Military Investment Series Part 1: Why Robo-Investing Sucks for the Service Member

We are approaching the less than a year mark  before switching over to the blended retirement series. I have decided to do an overview of what each component of TSP is and why it is to your benefit to use it for your primary investment vehicle. First part of the series is why do TSP at all? When we are bombarded by advertisements for robotic investment services known as “Robo Investing”, this looks appealing to make awesome market return without managing the money. I’ve noticed how a lot of service members are dicking themselves over with the following robo-investing services:

Robo-Investing Service Annual Fees (%)
Betterment 0.35
Wealthfront 0.25
Futureadvisor 0.5
Personal Capitol 0.89
Vanguard Personal Advisor Services 0.3
Acorns 0.25
bloom $99 a month

There are a few I have consulted that make the stupid decision to invest in Betterment or Wealthfront which charge more than ten times the cost of TSP. There must be a fundamental misunderstanding of math here with these guys. If we look at the cost in terms of basis points, we see that Personal Capitol charges 89 basis points where TSP charges 3.9 basis points, almost 23 times more expensive.

Despite having exclusive access to TSP, some of you are forgoing this benefit by not contributing to TSP. Rather than putting your $18k away automatically into TSP, some are putting their post tax money in essentially the same funds (or in even worse funds that don’t beat the index) in the above private services. Keep in mind TSP charges between 0.026% and 0.039%, meaning that for every $100,000 saved in the plan, military members paid only $26 to $39 in annual fees. In contrast Personal Capitol charges $890 on the same $100,000, putting it essentially the same funds or funds that return less than these index funds.

I don’t know about you, but $890 a lot of fucking money, costing thousands in earning in the future! Even the $350 a year Betterment charges for essentially the same collection of index funds is appalling. These bastards are over charging you, but you think your cool because your hipster friends use it. Not worth it!

Start your 2017 right and don’t be an idiot by ignoring the single greatest military benefit of TSP. Also imagine that sweet 5% base pay match in 2018 when you switch to BRS. Let your civilian sucker friends fall for robo-investing, stick with TSP, as it is one of your military benefits!

Happy New Year!


10 thoughts on “Military Investment Series Part 1: Why Robo-Investing Sucks for the Service Member

  1. Andy says:

    What if you’ve maxed out your $18k yo?!?

    • uiucderp2011 says:


      Whats up man!? Excellent question! So I have been looking into the indirect rollover into a Roth IRA and using the Vanguard 500 Index Fund Admiral Shares (VFIAX) which has an expense ratio of 0.05%. This is the closest I have found to TSP open to the public. The only fund that is less is the Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX). This one is a nice 0.02% which beats TSP! You would have to work for an employer that offers this option.

      I have to do an indirect rollover because we are making over the Modified AGI Limits: of Single $131,000 and Married Filing Jointly $193,000. If you are under these limits you can put right into a Vanguard Roth IRA.

      Stay out of robo investing, the fees are just too high and half the managed funds do not outperform the S&P 500 index.


  2. Dave says:

    Derp! What fund allocation do you recommend I keep my TSP in? I had it all in L2050 before I really got into the world of finances but now that I’m almost making this a hobby I am curious if there are better options?

    • uiucderp2011 says:

      Well I subscribe to TSP Pilot: but they want 2 Years @ $265.95! Anther one that is nice and free is TSP which has everything in C fund right now. They update often, where TSP pilot hasn’t made a move since June!

  3. […] away from financial advisors and wealth management firms. This includes robo investing as you have a much better and cheaper options to invest your money such as TSP, Vanguard, and […]

  4. Paul says:

    Are you not lured by the prospect of tax loss harvesting?

    • uiucderp2011 says:

      please explain

      • Paul says:

        I happen to have an account with wealthfront. I already max TSP and Roth IRA (for me and the Mrs) so the rest of my excess goes into a taxable account. For years I was into actively managed funds and even individual stocks, periodically checking to see if I was beating the averages and switching funds, selling stocks, dabbling in options, etc. It was tiresome. Robo-advisors offered me a relatively low fee to actively manage my account with tax-loss harvesting (TLH)( Now I don’t worry about what the markets are doing, knowing I have “somebody” looking out for me every second of the trading day. Of course everyone’s tax situation is different but it’s hard for me to see a downside to TLH. Depending on specifics, I believe the potential additional return from TLH can even make up for the management fees. Even if it doesn’t, I’m happy to pay a very reasonable fee because it gives me back at least a few hours a week that I used to spend checking my investments. One can always do something for cheaper if done by themselves but at a certain point your time may be better spent on other things or with other people. I’d hate to see your strongly worded post title turn away people from a service that may offer them a good option.

        • uiucderp2011 says:

          Thanks for the insight regarding robo investing. I do agree with you about filling the Robo investing bucket let. What I worry about is those that ignore TSP and put $18K or less into robo investing or active funds without considering TSP at all. Thanks again for the insight. I talked to Doug, and he mentioned you had seen the site. It has been suggested we do more point /counterpoint conversations like this. Even one Surgeon O-5 suggested a podcast!

          • Paul says:

            Happy to offer my insights and opinions when I can. You do a great job here. You “churners” are an exhausting bunch 😉

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