You can invest by yourself, or you can use a "robo-adviser" - a computer - to do it for you.
And soon, you'll be able to invest using a new local robo-adviser. Meet the money-management firm Alpha Architect of Broomall, which is testing a robo-adviser for launch in January.
Wesley Gray and his colleagues founded Alpha Architect initially to run money for high-net-worth clients and what are known as "family offices," wealthy families that manage their own money privately.
Alpha Architect will mirror those same strategies and offer them to regular folk, who can avail themselves of its robo-adviser with a minimum of $50,000.
The term robo-adviser is simply slang for low-cost, Internet-only money managers that automate investing with few or no humans involved and offer extras such as tax-loss harvesting.
Robo-advisers often use passive index funds, but Alpha Architect instead uses exchange-traded funds it has created.
"Although several robo-advisers offer passive portfolios, we believe in the benefits of active management," Gray said.
The firm has two ETFs trading now under the ValueShares name: QVAL, composed of U.S. stocks, and IVAL, made up of international companies. Alpha's assets total about $200 million. Two more ETFs are in the works.
Alpha Architect is positioning itself as a middle-market alternative to strictly passive index funds (priced usually under 0.20 percent annually) and active mutual funds (2 percent annually or more).
Its planned robo-adviser aims to rival those of Vanguard, Charles Schwab, and other giant mutual-fund firms. Start-up firms such as Betterment and Wealthfront founded robo-advisers to chase millennial investors.
In May, Vanguard lowered its minimum to $50,000, according to a spokeswoman. Its version of a robo-adviser, Vanguard Personal Advisor, charges an annual advisory fee of 0.30 percent of a client's managed assets, or $150 on a $50,000 portfolio annually.
Depending on your risk tolerance, underlying investments at Alpha Architect can include: domestic stocks; international stocks; real estate (through passive REIT ETFs); commodities (again through ETFs ranking commodities); and fixed income (ETFs investing in seven- to 10-year U.S. Treasuries).
Gray and CFO Jack Vogel argue that ETFs are highly tax-efficient, more so than mutual funds or investing in stocks and bonds individually. Alpha Architect monitors and rebalances at month's end, depending on what its models dictate, and will even raise cash if necessary.
"This is an integral part of our downside protection system," Gray said. "In a market downturn, it is common to find a portion of one's portfolio in cash as the market correction plays out."
For active portfolios, Alpha Architect's fees range from 0.57 percent to 0.79 percent, in addition to the 0.25 percent management fee. Those fees are higher than most passive ETFs, but lower than typical mutual-fund fees or other alternative investments offered by active managers.
A bit about Gray: After serving in the Marine Corps, he earned an M.B.A. and a Ph.D. in finance from the University of Chicago. He has a bachelor of science degree from the Wharton School of the University of Pennsylvania. He teaches as an adjunct at Drexel University.
Gray and his investment team outline their investment philosophy in a few books: Quantitative Value: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors and DIY Financial Advisor: A Simple Solution to Build and Protect Your Wealth, both published by Wiley.
Women and retirement
Are you a 50-plus woman wondering whether your income and assets are enough for a secure retirement?
The Women's Opportunities Resource Center and the Pennsylvania Institute of Certified Public Accountants are hosting group classes starting Oct. 27 at the Gershman Y, 401 S. Broad St. (at Pine). The cost is $60 for the four-week series.
The course is open to women with net savings/assets up to $250,000 (exclusive of their homes).
Applications are available at www.worc-pa.com (under Quick Links) or call WORC at 215-564-5500.