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No, Wealthfront and Betterment are not active fund managers. They invest your money in a variety of index funds and rebalance it often. Due to their hugely mana

by ropiku 10y ago

No, Wealthfront and Betterment are not active fund managers. They invest your money in a variety of index funds and rebalance it often. Due to their hugely managed sums they can do a lot of tricks to try to improve your yield while still being broadly diversified.

loeg 10y ago
The only trick they have is tax loss harvesting, which has limited effect (mostly due to $3,000/year limit on deducting). And you can do that by hand pretty easily.
- DontGiveTwoFlux 10y ago
  They also reinvest dividends automatically, and rebalance automatically when you add new funds so you aren't over allocated in a particular class of assets. Tax loss harvesting is limited to 3000 per year, but you can carry over until you've exhausted the losses. Of course TLH is only good if you're in a taxable account with them. I also don't buy it being easy- particularly with trying to avoid the pitfalls of wash sales and the paperwork to actually claim it.
  - loeg 10y ago
    > They also reinvest dividends automatically Typical brokerages can do that too :-). > rebalance automatically The value of which is maybe dubious, as pointed out elsewhere in the thread. It doesn't need to be done frequently, if at all, and is pretty trivial with a simple 3-fund portfolio. > Tax loss harvesting is limited to 3000 per year, but you can carry over until you've exhausted the losses. Right. But you only get so many working years. > Of course TLH is only good if you're in a taxable account with them. > I also don't buy it being easy- particularly with trying to avoid the pitfalls of wash sales and the paperwork to actually claim it. You need to be aware of how wash sales work even if you use a robo-advisor to do the TLH. You need to be sure you don't have substantially equivalent securities in your IRAs and 401(k), etc. The actual mechanic is pretty easy — sell one index fund (with shares held over 30 days), buy another extremely similar index (but not the exact same index). As far as the paperwork — it's imported automatically with Turbotax etc and is exactly the same paperwork as is needed for capital gains. TLH is also only good while you're working. If you have enough TLH saved up to cover the rest of your working years at $3k/year, you can stop paying the robo-advisor premium.

by ropiku 10y ago

loeg 10y ago

The only trick they have is tax loss harvesting, which has limited effect (mostly due to $3,000/year limit on deducting). And you can do that by hand pretty easily.

DontGiveTwoFlux 10y ago
They also reinvest dividends automatically, and rebalance automatically when you add new funds so you aren't over allocated in a particular class of assets. Tax loss harvesting is limited to 3000 per year, but you can carry over until you've exhausted the losses. Of course TLH is only good if you're in a taxable account with them. I also don't buy it being easy- particularly with trying to avoid the pitfalls of wash sales and the paperwork to actually claim it.
- loeg 10y ago
  > They also reinvest dividends automatically Typical brokerages can do that too :-). > rebalance automatically The value of which is maybe dubious, as pointed out elsewhere in the thread. It doesn't need to be done frequently, if at all, and is pretty trivial with a simple 3-fund portfolio. > Tax loss harvesting is limited to 3000 per year, but you can carry over until you've exhausted the losses. Right. But you only get so many working years. > Of course TLH is only good if you're in a taxable account with them. > I also don't buy it being easy- particularly with trying to avoid the pitfalls of wash sales and the paperwork to actually claim it. You need to be aware of how wash sales work even if you use a robo-advisor to do the TLH. You need to be sure you don't have substantially equivalent securities in your IRAs and 401(k), etc. The actual mechanic is pretty easy — sell one index fund (with shares held over 30 days), buy another extremely similar index (but not the exact same index). As far as the paperwork — it's imported automatically with Turbotax etc and is exactly the same paperwork as is needed for capital gains. TLH is also only good while you're working. If you have enough TLH saved up to cover the rest of your working years at $3k/year, you can stop paying the robo-advisor premium.