Tax Loss Harvesting, Rebalancing, and Extra
Launched in 2011, Wealthfront is a robo-advisor with $75+ billion in property below administration as of January 2025. A robo-advisor is an funding advisory service that makes use of an algorithm as an alternative of individuals that will help you make investments.
Wealthfront is a tax-efficient and low-cost technique to make investments. Its providing is compelling. For simply 0.25%, they do all of the heavy lifting utilizing a pc algorithm.
I believe robo-advisors are nice as a result of they provide skilled advisory providers, at the very least a vanilla model (or cosmopolitan, to maintain the ice cream analogy as correct as attainable), to the lots by counting on algorithms relatively than an advisor-heavy method.
Many funding advisers received’t meet somebody with out at the very least six figures to speculate since they receives a commission as a share of property below administration. Robo-advisors can do that as a result of robots don’t want something however hugs.
Their funding group is spectacular, that includes names like their Chief Funding Officer, Dr. Burton Malkiel (A Random Stroll Down Wall Avenue), and Charles Ellis (Successful the Loser’s Recreation), founding father of Greenwich Associates.
At a Look
- $500 minimal beginning steadiness
- 0.25% annual price
- Customizable premade portfolios
- Tax loss harvesting
- AI-powered monetary recommendation
Who Ought to Use Wealthfront
Wealthfront is nice for individuals who need a robo-advisor with tax loss harvesting and don’t care about receiving personalised monetary recommendation. It has three premade portfolios that may be personalized with a wide range of different investments.
In order for you to have the ability to communicate to a human advisor, Wealthfront might not be for you.
Wealthfront Alternate options
Desk of Contents
- At a Look
- Who Ought to Use Wealthfront
- Wealthfront Alternate options
- What Wealthfront Provides
- Concerning the “Robots”
- How Wealthfront Invests
- Threat Tolerance & Asset Allocation Software
- Wealthfront Money Account
- Wealthfront Free Monetary Planning
- Portfolio Line of Credit score
- How a lot does Wealthfront price?
- Wealthfront Alternate options
- Wealthfront Assessment: Closing Ideas
What Wealthfront Provides
Simplicity and optimization.
All robo-advisors promise funding returns with out as a lot upkeep. With an account minimal of simply $500, Wealthfront gives an funding advisory service to the lots.
It took me a few years to amass $5,000 in investable property, and it sat in an index fund at Vanguard whereas it grew. I didn’t pay a lot in charges, however I additionally didn’t get tax loss harvest both (heck, I didn’t even find out about it till a few years later!).
I noticed my job as an investor as being two major duties:
- Decide and set up an asset allocation and,
- Rebalance their portfolio periodically.
Wealthfront does the primary activity by having you reply a questionnaire about your danger tolerance to determine your asset allocation. Then, its robots do their magic to build up the proper property to get the allocation that most closely fits your danger tolerance.
As an ongoing service, they deal with rebalancing, tax loss harvesting, dividend reinvestment, and all the opposite smaller duties that may add to your returns however that we regularly neglect to do. That’s the place the optimization is available in.
Concerning the “Robots”
Computer systems are solely pretty much as good because the individuals who design and program them, so whereas I say “robots” so much on this put up (it’s a “robo-advisor”), the parents who constructed the robots and provides them the perception to do their automated magic – they’re not robots.
They’re PhDs led by Dr. Burton Malkiel. They rent solely PhDs to work on the funding group.
How Wealthfront Invests
Wealthfront has three premade portfolios to select from, however every will be simply personalized. In whole, it gives 239 investments, 17 asset lessons, and two cryptocurrency trusts.
The three premade portfolios are:
Basic: It is a portfolio of index funds that’s globally diversified. Its foremost holdings as of January 2025 are 45% in US inventory by way of Vanguard’s Whole Inventory Market Fund, 18% overseas shares by way of Vanguard’s FTSE Developed Markets ETF, and 16% rising market shares by way of Vanguard’s FTSE Rising Markets ETF.
Socially Accountable: This portfolio focuses on sustainability, variety, and fairness. Its foremost holdings as of January 2025 are 60% US shares by way of iShares ESG Conscious MSCI USA ETF, 12% overseas developed shares by way of iShares ESG Conscious MSCI EAFE ETF, and 11% company bonds by way of iShares ESG Conscious USD Company Bond ETF
Direct indexing: This portfolio invests in particular person shares and is designed for portfolios over $100K. Your portfolio allocation can be decided by your danger tolerance.
Along with the premade portfolios, there are a number of funding classes you possibly can spend money on. They’re:
- US inventory ETFs
- Bond ETFs
- Overseas/ rising markets ETFs
- International inventory ETFs
- Socially accountable ETFs
- Tech/ innovation ETFs
- Cryptocurrency trusts
- Wealthfront unique choices
- Investing technique ETFs
- Sector ETFs Commodity ETFs
Tax Loss Harvesting
To save cash on taxes, Wealthfront makes use of tax loss harvesting. If an asset drops in worth, Wealthfront will promote it and purchase a unique, but related, inventory. You’ll be able to then use that loss to offset any funding beneficial properties you’ve gotten.
Your danger tolerance performs a big half in your asset allocation. Wealthfront helps you identify your danger tolerance by way of a quiz on the web site.
It’s fairly easy. It takes a couple of seconds to by way of the questionnaire and get your beneficial funding plan: (you are able to do this your self with out placing any private info, they don’t ask for or require an electronic mail to play with this device)
Scroll right down to see the breakdown:
Underneath every class, they listing the three main ETFs. In concept, you possibly can go and purchase these allocations straight. In case you click on on every of the bars, you’ll see a breakdown.
