Wealthfront
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LAST UPDATED: June 27th, 2019
Wealthfront, originally known as kaChing, was founded in 2008 by Andy Rachleff and Dan Carroll as a mutual fund analysis company and they later moved into providing wealth management services. However, in December of 2012, they began offering tax-loss harvesting for their accounts with upwards of $100,000, and in 2013 they began the year with $97 million in managing assets, which reflected a growth of 450% in just one year. But Wealthfront didn't stop there, as they continued into 2014 they introduced direct indexing, which is a tax-loss harvesting platform that works by purchasing the individual securities of any given investment portfolio. By December of 2014, Wealthfront had more than $1.7 billion of assets under their management. Then they continued through 2014 by raising $35 million via a funding round headed up by Index Ventures, Ribbit Capital, and Benchmark Capital, which brought the company's total funding up to $65.5 million. As of March 2015, Wealthfront's total assets were approximately $2.0 billion.
Top Ranked Companies
The Good
- Cost
- Trading/investing
- Taxes
- Portfolio
Cost
Weathfront offers the kind of low-cost investing many people prefer with no commission fees, no custodial fees, no account fees and no exit fees. So you are probably wondering how they make their money. Wealthfront only charges a 0.25% of assets fee. For example: if you have $100K in your account, your monthly fees would only be a low $18.75 per month. Much lower than traditional investment firms. This fee structure is the same for everyone from small to large investors alike. Everyone is provided the same value for the same fee. Robo-advisors are a great low-cost alternative to traditional investment firms and they usually have low account minimums, which is perfect for those who want to start investing, but don't have large amounts of money to begin. For those who prefer to do things themselves and want the best low-cost option available.Trading/Investing
Wealthfront believes that it's a bad idea to try and time the market through frequent trading. Therefore, they will invest your money in Index Funds. These types of funds trade very infrequently. They try to follow the market rather than trying to time it. That means you are more likely to maximize your gains via passive investing. Wealthfront believes in hassle free investing so they will automatically invest your money based on a risk score that uses academically proven approaches such as Modern Portfolio Theory. Then they will monitor and rebalance your portfolio automatically with no hassle and no work required on your part. They also offer automatic deposits and transfer money into your account on a scheduled basis.Taxes
Wealthfront takes full advantage of the tax status of your accounts. They will put bonds and real estate assets in your retirement accounts so they can compound tax-free. And they usually use tax-efficient stocks in taxable accounts. Wealthfront can help you lower your taxes by utilizing tax-loss harvesting. Their tax-loss harvesting feature could help improve your performance up to 1% per year all by saving you money on your taxes. But what exactly is tax-loss harvesting? Tax-loss harvesting is a technique that's used to lower your taxes while maintaining the expected risk and return profile of any given portfolio. What that means is that this strategy will harvest previously unrecognized investment losses in order to offset the taxes due on your other gains and income. You can then reinvest those tax savings to significantly grow the overall value of your portfolio. And yes, it's 100% legal.Portfolio
Wealthfront builds your investment portfolio from 11 asset classes, which include both U.S. and international stocks and bonds. It's not a good idea to invest in only one asset class. A diversified portfolio will have less volatility over an extended period of time and diversification enables rebalancing. Wealthfront employs ETFs that track indexes for all the major asset classes they use in their portfolios and each ETF is chosen by their investment research team based on a number of factors, but they always tell you why each particular ETF was chosen over its alternatives.The Bad
- Online capabilities
- Limited discounts
Online Capabilities
The Wealthfront website is visually appealing; however, it's extremely hard to navigate. The menu tabs don't really indicate where to click for the information you need. Then, once you get to a page that looks like it could be helpful it's really just more of the same. Hopefully Wealthfront will reassess their website structure to make it more user-friendly and easier to navigate to find the information you need. Unfortunately, Wealthfront does not offer a web app for Android users, this is a game changer for many as a web app is something most people want and use to manage their finances. They do however offer a web app for iOS users though.Limited Discounts
Wealthfront does not offer large balance discounts like some of its competitors. If you have anything over $100,000 to invest, you could probably find cheaper options, but cheaper doesn't always result in better; therefore, you should weigh your options carefully.The Bottom Line
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