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“Plant” your savings…?

by on August 16, 2010

Plantly's homepage

One of the first startups that we wanted to review is Plantly. Some of you may already have heard of them as they presented at TechCrunch Disrupt in NY this past May. They’re still in private beta but we had a chance to take a look at their site and if they really have a “risk-aware investment tool that aims not to suck.”

First impressions – it’s a very slick interface but the overuse of Flash can be distracting at times (I’m not sure as to what the point of the 180 boxes/”plants” on their “Find a Plan” page is…) but they do a great job in walking you through a series of quick questions ranging from how much you want to invest to how much risk you want to take on. Based on your results, they’ll recommend a basket of ETFs that would be the ideal diversification strategy based on your portfolio size and risk profile. What’s cool is the fact that you can optimize your portfolio based on the transaction fees charged by your brokerage – it’s nice to be able to see how much you’ll actually be spending in fees before you go through and make the decision to invest in a certain portfolio.

So, if what you’re looking for is one step above a cookie-cutter recommendation, Plantly is the tool for you. It’s easy and very simple to use.

But we also found it almost too simple to use – we personally found the oversimplification of the risk portion of the portfolio was a little alarming. Seeing a couple of graphs that give me a series of scenarios of how my portfolio is going to do is nice but I’d really like to see how the recommendations have done in the past. Plantly does give you profit numbers so people can see what the returns of their recommended plan would have been if you had invested at some point in the past. What’s missing is the volatility of these portfolios – sure you’re telling me that I could have made 10% in profit had I invested a year ago, but is it 10+/-2% or 10 +/- 20%? That suddenly completely changes the situation…

What also worries me is the fact that when you look at how their recommended plan has done in the past – you can see the profits that you would have realized had you invested say a year or two years ago. But it’s always just profits! This is rather disconcerting since the recent economic conditions have been far from ideal (duh). So, it makes me feel that their algorithm for picking their ETFs is just picking the combination of ETFs, that in hindsight, outperformed the market. Now this is misleading especially considering that historical returns are in no way an indication of how the market or your ETFs are going to do in the future – think “random walk.”

But since Plantly warns all users to “not invest just yet,” they’re probably already thinking of ways to address the issues I’ve brought up in this post. They’ve got some cool features that you could use right now but you’d just have to augment it with other tools and services provided by either Morningstar or your own brokerage firm.

Definitely worth checking out and ask them for an invite code if this is something you would be interested in!

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