, Save-A-Lot, Foodland, Kroger, Piggly Wiggly, Publix, Rite Aid, Target, Walgreens.
  • Lexington, KY– Aldi, CVS, Dollar General, Dollar Tree, Family Dollar, Save-A-Lot, Kroger, Meijer, Rite Aid, Target and Walgreens.
  • Minneapolis, MN– Aldi, Cub Foods, CVS, Family Dollar, Hy Vee, IGA, Rainbow Foods, Shopko, Target and Walgreens.
  • San Diego– Albertsons, CVS, Dollar Tree, Ralph’s, Rite Aid, Vons, Smart & Final, Target, Fresh & Easy, Walgreens, Stater Bros and Save-A-Lot.

Savings Catcher applies to your in-store Walmart purchases only. Online prices from competitors don’t count. If you use a manufacturer’s coupon, it will consider the pre-coupon price. You can submit up to 7 receipts per week and 15 receipts per month. Savings are issued on a Walmart gift card that can be used in-store or online. There are item restrictions.

Included:

  • Most groceries such as cereal, rice and most fruits and vegetables except for: store brand items, deli, bakery and weighed items like meat.
  • Consumable items such as paper towels, bleach and trash bags.
  • Health and beauty items such as shampoo and makeup.
  • Select general merchandise items.

NOT included:

  • Store brands, deli, bakery and weighed items like meat.
  • General merchandise items, (including, but not limited to, electronics, media and gaming, toys, sporting goods, housewares, small appliances, home décor, bedding, books and magazines, apparel and shoes, jewelry, furniture, office supplies and seasonal products).
  • Non-branded items.
  • Tobacco, firearms, gasoline, tires, prescription drugs, optical and photo products and services, or products that require a service agreement such as wireless, automotive or financial products.

How much should you expect back? One frequent shopper reports 2-3% back, via DailyFinance:

Anne Jurchak was part of Walmart’s focus group. She said she’s been getting back $5 to $7 on her weekly trips to Walmart in which she typically spends $200 to $250. Jurchak has used those savings to buy holiday stocking stuffers and a case for her e-reader.

Keep in mind that like many other savings programs like CVS ExtraCare and Safeway Club cards, this will collect data on you and basically track your spending to your SavingsCatcher account. I personally don’t worry about that kind of stuff too much, but FYI.

Covestor Core Portfolios Review: Free Managed ETF Portfolio

covlogoLow-cost index ETF portfolio are everywhere these days! Covestor is a site that usually charges you a fee to manage your portfolio to follow various active managers, with fees ranging up to 2% per year (split Covestor/manager 50/50). However, they recently introduced their Covestor Core Portfolios, which consist of passive ETFs from providers such as Vanguard and Blackrock iShares. These have no management fees, so you’ll just pay the expense ratios of the underlying ETFs plus any trading commissions. Total trading commissions are estimated at $20 annually (investments held at Interactive Brokers, average trade runs about $1, no markup charged). There is a $25,000 minimum investment required.

The three initial portfolios are the Covestor Core Moderate (40% stocks, 60% bonds), Core Balanced (60% stocks, 40% bonds) and Core Growth (80% stocks, 20% bonds). Periodic rebalancing will be done to maintain risk-return profile. Unfortunately, you can’t see the exact portfolio asset allocations without having an account (why not??), but you can try and tease most of the info out of what they give you. Let’s take the top 5 holdings of Core Growth:

  • 34.7% Total US Stock (VTI)
  • 21.4% Emerging Markets Stock (VWO)
  • 19.2% Developed International Stock (VEA)
  • 7.2% Total US Bond (AGG)
  • 5.1% US REIT (VNQ)

The top 4 stock ETFs add up to 80.4%, which must be all the stock ETFs that they use. Broken down in terms of stock asset allocation only, that is 43% Total US, 27% Emerging Markets, 24% Developed International, and 6% REITs.

Let’s take the Top 5 holdings of Core Moderate:

  • 31.8% Total US Bond (AGG)
  • 29.7% Total US Stock (VTI)
  • 10.1% Treasury Inflation-Protected Securities TIPS (TIP)
  • 9.2% Commodities (DJP)
  • 5.6% Emerging Markets Stock (VWO)

Total US Bonds and TIPS only add up to 41.9%, but there are supposed to be 60% bonds, so I’m a bit confused. My guess is that their commodities futures ETN (DJP) is considered fixed income? Usually commodities futures are considered equity-like or an alternate asset class. I suppose they are collateralized by T-Bills, but still even added in, that’s only 51.1%. Still confused.

What about competitors? At a $25,000 portfolio balance, Betterment would charge $62.50 a year and Wealthfront would charge $37.50 a year (first $10k free). At a $250k portfolio balance, Betterment would charge $375 a year and Wealthfront would charge $600 a year (first $10k free). Vanguard Personal Advisor Services has a $100,000 minimum, but includes regular interaction with a CFP and costs 0.3% a year (a $250k portfolio would cost $750 a year). All include any trading commissions in their fees.

All in all, the lack of transparency and also lack of the asset allocations making sense don’t have me very interested in Covestor Core Portfolios, but it is definitely part of an accelerating movement towards having low-cost index funds as your primary investment holding. Remember, with a little learning you can easily DIY all this for “free” as well and maintain full control over your investments.