You’ll be able to mess around with the Threat Tolerance slider to see how the allocations change (the portfolio is 7.5, the max is 10), plus see the distinction between a Taxable Funding Combine and a Retirement Funding Combine. I like that the Projected Efficiency is a diffusion versus a single line because it’s usually depicted as a result of it extra precisely displays the info.
As you possibly can see, the funding choices for the taxable account include the Vanguard Whole Inventory Market Fund and Schwab US Broad Market ETF. If you wish to spend money on a socially accountable fund, it suggestsiShares ESG Conscious MSCI USA ETF.
Wealthfront Money Account
Lastly, generally you’ll have money not invested within the markets, and Wealthfront has a money account that presently pays 4.00% with FDIC insurance coverage as much as $8,000,000.
There aren’t any month-to-month charges and no minimal steadiness necessities.
Wealthfront Free Monetary Planning
Wealthfront gives a free automated monetary planning expertise that’s out there to everybody.
It’s an automatic monetary recommendation engine that takes your particular person knowledge, like revenue, spending, and investing, to guard your monetary property and skill to satisfy future objectives.
It considers life occasions, like shopping for a home and having youngsters, and adjusts your plan accordingly. And it does this commonly, relatively than yearly or as soon as 1 / 4, as you’d with a human advisor.
You’ll hyperlink your entire accounts so the software program can see your present standings. It’s going to calculate your networth and provide you with a plan to satisfy your objectives. You may get a snapshot of your funds, discover varied situations, after which take a look at totally different tradeoffs. In case you’ve by no means constructed a plan, they’ve an interactive Monetary Well being Information that helps you get began.
Portfolio Line of Credit score
When you’ve got a person or joint account with a steadiness of at the very least $25,000, a Portfolio Line of Credit score helps you to request money as much as 30% of the present worth of your account, and so they’ll ship it over as shortly as one enterprise day.
Your portfolio turns into a line of credit score. (therefore the identify!)
The rate of interest is variable and relies on the efficient funds fee, plus 1.08% (fee schedule & definitions):
Their rate of interest might beat a house fairness line of credit score (because it’s technically a margin lending product and never a standard mortgage), and since there aren’t any charges, it’s even cheaper. And in contrast to a daily mortgage product, there isn’t a credit score test, no minimal month-to-month funds, and the mortgage is secured by the property in your portfolio.
How a lot does Wealthfront price?
Wealthfront doesn’t cost a fee or account upkeep charges; as an alternative, it depends on an account administration price. The account administration price is 0.25% of property. That is on high of the charges charged by the underlying ETFs, which common 0.12%.
Wealthfront Alternate options
There’s so much to love about Wealthfront, nevertheless it’s at all times a good suggestion to comparability store earlier than signing on to any funding account. It’s your hard-earned cash, in spite of everything. Listed below are a couple of Wealthfront options to contemplate.
Betterment
Betterment is one other robo-advisor that gives tax loss harvesting. You may get began for $10, and it expenses both $4 a month or 0.25%. You’ll be charged the 0.25% in case you arrange recurring month-to-month deposits of at the very least $250 or you’ve gotten a steadiness of at the very least $20,000.
It additionally has a money reserve account that earns 4.00% APY and has a $0 minimal steadiness requirement. FDIC insurance coverage goes as much as $2 million.
When you’ve got a steadiness of at the very least $100,000, you will get personalised one-on-one recommendation from a CFP®. There’s an annual administration price of 0.65% for this service.
Right here’s our full Betterment assessment for extra info.
SoFi® Investing
Mortgage large SoFi additionally gives robo-advisor providers. You can begin with $50 and it expenses 0.25%, the identical as Wealthfront. It doesn’t have a money reserve account precisely, nevertheless it does supply financial institution accounts, together with a high-yield financial savings account that earns as much as 3.80% APY (unlocked with direct deposit or by depositing $5,000+ each 30 days, in any other case 1.00% APY).
One massive advantage of SoFi Investing is that it gives human monetary advisors to all shoppers at no extra prices. Nevertheless it doesn’t present tax loss harvesting.
Right here’s our full assessment of SoFi Investing for extra info.
M1 Finance
With M1 Finance, your portfolio is named a “pie,” and inside this pie, you possibly can add as many “slices” as you would like. These slices will be particular person shares, ETFs, or skilled pies. It doesn’t present tax loss harvesting.
You may get began for $100 and the primary 90 days are free. After that, the price is $3 a month, until you’ve gotten a steadiness of at the very least $10,000 or an energetic private mortgage.
It has a high-yield financial savings account to function your money reserve account that earns 4.00% APY.
Right here’s our full assessment of M1 Finance for extra info.
Wealthfront Assessment: Closing Ideas
Wealthfront has top-notch software program and automation, a surprising Ph.D. funding group led by one of many greats, and is low-cost. You’ll pay 0.25% it doesn’t matter what your steadiness is, which is a deal when your steadiness is small however might get dear as your steadiness grows.
Additionally they supply tax loss harvesting, which not each robo-advisor does. So, if that’s one thing you might be in search of, Wealthfront is price contemplating.
Relating to recommendation, they solely supply automated recommendation, and there’s no possibility to talk to a human advisor.
In case you’re utilizing Wealthfront, I’d love to listen to about your expertise!
