Picking stocks is hard, especially winning stocks. In fact, even Warren Buffett suggests that ordinary investorssimply buy an index fund[i]and hold it for their lifetime. In order to select a great stock, the investor must evaluate the business’s financial records. If the enterprise is still attractive, then you must calculate its discounted future cash flow and determine if the business is worth the current price.
I didn’t even get into the other influencing factors over your stock picks, such as the ongoing economic climate, the stock’s dividend yield, length of holding the stock. Bottom line: Stock picking is complicated!
Enter Emperor Investments. By now, I’m certain you’ve heard of robo-advisors. Emperor is a new hybrid robo-investment firm that aims to select individual winning stocks. They manage a diversified[ii]portfolio for investors who don’t want to stress over picking stocks themselves. I’ve created my own account with them to provide you with an in-depth review of their platform. Be sure to read until the end, Emperor Investments is offering VVI readers 6 months free management!
Table of Contents
Who is Emperor Investments?
Emperor Investments is a SEC registered and SIPC insured investment brokerage that takes a fresh approach to passive robo-advising. They blend human analysis into their algorithm to assist investors in developing a portfolio.
Here’s what sets them apart: instead of picking broad based ETFs, Emperor selects individual stocks based on their specific criteria. They intend to eliminate the daunting task of stock picking from investors who prefer a 100% equity allocation across various sectors. Let’s talk more about how they select those stocks.
What Do They Offer?
Emperor offers individual taxable accounts and retirement accounts, including both Traditional IRAs and Roth IRAs. They also have a broad choice of other more personalized options you can browse here.
Strategy & Technology
The team at Emperor combines mean variation optimization and fundamental analysis to find their “Dream Team” of businesses. Based on those choices, their algorithm then constructs a portfolio based on your personal risk tolerance. They keep their standards high, basing their picks on the following factors:
A long record of consistent dividend payments
Business management that is morally and ethically sound
Buying equity at fair market prices
This strategy is exactly what value investors (or any investor) should consider for when committing to buying a company. Sometimes it’s hard to remember that we are investing into a business rather than a ticker symbol on a line chart. If you want to know more, read up on their exact methodology in their white paper.
So, how well have their stock picks performed? Using their forward testing[iii] model, Emperor claims their investments have outperformed the S&P 500[iv]95% of the time. Of course, past performance is never indicative of future results, so you can take any testing method with a grain of salt. Their model does acknowledge the financial crisis of 2008.
So why would an investor pick Emperor over other robo-advisors? Well, it’s difficult to compare Emperor to other robo-advisors, since each are providing different investment opportunities. That being said, here are the advantages Emperor offers investors.
Pure Stock Portfolios
Unlike most robo-advisors, Emperor portfolios are 100% stocks, with no ETFs. No other robo-advisory firms offer this. This allows investors to be a stakeholder in a company and reap the rewards of dividends. If a lack of diversity concerns you, don’t worry.
They select equities on a range of sectors to limit your portfolio becoming overweight in one area. Emperor provided me with a diversified balanced growth portfolio to which you can see below.
Personalized & Goal Oriented Portfolios
Emperor puts you through a verbose and detailed questionnaire to ensure they invest you in the portfolio that matches both your risk tolerance and your overall objectives. While other robo-advisors do this as well, I found Emperor’s being more detailed and tailormade to the investor.
For example, I set a personal goal of raising $50,000 in 5 years for my future dream home. After adjusting the settings, the system shows you how much you will need to deposit achieve your goal.
Portfolio drift is a common issue in investing, and Emperor takes care of the problem for you. Once your portfolio reaches a certain criterion (usually when weighting is off by 30% or so) it will automatically be rebalanced for you. If you are concerned about a tax liability, Emperor’s got your back. They apply their tax management strategy and sell items with the highest loss (or lowest gain) first.
Dividend investing is a popular strategy and an excellent way to produce passive income with your stock portfolio. For those that have a long investment horizon, a buy and hold strategy benefits tremendously from reinvesting those dividends. Being of the same attitude, Emperor automatically reinvests dividends for you, so you could enjoy greater profits down the road.
No Hidden Fees
Most robo-advisors charge a modest fee to maintain your account. While these fees are reasonable, there are still other hidden fees the shareholder must pay.
