How To Invest In Wealthfront

Date:

Wealthfront Is Best For:

How to Invest for Beginners in 2022

None.

Savings account/cash management account

The Wealthfront Cash Account offers high interest checking. The cash account offers a competitive yield and is covered by up to $2 million in FDIC insurance. The account requires just $1 to get started.

Customer support options

Licensed product specialists available to provide support or product information via phone or email . Phone support Monday through Friday 8 a.m. to 5 p.m. Pacific and all emails are responded to within one business day.

Other Details You Should Know

Partnership: In January 2022, Wealthfront agreed to be acquired by UBS Group AG. However, in September 2022, the investment service provider and UBS said that they had decided to terminate the pending acquisition. The two said they were looking at ways to partner, and announced UBS had given Wealthfront financing, but that Wealthfront would remain an independent company.

Portfolio line of credit: Wealthfront offers a portfolio line of credit that allows customers with balances of $25,000 or more in a taxable investment account to borrow up to 30% of their portfolio. Credit checks and paper work aren’t prerequisites to borrow money from your portfolio, and it takes one business day for funds to be transferred.

Risk parity: In taxable accounts, customers can select Wealthfront’s Risk Parity Fund, a proprietary mutual fund the company says offers greater exposure to asset classes with higher risk-adjusted returns.

The funds expense ratio is lower than other risk parity funds, but as it is a more actively managed fund, its costs are slightly higher than the other index funds Wealthfront employs, bringing the weighted average expense ratio of portfolios that include the Wealthfront Risk Parity Fund to 0.11%. Clients who select risk parity will hold a mix of three ETFs VTI, EMB, BND until their account balance reaches $100,000, at which point these ETFs will be replaced with the Risk Parity Fund.

What Are Its Plans And Pricing

Wealthfront charges 0.25% per year for all of its portfolios. If you have a portfolio under $100,000 youll also pay 0.07-0.16% per year for fund fees. With direct investments, you wont have to pay the fund fee.If you want to start an automated savings plan, you can link your Wealthfront account directly to a checking or savings account.Wealthfront supports the following types of investment accounts:

  • Traditional IRAs
  • Individual and joint taxable brokerage accounts

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Key Advantages Of Wealthfront Robo

Wealthfront robo-advisor offers some attractive features for investors, including:

  • Low investment minimums.
  • A diverse range of account options.
  • Access to the Wealthfront cash account.
  • Low management fees and low-fee ETFs.
  • Automated investing, with human financial experts standing by.

Part of Wealthfronts appeal is that it makes investing accessible to just about anyone as long as you have the $500 minimum need to open an account. Compared to other robo-advisors, Wealthfront fees are budget friendly to those looking for automated financial advice versus working with a human financial advisor.

The Case Against Active Investing

Investment Management, Online Financial Advisor

As our Chief Investment Officer Burt Malkiel explained in his seminal book A Random Walk Down Wall Street, a stock’s price incorporates all the available knowledge about the value of the company and the best predictions about the future of the stock. According to Burt, stock-picking is a losing game you cannot beat the market the best you can do is to track the overall returns of the financial markets.

But since there’s an entire industry devoted to outperforming the market, let’s take a look at how active managers do. The table below compares the performance of actively managed large cap equity funds with the performance of the S& P 500 .

Source: Lipper Analytic Services and Vanguard Group for more details, see this blog post.

As you can see, over a 1 year period, about 85% of funds that tried to chase outperformance by actively selecting stocks actually failed to perform as well as the index that simply tracks the overall US stock market. This underperformance is consistent even over longer time horizons.

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Wealthfront Vs Vanguard: Services & Features

This is where the rubber meets the road. Wealthfront and Vanguards products overlap in that they both cater to fund-based, hands-off investors. Despite offering the ability to actively trade and manage assets, Vanguards identity is as a mutual fund broker. Its trading platform retains that identity, and is best for investors looking for the risk mitigation of a portfolio heavy in pooled assets. Wealthfronts robo-advisory model offers exclusively pooled assets, and so caters to that same crowd.

Yet there is where the similarities end.

Wealthfront invests based on an automated system. When you create an account you answer basic questions such as age and income, then you create a financial plan based on issues such as risk tolerance and whether you are investing for specific goals. From there the system allocates your money among assets in the firms shared portfolios, choosing how to balance your investments based on your financial planning.

The firms portfolio includes a wide mix of assets, from equities and bonds to exchange-traded funds and real estate. This is a departure from many robo-advisories, which often build their portfolios exclusively from ETFs. Investors with more than $100,000 on account can also choose to invest in the Wealthfront Risk Parity Fund, a fund which offers a higher rate of return for an additional 0.25% annual fee.

Enjoy Expert Experience And Advice

One great thing about this platform is that they have relied on the experience and knowledge of CFAs, Ph.D. advisors, and data scientists to create an investing platform that isnt just powerful but is also user-friendly.

It can be really overwhelming to start investing, especially when you are given a platform to use that just doesnt make sense. Generally speaking, you wont have this problem with the Wealthfront platform.

