That’s The Easy, Now For The Ugly
Look at the list of mutual funds presented earlier. Each will have a dividend and a capital gains distribution, which will sit in a black box, and then be announced, and given to you.
Let’s say that you have a tax situation, and that the extra distribution puts you into the next tax bracket…not fun, and you would’ve been unaware. This same problem will occur on robo-advisors, of every stripe.
So while there is no disputing the method used to arrive at their holdings (Finance 701 is just that), here then will allow you to keep your wits when you look at your returns, versus benchmarks. Your takeaway: headlines are pretty, but can be misleading and create further errors if you have skipped steps, and draw conclusions (there’s a reason our 3rd grade math teacher said ‘show your work.’)