How to build your own dividend-focused robo-adivsor

Today we have a guest post! The guest post is written by Brendan Lee Young is one of the founders of Passive, an automated portfolio management tool that helps DIY investors be their own wealth manager using their brokerage accounts. He follows a core-and-explore investment strategy but loves the feeling of getting paid dividends. Please note that this article was written for informational and educational purposes. It should not be taken as financial or investment advice.

In this post I’d like to show you how you can undercut robo-advisors and build your own dividend-focused robo-advisor using a proper broker and Passiv. Robo-advisors are essentially software that asks you a bunch of questions to determine what levels of risk you’re willing to take, then based on your answers they invest your money into ETFs and they charge you a scaling fee for portfolio rebalancing. This fee is charged on top of the underlying fees for the ETFs in your portfolio. For the ordinary person with no financial knowledge, this may sound like an ideal solution for building long-term wealth. 

However, if you are a DIY investor with knowledge of your desired risk tolerance and portfolio make up, then you can get all of the advantages of a robo-advisor without having to pay a scaling fee. Here’s how to do it.

Step 1: Get Yourself a Proper Broker

By proper, I mean one that has free trades and an API. What’s an API? It’s basically a way for Passiv to securely access your account and get information that will help you manage your portfolio. Below is a list of brokers that have free trades and can integrate with Passiv:

  • TDAmeritrade
  • Interactive brokers
  • Alpaca
  • Questrade*
  • Tradier (support coming soon)
  • Ally Invest (support coming soon)

*Questrade offers $0 trade commissions on ETF purchases.

Step 2: Know what stocks and/or ETFs you’d like to hold and your target asset allocation for each asset in your portfolio. 

If you’re not sure what stocks to buy, I suggest reading up on The Dividend Aristocrats, which maintain a list of S&P 500 stocks that regularly pay increasing dividends.

If stock picking isn’t your jam, there are several ETFs with low fees (in no particular order) that you can use in place of or in combination with individual stocks. For example:

VYM – Vanguard High Dividend Yield ETF:

This ETF tracks the FTSE® High Dividend Yield Index. With a low expense ratio of 0.06% and a broad diversification, this is the most popular high dividend ETF with over $25B of Assets Under Management (AUM). As of 03/31/2020, its current SEC yield is 4.15%.

VIG – Vanguard Dividend Appreciation ETF:

This ETF tracks the performance of the NASDAQ US Dividend Achievers Select Index, which comprises companies consistently growing their dividends every year. It also has a low expense ratio of 0.06% and as of 03/31/2020, its current SEC yield is 2.20%.

Schwab U.S. Dividend Equity ETF:

This ETF tracks the Dow Jones U.S. Dividend 100™ Index. It also has a low expense ratio of 0.06% and as of 04/29/2020, its current SEC yield is 3.66%.

iShares Core High Dividend ETF:

This ETF tracks an index composed of relatively high dividend paying U.S. equities that have been screened for financial health. It also has a low expense ratio of 0.08% and as of 03/31/2020, its current SEC yield is 5.21%.

Of course there are plenty other good options for high paying dividend ETF but low fees is usually a good place to start. If you want to find more ETFs other than low fee dividend-focused ETFs, then check out It’s a great resource that maintains a comprehensive database of all dividend paying ETFs in the USA as well as other categories of ETFs. 

Step 3: Use Passiv to help you manage your portfolio

Passiv is a web app that helps you manage your portfolio and maintain a desired target allocation in one or multiple accounts. It’s what you’ll use to turn your brokerage account into your own personalized robo-advisor.

Getting started with Passiv is simple:

  1. Create a Passiv account
  2. Connect Passiv to your brokerage account using a secure API. You can even manage your whole family’s investments with a Passiv Elite subscription as it allows you to connect multiple accounts and manage them as one portfolio. 
  3. Set up your target portfolio by entering which securities you’d like to hold and their relative allocation in your portfolio. If you already hold securities, you can also import your current portfolio allocation from your brokerage to start with. 
  4. Set up automatically recurring contributions to your broker. 
  5. Sit back and let Passiv do the work. 

passive, robo-advisorUsing Passiv will free you from having to create and maintain spreadsheets to manage your investments. It shows you what trades are needed to maintain your target allocation and rebalance your portfolio. Once you’ve got the trades, simply login to your brokerage to place them. By default it will prioritize buying the underweight assets in your portfolio. However, you can adjust the settings to sell the overweight assets and purchase the underweight ones in your portfolio. Also, you’ll get notifications that let you know when cash hits your account and your portfolio drifts.

Passiv is free to use but, if you go with the paid version, you’ll get access to more advanced features like the ability to link and combine multiple accounts into one portfolio. Likewise, the ability to use One-Click trades which lets you place the calculated trades in your brokerage account for you.

Our goal at Passiv is to make DIY investing easier to follow so that more people can have the confidence to invest on their own and build long-term wealth. With the rise of passive investing, low-cost ETFs, zero stock trades and brokerages investing in APIs, we hope to see more software products out there serving the needs of DIY investors.

One thought on “How to build your own dividend-focused robo-adivsor

  1. I glad a company finally set something up like this. However, it would be a little better if they were a broker as well so you wouldn’t have to have multiple financial apps.

    Thanks for sharing!

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