One thing that really sets Wealthfront apart from its competition is that they have strong and educated financial investment leaders running the company. This is obvious in their easy-to-use, automated management software.

Unlike other companies and software that just dont make a lot of sense, Wealthfront has designed theirs to be intuitive, simple, and to offer plenty of support during the investing process.

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How To Invest With Vanguard

Once you are ready to open a Vanguard account, you have to choose the type of account and plan that you need. I love that there are options such as setting up savings for a childs education, your retirement, or even opening an IRA or rollover a 401.

The online application only takes around 10 minutes, and you do have to have access to employer information, as well as information about your bank accounts to be able to complete the process.

When you’ve set up your account and chosen your investments and funds, you then add money to the account. At this point, you have a choice of either customizing your investments yourself or allowing the automated software to do this for you.

I think its a good idea for people who are just starting out to allow the software to complete the work for you, but if you want to have more control over your investments and you have done your research on the ones that you want, then choosing your own investments can be enjoyable.

If you’re ready to invest and want to learn more about the different types of retirement funds open to you, then check out what Michael Foster at Forbes has to say to help you make the right decision.

Other Tax Minimization Strategies

How Investing With Wealthfront Can Save You Money On Taxes

If youre transferring assets as a new client Wealthfront makes sure the new assets are compatible with your portfolio. It holds onto securities with short-term capital gains until the gains become long-term.

Capital gains taxes can be a big headache for investors. Wealthfront lowers them by rebalancing your portfolio consistently to minimize sales, offering the option of index funds with lower turnover, and optimizing the after-tax potential of both taxable and retirement accounts.

Stock level tax-loss harvesting

Available to investors with $100,000 or more in a taxable account, stock level tax-loss harvesting also known as direct indexing takes regular tax-loss harvesting to the next level. Wealthfront creates a tailored index fund for you by purchasing individual stocks and ETFs from the U.S. Stock Index.

More stocks mean more opportunities to harvest losses, and Wealthfront software keeps an eye on your stocks performance. The number of potential stocks increases with the size of your accountup to 100 stocks for a $100,000 minimum, up to 500 with a $500,000 minimum, and up to 1,000 if you hit $1 million.

Smart Beta

Wealthfront combines all its levels of tax-loss harvesting into its PassivePlus plan.

Risk parity fund

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Wealthfront Investment Adviser 2023 Review

Having an investment portfolio isnt just for the uberwealthy or retirees. If you want to grow your money , no matter how little or how much you have, investing is the way to go.

Wealthfront is a company that aims to make it even easier and affordable to jump into the investment world, all from the convenience of your computer or smartphone.

With a minimum investment amount of $500, anyone can open a Wealthfront account.

Youll answer some questions and within minutes, youll have a recommended personalized portfolio based on your financial goals and how risky youre willing to go.

In addition, youll have access to world-class wealth management planning tools to set you up for financial success.

Here are the ins and outs of Wealthfront so you can decide if its the best investment solution for you.

Who Should Use Wealthfront

Wealthfronts robo-advisor can appeal to a wide variety of investors. But if you fit more than one of the descriptions below, you probably will be super happy investing with Wealthfront.

  • Cost-conscious. If you care about fees as an investor and you should youll appreciate how Wealthfronts total cost compares to other options in the robo-advisor industry.
  • Hands-off. You wont be happy if you like picking individual stocks. But if you prefer to invest your money smartly but with minimal effort, a robo-advisor such as Wealthfront will appeal to you.
  • Enjoy digital charts and tools. Its free financial planning tools are a large part of Wealthfronts appeal. If you like charts and data, especially when it comes to your personal finances, you probably will enjoy Wealthfront.

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Wealthfront Review: Where It Shines

After reviewing Wealthfront, Ive identified the following positives:

  • Automated investment management. Wealthfront is a trustworthy place to park your investment dollars if you want to take a hands-off, automated approach to managing your portfolio.
  • Low costs. Wealthfronts annual fee and average expense ratios are among the least expensive in the industry.
  • Top-notch financial planning tools. Ill talk more about the tools, called Wealthfront Path, shortly. But Wealthfront arguably leads the robo-advisor industry in terms of the free digital planning tools it provides to clients.
  • Advanced tax-loss harvesting. Wealthfronts multi-layered approach to limiting the tax burden of its customers draws rave reviews from several major financial publications and websites.
  • Rare focus on college savings. Saving for a family members college education usually isnt the top priority. When you need to worry about an emergency fund, a retirement plan, a mortgage and the family cars, its easy to forget about saving for college. But Wealthfront makes it a focus of its efforts.
  • Strong cash management account offering. Wealthfronts banking option offers 0.35% APY, no fees and requires only a $1 minimum deposit.

An Interview With The Former Ceo Adam Nash

Wealthfront Investment Methodology White Paper

Adam was an incredibly insightful guest. Before he became the CEO of Wealthfront, he was a personal finance nerd who volunteered his time to help people learn the basics of how to manage their money. This is something that we really resonate with. Theres something to say about leading with giving.

Not being satisfied with only teaching, he decided to join Wealthfront as one of the first 20 employees to help bring sophisticated financial advice to the average investor. He also agrees with our mindset that the average investor is perhaps anything but average in the gains they receive.

