How Marcus Invest Selects ETFs For Your Portfolio

So you’re ready to start investing. You’ve set the funds aside, and maybe you have a goal in mind like retirement or a second home.

Figuring out where to go from there can be, well, a little overwhelming. As you probably know, there are so many investment options out there. And that could make it tough to decide where to invest your money.

Marcus Invest is here to help you take the guesswork out of the process – and we can do some of the heavy lifting for you. We’ll recommend a diverse mix of stock and bond ETFs that are aligned with your goal. You’ll have exposure to a range of industries and economies so you have multiple opportunities for growth and won’t be tied to the fate of a single stock. 

Marcus Invest and ETFs

Before we can recommend a managed portfolio for you, we’ll need to get to know you a little better. When you open a Marcus Invest account, we’ll ask you some questions to get a better feel for your investment profile and what you have in mind for the money that you will be investing. For instance, we'll want to know about your time horizon and risk tolerance. This process helps us recommend a strategic asset allocation that we think is a good fit for your investment objectives.

Then based on the information you’ve given us and the portfolio theme you select, we’ll recommend one of our ETF-based portfolios. 

ETFs, or exchange-traded funds, combine several assets into one single fund. So, a single ETF may give investors exposure to several different companies. ETFs are also traded on an exchange, just like stocks.

An ETF could be made up of a variety of stocks from large domestic companies. They can also include other investments, like currencies and commodities. But the ETFs included in Marcus Invest portfolios are either stock or bond ETFs, meaning that they will only include stocks or bonds, not currencies or other investments.

With so many investment options out there, it’s fair to ask why we decided to build our portfolios using only ETFs. It's a good question! We recommend ETF-based portfolios because they offer a few perks: intraday trading ease, relative transparency and potential tax efficiency. And these benefits typically come at a lower total cost than most actively managed mutual funds.

We do our homework to make sure the ETFs that are available on our platform are well suited for our portfolios. And there’s a lot that goes into that process. So let’s dive in!

How Marcus Invest chooses ETFs for our platform (and then, your portfolio)

As of December 2020, there were roughly 2,300 ETFs to invest in on the U.S. markets, according to Morningstar. Going through the list yourself and taking a close look at each one would be a Herculean task.

But with Marcus Invest, you don’t have to – we’ll do the work for you. So let’s start by taking a look at the ETFs on the Marcus Invest platform. 

Marcus Invest is built on something called an “open architecture” platform. That means that our portfolios can include a wide variety of ETFs from different institutions, in addition to some of our own Goldman Sachs ETFs (available in select portfolios).

We also include ETFs from reputable third parties that we’ve carefully vetted. That way, we have a wide variety of ETFs to choose from, which helps us recommend a portfolio that is a good fit for your selected portfolio theme.

We focus on finding the ETFs that we think are best suited for our portfolio themes, whether they are from Goldman Sachs or another institution. For that reason, all of the third-party ETFs that we select have undergone some intense analysis. Our teams of investment professionals have done a ton of research to create a curated list of ETFs for our portfolios. 

Translation: We really think hard about which ETFs are a good fit for our portfolios, and not all of them make the cut. 

Inside the ETF vetting and selection process

Now, we’re about to nerd out on our process here. If you want to skip ahead, we won’t blame you! But stay tuned if you want the nitty-gritty details on how we choose ETFs for our platform.

First, we can’t take all the credit for this process. Other colleagues at Goldman Sachs help us along the way, including the Alternative Investments and Manager Selection (AIMS) group. They’re a team of Goldman Sachs Investment professionals that specializes in manager due diligence – in other words, they do a lot of the hard work when it comes to researching ETFs unaffiliated with Goldman Sachs.

AIMS developed an extensive screening framework, which creates a list of approved ETFs that are managed by third-party companies. The AIMS team also uses its in-depth knowledge and experience working in the industry to source, research and vet the catalog of third-party ETFs approved for use by Marcus Invest. So, if a third party ETF is on our platform, that means they’ve taken a hard look at it.

Here’s a little bit about the process. When considering an ETF, the AIMS team starts by doing investment and operational due diligence on the ETF provider. That means they take a look at the processes used by third-party ETF managers, their investment policies, operational readiness, etc. 

Then, they also apply a quantitative screen and dig into the data associated with each investment. That includes looking at each investment from a variety of angles (or metrics as they say in the biz), including the ETF’s tracking error, total assets, trading activity and total historical track record. And we don’t forget ETF fees! Our teams take great care in evaluating ETF fees (often called expense ratios) to help keep your investment costs low.

Goldman Sachs ETFs that are offered as part of Marcus Invest go through a rigorous evaluation process, too. It’s a slightly different procedure and typically doesn’t involve the AIMS team. For Goldman Sachs ETFs, we generally focus more on the qualitative aspects of the investment – more so than they would when evaluating one from a third-party.

Basically, we’re doing the head-splitting investment research for you. We know that all of this stuff can be time-intensive for investors to do on their own. That’s why we’re trying to get it all out of the way before you invest a single dollar.

Marcus Invest does the heavy lifting for you

Investing can be fun and exciting, but there’s a lot to it. That’s why we’re here to help. 

With a curated list of ETFs that we’ve researched and vetted, Marcus Invest can recommend a portfolio for you that’s aligned with your investment goals. We’re here to help take on some of the hard work of investing. After all, you have financial goals you’re trying to achieve, and we want to help you see them through.