SigFig Launches Diversified Income Portfolio, with 4% Target Yield and Low Volatility

Generating investment income is a goal for many investors, especially for those in or approaching retirement. Unfortunately, most investors who seek income do a poor job of it. They are often poorly diversified (64% of income investors own three or fewer stocks*), or generate low yields by investing in cash and bonds, and almost always have US home-country bias.

With that in mind, the investment team at SigFig set out to create a well-diversified portfolio with a generous income stream while managing risk. Today, we are excited to unveil SigFig Diversified Income, a portfolio that is designed to target a 4% income yield by blending eight different income-generating ETFs. By diversifying across many asset classes and geographies, our Diversified Income portfolio provides 4% gross annualized yield** with half the volatility of the S&P 500.

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Unlike traditional wealth management firms who frequently have high minimums of $1 million or more and charge high fees of over 1%, the SigFig Diversified Income portfolio has a minimum investment requirement of $100,000 and management fees of 0.50% which include all trading commissions. And unlike bonds and CDs, which can be hard to sell before they mature or are subject to early withdrawal penalties, our Diversified Income portfolio can be sold at any time, for any reason.

At SigFig, our mission is to help investors improve their portfolios by balancing risk and return and minimizing fees. With this product, investors who seek income can do so at reduced volatility and at very low cost.

Want to know more? Click here to speak with a SigFig Investment Advisor, who will answer any questions you may have.



* Data is from investors who have synced their investment portfolios with SigFig who are 40+ years old with at least 30% of the portfolio in dividend stocks or AGG/BOND/TIP. Historical data to calculate yields and volatility are from Yahoo Finance and Google Finance.


** Target yield of 4% is net of underlying fund expense ratios and gross of management fees. Since its inception 5/31/2012, the Diversified Income portfolio has gross annualized yield of 4.3% and net annualized yield of 3.8%.


Additional disclosures: Target returns are based on model performance and do not represent actual client accounts. There are inherent limitations with model portfolios, such as the limited impact of market factors related to executing trades or liquidity, among other limitations. The target results are not an indicator of the returns a client would have realized or will realize in relying on the Diversified Income portfolio. Past performance is no guarantee of future return. All investments carry a degree of risk. For more information and disclosures, please visit https://www.sigfig.com/l/terms.

Funds are for Venus, Stocks are for Mars

Recently we took a look at how men and women behave differently as investors.

Overall, we found, women invest better (less trading, less playing around with individual stocks, and better performance), but the differences are small.

This week, we want to ask a related question: which securities are especially favored by male or female investors? Or, to put it in an a terrible but immediately comprehensible way, what are the “pinkest” and “bluest” securities — stocks, mutual funds, and ETFs — among SigFig users? And if it turns out men invest in car companies and women invest in cosmetics firms, how much trouble are we going to get into for pointing this out?

Luckily for us, it didn’t turn out that way at all. We found evidence that men and women do favor somewhat different types of securities, but the trend only matched one popular stereotype.

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The pink and the blue

First, a quick explanation of how we determined which securities are “blue” and which ones are “pink.”

Most SigFig users – about 80% – are men. So on average, each security in our dataset is owned 80% by men and 20% by women. Any security whose ownership is more than 20% female goes on the “female-favored” list.

We found 18 securities that passed this test. They showed a mild bias toward health care investments (Vanguard Health Care fund, Pfizer, AbbVie, and Fidelity Select Biotechnology Portfolio). Overall, the female-favored securities break down as follows:

Index funds and ETFs: 7
Active mutual funds: 6
Individual stocks: 5

For comparison, we also looked at the most male-dominated securities. Here we see a lot of big-name individual stocks, including Alibaba, Twitter, Tesla, Coke, Microsoft, and Ford. The breakdown goes like this:

Index funds and ETFs: 7
Active mutual funds: 0
Individual stocks: 11

What’s going on?

We should be careful about drawing too many conclusions from this data. It’s based on a particular point in time, and the favorite holdings may already have shifted. And few of these securities show a large male or female bias. Everything we’re calling a “trend” could be a statistical artifact.

But let’s ask the question anyway: why do men tend to favor individual stocks? It could be because they believe they can pick and trade them profitably, but it might also be because men (particularly men who use an online investing tool) are more likely to work at startups, tech firms, and other companies that pay them in stock. Twitter, for example, employs 70% men. Microsoft? 71%.

We also found evidence that men are more likely to hold an account at a trading-oriented discount brokerage (such as Scottrade or TradeKing) and women are more likely to have an account at a mutual fund giant like Fidelity or Vanguard.