Listen to Adams story and the features that Wealthfront rocks as well as what sets them apart from the pack. Adam was so focused on educating us and so down to earth we almost forgot that he was the CEO of a sexy startup that manages nearly $11 billion.

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Investing With $: Wealthsimple

How much do you need? No account minimum! You can open a new account with as little as $1!

How does it work? Wealthsimple is a robo-advisor which means it collects information about your background, goals, and risk tolerance and builds a custom investment portfolio for you. It is like having a financial advisor thats a computer.

You have say over your asset allocation and whether you want a portfolio made up of socially responsible companies, but then Wealthsimple fully manages your investments for you.

How much does it cost? Wealthsimple manages portfolios smaller than $5,000 for free for the first year. Then Wealthsimple charges a management fee of 0.50% on accounts less than $100,000 or 0.40% if your portfolio is greater than $100,000. This is in addition to a 0.10% expense ratio for fees owned in the portfolio.

Who is Wealthsimple good for? Wealthsimple is best for investors who want to invest in socially responsible companies. While their no account minimum offer is excellent, if you want to work with a robo-advisor, I would recommend saving up the $500 to invest with Wealthfront . The fees at Wealthfront are lower, and they dont charge a management fee on the first $10,000 in assets.

Where Wealthfront Shines

Comprehensive offerings: Wealthfront provides the kind of holistic financial advice and automated investment management that appeals to new and experienced investors alike: helpful planning tools, diversified and hands-off portfolios and advanced tax optimization strategies.

Investments: The companys methodology includes giving investors a streamlined questionnaire to identify risk tolerance, then employing exchange-traded funds in up to 12 asset classes.

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Is It Worth It

Im quick to recommend Wealthfront to novice investors, and anyone who wants to outsource investing to an algorithm. The only automated investing platform that is less expensive is M1 Finance, and M1 Finance doesnt have the robust investing theory that Wealthfront has.The clearest advantage of Wealthfront is its ability to do systemic tax loss harvesting. Of course, that only matters in unsheltered tax accounts.The biggest drawback to Wealthfront is an overemphasis on conservative asset classes. The asset allocation it suggested for me was very conservative despite my long time horizon to retirement.Overall, Wealthfront is an excellent option, and its still one of my top recommendations for automated investing platforms.

How To Get Started

Direct Indexing: How To Invest In Stocks + Reduce Taxes

To get started, you first have to tell Wealthfront a little about yourself and your investment goals. Wealthfront robo-advisor uses the information you provide to build a portfolio for you, drawing from 10 global asset classes. This makes it easier to create a diversified portfolio that aligns with your goals and risk tolerance.

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Competition: How Wealthfront Stacks Up

This robo-advisors closest competitors are Betterment and Wealthsimple. Wealthfront requires a minimum investment of $500, while neither Betterment nor Wealthsimple require a minimum investment. Wealthsimple will also manage your first $5,000 for free.

Betterment and Wealthsimple also both offer two different investing options. Betterment’s first option is called Betterment Digital, while Wealthsimple’s first option is called Wealthsimple Basic. While Betterment Digital charges the same 0.25% fee as Wealthfront, Wealthsimple Basic charges a much higher fee of 0.50%. Betterment Premium and Wealthsimple Black both require a minimum investment of $100,000 and an annual fee of 0.40%.

Wealthfront charges lower fees overall than Betterment and Wealthsimple but the biggest difference is that both Betterment and Wealthsimple offer access to human financial experts. Wealthfront is completely online with no human financial advisors. However, Wealthsimple gives all investors access to human advisors, while Betterment only provides access for Betterment Premium investors. The Betterment Premium plan, which requires a minimum investment of $100,000, includes unlimited phone consultations with a Betterment financial planner. Wealthsimple Digital, which requires no minimum investment, offers access to a human advisors through phone call, text and email. Wealthsimple Black, which requires a $100,000 minmium investment, offers financial planning sessions with human advisors.

How Do We Review Robo

NerdWallets comprehensive review process evaluates and ranks the largest U.S. robo-advisors. Our aim is to provide an independent assessment of providers to help arm you with information to make sound, informed judgements on which ones will best meet your needs. We adhere to strict guidelines for editorial integrity.

We collect data directly from providers through detailed questionnaires, and conduct first-hand testing and observation through provider demonstrations. The questionnaire answers, combined with demonstrations, interviews of personnel at the providers and our specialists hands-on research, fuel our proprietary assessment process that scores each providers performance across 16 factors. The final output produces star ratings from poor to excellent .

For more details about the categories considered when rating robo-advisors and our process, read our full methodology.

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Tips For Maximizing Your Savings

  • If you are looking to invest, its smart to start by talking to a financial advisor. A financial advisor can help you create financial financial goals so that you understand what you should be trying to do as you invest. For example, you dont want to open a regular brokerage account if your primary goal is building retirement savings.
  • Unlike many other robo-advisors, Wealthfront supports 529 accounts. If youre trying to save for college, its a good idea to start with this guide on everything you need to know about 529 plans.
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