An intriguing entrant to the robo-advisory arena is Acorns, an SEC Registered Investment Advisor. The idea behind this firm’s approach is to enable investors to “invest the change” (aka “acorns” or relatively small amounts of money) that will build over time into a sizable portfolio.
Managed portfolios seem to becoming more popular as more people want to invest, but aren’t sure how.
The practice of portfolio management has been around a long time but has more recently become part of the mainstream as portfolio management services are now accessible to the average person (who may have just a few thousand dollars to invest). Companies like Betterment and WealthFront (also called robo advisors) have begun to popularize the concept.
What is a managed portfolio or what are portfolio management services? Generally, a managed portfolio is one in which a professional manages investments on a client’s behalf. Typically, the client will pay a flat or sliding-scale fee based on the portfolio size. The fee is calculated by multiplying a percentage (such as 0.25% or 1.0% set by the investment or brokerage firm) by the assets under management (AUM). The AUM represents the dollar value of investments being managed.