The takeaway

Women are more likely to hold active mutual funds and health care investments; men are more likely to hold ETFs and individual stocks—especially tech stocks. But the differences aren’t huge. And, as usual, we only know what we see among investors who use SigFig to track their portfolios. They may not be representative of investors as a whole.

Not Your Old Man’s Mustang: How Generations Invest in Tesla vs Ford

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Tesla (TSLA) announced a new leasing program Saturday, with lower monthly costs and a newly-introduced “happiness guarantee.” Consumers can now lease a new Model S for $777 to $1,296 a month (depending on battery and annual mileage allowance) — and have three months to return the car if they don’t like it and discontinue the lease.

That may sweeten the deal for drivers who already have had their eyes and budgets set on the electric car, but Teslas are hardly yet mainstream. The company has projected sales of 35,000 cars this year. Ford will sell 150,000 cars in September alone.

Yet, a look at investors’ portfolios tells an interesting story: even though about half as many investors own Tesla (TSLA) stock on average as those who own Ford (F), the trend is reversed for younger generations. Investors in their 30s or younger are more likely to own TSLA stock, while Ford remains a clear winner among investors in their 50s or older.

Individual Investors’ Reaction to PIMCO Shakeup? 85% Stayed Put

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It’s been nearly a month since Bill Gross’s sudden departure from PIMCO rattled the investment world. Analysts predicted investors would pull billions out of the funds — and were right.

The reaction was swift: investors withdrew $23.5 billion from PIMCO Total Return in September, the lion’s share of which happened Friday after the news broke, according to the Wall Street Journal. This represented about 10% of the fund. Meanwhile, nearly $550 million left PIMCO Total Return ETF (BOND), which was also under Gross’s management.

What about individual investors? Since the news broke on September 26, nearly 4.5 times more dollars tracked by SigFig have flowed out of PIMCO funds than into them. But this activity was concentrated among 15% of owners of PIMCO — 85% of PIMCO holders have not engaged in any trading in this timeframe.

Investors seem to have moved that money over to other bond funds, with Vanguard’s Bond Index fund (VBTLX) and the iShares Barclays Aggregate Bond Fund (AGG) among the beneficiaries. With an expense ratio of 0.08%, the low-cost VBTLX and AGG are bargains compared to the bulk of bond funds that charge 0.45%-0.90%.

What Women Can Teach Men About Investing – And Vice Versa

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Who invests better, men or women?

Academic research is nearly unanimous: women do. Why? Because men trade more often, incur unnecessary fees and taxes, and suffer inferior performance. (Guys, don’t worry. We’re only talking about investment performance.)

Or, as the title of a popular book put it: Warren Buffett Invests Like a Girl.

One of the most widely cited studies of investment performance by gender is a 2001 paper by Brad Barber and Terrance Odean called “Boys Will Be Boys.” In it, the authors look at the performance of over 30,000 households with accounts at a large brokerage. They found that men significantly underperformed women in their investment accounts. The difference was most pronounced—over 2 percentage points per year in returns—between single men and women.

But the data behind that study is now nearly twenty years old, collected before the advent of robo-advisors, online discount brokerages, and exchange-traded funds (ETFs). At SigFig, we were curious whether we’d find the same trend in our data set, collected from all types of accounts (taxable, 401(k), IRA, and so on) over the last 12 months.

The answer is mixed. Women definitely still invest better than men on a variety of measures — but men have a couple of habits worth emulating, too.

Trading and Performance

Men trade much more than women, executing 33% more trades, on average, in the last year. (If we measure by portfolio turnover, men have 50% higher portfolio turnover than women.) We’ve confirmed that trading more is associated with inferior performance.

Indeed, our data suggests that women earned higher returns (net of fees) than men in the last year, for portfolios of similar or even lower risk. The difference is on the order of 25-50 basis points, however, and the time period short. We’ll keep an eye on it.

Security selection

Here’s where the story gets more mixed.

Men tend to hold more individual stocks than women as a percentage of their portfolios (29% vs 24%). But they also hold more ETFs than women (17% vs 12%). ETFs tend to be cheaper than traditional mutual funds and less likely to be actively managed.

Indeed, when we look at the fund expenses our users are paying, women pay slightly more, 0.48% for women vs 0.42% for men annually. That doesn’t take trading fees or taxes into account, however, which is probably why women still outperformed men.

Not so different

We’re stereotyping here. Male and female investors are more similar than different. It would be easy to find an individual woman who day-trades or a man (such as this writer) who sits on a low-cost portfolio and rebalances it once a year.

But the differences are real. Women who have to endure lectures about investing from the men in their life have every right to smirk and ignore them.