Don't Trust the Robots

The robots are out to get you.

Human investment advisers have a long history of self-interested decision-making. They might make an unnecessary flurry of trades to collect more commissions... or collect steep management fees for merely buying the S&P 500 Index.

The robots were supposed to change all that. And no, I don't mean big, clunking machines that motor along behind you when you visit the bank. I'm talking about the "robo-advisors" that began popping up as the smartphone revolution kicked off in the late 2000s.

Robo-advisors are algorithms designed to allocate money among different asset classes like stocks, bonds, and cash... They offer a simple, low-cost, set-it-and-forget-it way to invest. And investors have responded.

As recently as 2017, robo-advisors had $1.1 billion worth of assets under management. As of last year, that figure rose to $1.8 trillion.

The idea is that they can make investors the most money possible, accounting for risk, without the expense (for either a financial institution or a client) of paying a human for this expertise. But the robots aren't always as benevolent as you might expect...

Consider the robo-advisor called Schwab Intelligent Portfolios, which the broker Charles Schwab launched in 2015.

Investor cash poured in. And Schwab's robots would lend it out to an affiliated bank, collect interest, and pay just a portion of that interest back to the clients... all while telling the clients that the Intelligent Portfolios were getting them the best possible deal.

The difference between the two interest rates – what Schwab received for lending out clients' money and what clients actually received from Schwab – was the robots' secret profit.

Turns out, even robots aren't above the law. A few years ago, Schwab had to pay $187 million to settle a lawsuit with the U.S. Securities and Exchange Commission ("SEC") over its robo-advisors' underhanded dealings.

From an SEC statement...

The Securities and Exchange Commission today charged three Charles Schwab investment adviser subsidiaries for not disclosing that they were allocating client funds in a manner that their own internal analyses showed would be less profitable for their clients under most market conditions.

Gurbir Grewal, director of the SEC's enforcement division, called Schwab's conduct "egregious."

I get why folks would want to trust their investing to robots...

Deciding what to invest in and figuring out proper asset allocation can seem boring and complex (though it doesn't need to be). And teaching you the right way to do it doesn't make Wall Street any money... That's why you don't hear much about it.

But it's the most important factor in your retirement-investing success.

I've written many times about the benefits of asset allocation. Distribute your portfolio among different asset classes – stocks, fixed income, cash, and chaos hedges (like precious metals). Keeping your wealth stored in a diversified mix of investable assets is the key to avoiding catastrophic losses.

You also need to consider something called correlation...

Correlation is a statistic that measures the degree to which two stocks, or sectors, move in relation to one another.

Positive correlation means the two assets move in the same direction together. For instance, when the price of fuel increases, so do the prices of airline tickets. Negative correlation means the assets move in opposite directions. For example, if stocks fall, gold tends to rise. (You can use online calculators like this one to easily find correlation.)

A good way to protect your portfolio is by making sure all your assets aren't positively correlated – and therefore won't drop in tandem should hard times hit.

Of course, too many folks will ignore all this advice and still load up their portfolio with the "next big thing." I'm sure plenty of people did this when it looked like Nvidia was unstoppable.

The truth is, no matter how compelling a single stock might be, it's never going to be a smart idea to put all of your money into it. That's a crazy risk to take.

Even putting 10% or 20% of your portfolio into any one stock is a huge gamble, because if something goes wrong – like we've seen this week – you'll watch a big chunk of your net worth go up in smoke.

To really grow and compound your money over time, your total portfolio needs to make sense. It needs to be more than the sum of its parts.

The problem is, the entire financial-publishing industry tends to spend way too much time focusing on individual stocks... and nowhere near enough time on overall portfolio construction.

We're an industry obsessed with ingredients, not recipes.

But, last week, I went on camera to explain why that doesn't have to be a problem for you... We've put together one perfectly balanced, fully diversified portfolio built to grow in any market condition imaginable.

And if the track record we've seen so far is anything to go by, you could more than double what your current portfolio is earning.

This is Stansberry Research's most important recommendation.

Watch me explain it all here now.

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Here's to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
July 14, 2025