Robo-advisors use a large blend of ETFs in their portfolios, and each ETF comes with its own expense ratio paid to the brokerage that operates the ETF. Therefore, the shareholder must pay the expense ratio in addition to the management fee from the robo-advisor.
While this may sound like penny pinching, it isn’t. Intelligent investors recognize that small expenses can compound over many years and can drain your returns. Since Emperor does not hold any ETFs in their portfolios, the investor only must pay a single fee. As with many firms, their pricing varies based on the account size according to the following schedule:
<$100,000 0.6% annually
$100,001-$300,000 0.5% annually
$300,001-$600,000 0.4% annually
$600,001-$900,000 0.3% annually
>$900,001 0.2% annually
So far, Emperor sounds great for the buy and hold, set-it and forget-it investor. Before you take the plunge, let’s discuss some drawbacks of the service.
Lack of Fixed-Income
Emperor does not provide any fixed-income (bonds or cash equivalents) opportunities in any of their portfolios. Having a 100% stock allocation is inherently risky, no matter the economic climate or the investor’s specific goals.
This portfolio allocation would be especially volatile in a retirement account. Legendary investor Benjamin Graham even advised that the most enterprising of investors have only75% of their portfolios in stocks.
However, Emperor recognizes this. After discussing this point with them, they clarified that they would rather focus on what they excel at: picking quality stocks and managing the equity side of the portfolio. In order to achieve diversification through fixed-income investments, the investor would have to look elsewhere.
Based on the evaluation of my own portfolio, as well the model portfolios provided by Emperor, they seem to lack international markets. All stocks in the portfolios are US-based companies or American Depository Receipts (ADRs). International stocks are regularly a contentious point when formulating a portfolio, but we should mention it, nevertheless.
Additionally, there are significant small-cap and mid-cap stock exposure in the portfolios. This is more of a decision by the managers and algorithm, but these additions may be too much exposure than a typical investor would desire.
No Mobile App
In the digital age, virtually every major financial institution has a mobile app for on the go customers. Emperor only supports a desktop version of their site. This is a slight ding against them since most other robo-advisors have an app already. However, you can still access a mobile-optimized version of the site on your device’s browser.
Is Emperor for You?
For the Enterprising Investor
If you prefer to actively manage[vi] your investment portfolio, then Emperor is obviously not for you. They are providing a service for the investor who doesn’t enjoy doing any research. If you’re an aggressive trader or enjoy researching your own stock picks, then there are platforms that can serve you better.
For the Defensive Investor
If you are a defensive or passive investor, then Emperor could be an exciting new opportunity for you. Emperor does all the hard work of analyzing stocks for you!
The passive investor could use the Emperor’s unique 100% equity allocation with another service to round out their investment portfolio. There just isn’t a service in the industry equivalent to what Emperor is offering for their management fee.
Interested in Emperor Investments?
For those interested in trying out Emperor, VVI readers can sign up using my referral link below and six months managed for free! There is a $500 minimum investment to open an account. You can click here or the image below to get started!
[i]Mutual Funds and Exchange Traded Funds (ETF’s) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
[ii]Asset allocation and diversification do not guarantee a profit or protect against a loss in a declining market.
[iii]The results of forward-testing does not represent the results of actual trading using client assets and should not be considered indicative of the skill of the adviser. Forward-testing (aka paper trading) fails to address the broad market’s impact on individual securities and generally does not account for cost like slippage, commissions or fees. Forward-testing often includes “formfitting” which is the ability to select ideal entry and exit points.
[iv] The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock’s weight in the index proportionate to its market value. Indices are unmanaged and investors cannot invest directly in an index.
[v]Rebalancing/Reallocating can entail transaction costs and tax consequences that should be considered when determining a rebalancing/reallocation strategy.
[vi] Active portfolio management, including market timing, can subject longer term investors to potentially higher fees and can have a negative effect on the long-term performance due to the transaction costs of the short-term trading. In addition, there may be potential tax consequences from these strategies. Active portfolio management and market timing may be unsuitable for some investors depending on their specific investment objectives and financial position. Active portfolio management does not guarantee a profit or protect against a loss in a declining market.