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I don't think Wealthfront etc. have any advantage w.r.t. diversification or rebalancing. Vanguard's target retirement funds seem to have target allocations (whi
by dlubarov 9y ago
I don't think Wealthfront etc. have any advantage w.r.t. diversification or rebalancing. Vanguard's target retirement funds seem to have target allocations (which change gradually as the retirement date approaches), and rebalance to stay in sync with those. E.g., VTTSX seems to maintain ~90% stocks and ~10% bonds, with ~60% of the stocks being domestic, and ~70% of the bonds being domestic.
They do have an advantage in tax loss harvesting, but the maximum annual savings is basically $3000 * (current marginal bracket for ordinary income - LTCG rate in retirement), which is about $600 for the typical investor. If you have more than 250k in Wealthfront, their annualized fee will be greater than $600.
- fullshark 9y agoThe roboadvisors invest in market segments not included in the target retirment funds (like natural resources and REITS). If you were to do that on your own using various vanguard vehicles you'd then have to worry about rebalancing.
- dlubarov 9y agoWell you still get exposure to companies in those segments, such as Monsanto and Equity Residential. If you just want "normal" positions in those companies (i.e. weighted by market cap), then Vanguard funds like VTSMX (a component of their retirement funds) are perfect.