More: Barron’s (their asset allocation percentages are wrong, they assume the Top 5 holdings are the entire portfolio), ETF.com

TradeKing Advisors Review: Managed Core and Momentum ETF Portfolios

tkalogoAnother online ETF portfolio advisor joins the mix. Discount brokerage TradeKing, possibly best known for their $4.95 stock trades, announced a new subsidiary called TradeKing Advisors which will directly manage ETF portfolios for retail customers. Details:

  • Portfolio asset allocation designed and monitored by Ibbotson Associates. There will be Core and Momentum portfolios.
  • The portfolio will be determined by an 8 question risk questionnaire.
  • TradeKing Advisors will manage and rebalance portfolio as needed to stay on target. Assets will be held at TradeKing brokerage.
  • Management fee of 0.75% of account balance annually for Core portfolios, minimum initial investment of $10,000. For Momentum portfolios, 1% management fee and $25k minimum account size. For account balances over $250,000, the fees for each portfolio are reduced to 0.50% annually.

Per their website, their “strategies include a diversified allocation of up to 20 asset classes – including fixed income, equities, real estate and foreign investments – implemented cost-effectively with ETFs.” I could not find any specific information about the asset allocation of these ETF portfolios or the ticker symbols used.

But that’s okay, as I pretty much stopped listening when the fees were listed at 0.75% for a basic index ETF portfolio. It may be less than what E*Trade charges but in my opinion that’s still too much to pay for any ETF portfolio, and much more than many other services like Betterment and Wealthfront that do pretty much the same thing also with a slick user interface. Supposedly TradeKing will differentiate themselves with their “exceptional customer service”. As a TradeKing brokerage customer, I found their customer service fine and Live Chat is nice but not worth another 0.40% to 0.50% annually as you don’t even get assigned a Certified Financial Planner or CFA. So far it just sounds like an expensive robo-advisor. In that case, I will pass.

Kindle Unlimited Review: Personal Finance and Investing Books

kindleu2Amazon has just announced Amazon Unlimited, an eBook and audiobook subscription service that costs $9.99 a month (30-day free trial) and not included in Amazon Prime. They claim over 600,000 titles in their library, although that number is padded by a lot of little-known self-published eBooks. “Thousands” of those books come with free audiobook versions. You can read unlimited books (max 10 out at once) and on any Kindle app (Windows, Mac, web browser, iPhone/iPad, Android, etc).

It’s a library card with 24/7 instant availability, but how well-stocked is this virtual library?

My personal reading habits include mainly business, personal improvement, and finance books. I compiled a list of notable books that I have read or want to read first, and then checked if Amazon Unlimited had it. I’m also including the findings from my Oyster review (a competing eBook app) for comparison purposes.

Book Oyster.com Amazon Unlimited
William Bernstein’s Recommended Reading List for Young Investors
The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas Stanley and William Danko. Yes No
Common Sense on Mutual Funds by Jack Bogle. Yes No
Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor. No No
The Great Depression: A Diary by Benjamin Roth. Yes No
Your Money and Your Brain by Jason Zweig. Yes No
How a Second Grader Beats Wall Street by Allan Roth. Yes No
All About Asset Allocation by Rick Ferri. No No
5 Recent Bestsellers
Flash Boys: A Wall Street Revolt by Michael Lewis. No Yes
Pound Foolish: Exposing the Dark Side of the Personal Finance Industry by Helaine Olen. No No
Think Like a Freak: The Authors of Freakonomics Offer to Retrain Your Brain by Steven Levitt and Stephen Dubner. No No
Capital in the Twenty-First Century by Thomas Piketty. No Yes
Thinking, Fast and Slow by Daniel Kahneman. No No
5 Personal Favorite Financial Books
Your Money or Your Life by Vicki Robin and Joe Dominguez. No No
Work Less, Live More: The Way to Semi-Retirement by Robert Clyatt. Yes No
The Richest Man in Babylon by George S. Clason. No No
The Four Pillars of Investing by William Bernstein. No No
A Random Walk Down Wall Street by Burton G. Malkiel. No No

 
* Oyster catalog checked June 2014 and Amazon Unlimited checked July 2014.

Recap

In the “major publisher, popular, well-reviewed” category, Oyster wins hands-down. AmazonUnlimited reportedly does not have any of the major “Big 5″ publishers (they are not BFFs right now). In the “recent business bestseller” category, neither is great but Amazon actually has a slightly better showing. Many of Michael Lewis’s other books are also on AmazonUnlimited (The Big Short, Liar’s Poker, The Blind Side). In the “niche DIY early retirement personal finance nerd” category, again neither does great although Oyster technically wins by a nose.

Bottom line: Amazon Unlimited has a relatively limited catalog for personal finance enthusiasts.

Keep in mind that the Amazon Kindle Owner’s Lending Library still exists (at least for now) and boasts 500,000+ titles (again padded by self-published eBooks). The Kindle Lending Library is free if you already have both a Kindle (any model) and an Amazon Prime subscription. You can only read on a Kindle device though, and you only get one title per month.

There are some promising titles available if you dig around, for example I noticed that William Bernstein’s “Investing for Adults” series of books (The Ages of the Investor, Skating Where the Puck Was, Deep Risk, and Rational Expectations so far) are all available with both Kindle Unlimited and Kindle Lending Library.

Personally, I might sign-up for the free trial and read whatever books I can during that window and maybe it’ll spill over for a month (though you can cancel now and still enjoy you free month without worry of auto-bill), but I can’t see myself paying $120 a year for a limited selection of books (that interest me) that I can’t keep forever.