More Freedom Investing Added to Marotta’s Schwab IIP Asset Allocation (June 2020)

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In addition to our “Comprehensive” and “Collaborative” service levels, we also offer some of our services in a “Do-It-Yourself” service level that has a lower annual fee and no minimum. Basic services include asset allocation design and portfolio management. Some additional services are available for an additional charge.

Within the past year, we opened up our Do-It-Yourself service level so that, in addition to the algorithm-traded Schwab Institutional Intelligent Portfolios (IIP) accounts, we also offer regular accounts which are hand-traded by our investing team.

We often recommend the algorithm-traded IIP accounts for IRAs as the quick implementation of the dynamic tilt can be worth a lot.

However, hand-trading is often better for taxable accounts as capital gains management is handled poorly by algorithm but wisely by skilled traders. Furthermore unlike the Schwab IIP accounts, our hand-traded accounts do not require a 4% allocation to cash. Assuming a 7% rate of return, a 4% allocation to cash could reduce performance by as much as 0.28% because it is not fully invested.

If you want to open a Schwab account to be hand-traded by Marotta, then one option for opening that account is to use Schwab.com’s online account open. If you want to open a “Do-It-Yourself” account on the Schwab Institutional Intelligent Portfolios (IIP) platform, you should follow these instructions.

This month we are excited to report that we were able to add five new country-specific funds to our Schwab Institutional Intelligent Portfolio allocations.

For accounts using the IIP technology, the list of fund choices is extensive, but not unlimited. Among its screening requirements, Schwab requires that ETFs have at least $20 million in assets and that each fund be relatively liquid (the bid-ask spread is small) before it can be part of their platform. These requirements are there to help ensure that Schwab’s algorithmic trading won’t move the stock price very heavily or cost the investor too much.

This quarter, Schwab completed their semi-annual fund analysis to see if they would add new funds into their Intelligent Portfolio platforms. As a result of those new fund additions, this June 2020, we added five new country-specific funds to our Schwab Institutional Intelligent Portfolio asset allocations.

1. New Zealand

New Zealand has been part of our Freedom Investing score since the beginning. It has consistently had an Economic Freedom score of above 75 and an Investment Freedom score of at least 70. Schwab just added our Investment Committee Buy List fund iShares MSCI New Zealand ETF (ENZL) to its IIP platform. ENZL has an expense ratio of 0.50%.

2. Ireland

Ireland achieved a high enough Freedom score in 2000 to join our Freedom Investing strategy, but Schwab just added iShares MSCI Ireland ETF (EIRL) to its IIP platform. EIRL has an expense ratio of 0.49%.

3. Netherlands

Although the Netherlands always had a great Investment Freedom score, it waivers on its overall freedom score. First joining our strategy in 2002, it has been part of our index during 2002, 2006-2010, and 2017-2020 present. We’re happy that Schwab added iShares MSCI Netherlands ETF (EWN) to the platform. EWN has an expense ratio of 0.50%.

4. Denmark

Denmark improved its freedom score sufficiently to join our Freedom Investing strategy in 2005. Now, our choice ETF for the country, iShares MSCI Denmark ETF (EDEN), has been added to the Schwab IIP platform. EDEN has an expense ratio of 0.53%.

5. Chile

The last country we added this month was Chile. Although we mainly talk about our developed country Freedom Investing strategy, we also monitor and strategize Freedom Investing for emerging market countries. We don’t write about it as much though because Chile is the only emerging market to meet our criteria.

Chile has consistently met our Freedom Investing criteria since 1997 and has had a place in our portfolio design since the beginning of Freedom Investing. We invest in Chile alongside a general emerging market fund like Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) so we can tilt our emerging market allocation towards freedom.

Now that Schwab has added iShares MSCI Chile Capped ETF (ECH) to their IIP platform, we are happy to welcome Chile into our IIP asset allocations. ECH has an expense ratio of 0.59%.

Honorable Mention

There is one more country that we hoped to add this June 2020, but we discovered that Schwab limits our fund selections for each of their security type categories (Stocks, Fixed Income, and Commodities) to only twenty different funds. As a result of this limitation, we were not able to add Finland as it would have been our 21st stock added. Finland has been the newest country to pass our criteria. It just achieved an overall score of 75.7 in 2020 after years of hovering close to a score of 74. Although we would have liked to add it, it is not essential to get the benefit of Freedom Investing.

Now, all of our Freedom Investing countries, except for Finland, are represented in our Schwab Institutional Intelligent Portfolios allocations.

If you want to open a “Do-It-Yourself” account on the Schwab Institutional Intelligent Portfolios (IIP) platform, you can follow these instructions. If you want to hear more updates about our Freedom Investing and other financial strategies, you may enjoy subscribing to our weekly newsletter.

Photo of Netherlands by Dimitry Anikin on Unsplash

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Chief Operating Officer, APMA®

Megan Russell has worked with Marotta Wealth Management most of her life. She loves to find ways to make the complexities of financial planning accessible to everyone. Her most popular post: The Complete Guide to Your Washing Machine