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Correct. What they are selling you is an asset allocation, this turns on it's head all the innovation since the early 90s...and the performance you likely get w

Correct. What they are selling you is an asset allocation, this turns on it's head all the innovation since the early 90s...and the performance you likely get will be indistinguishable from what most people could achieve on their own. One of the big advantages that savers have today are open platforms (there was a time when fund managers ran their own platforms), low dealing costs, low spreads, and ETFs. All that investors need to do is just work out the asset allocation themselves and they will save huge amounts. And I would guess 95% of people reading this are able to do it. Just to be clear, we are looking for a least bad situation. Asset allocation is very complex, there is no way most investors can get an amazing result themselves but what most investors don't know is that WealthFront have zero chance too. So the aim is to equal what they do without their mad fees (I have no idea how they charge so much, marketing? I don't know, I know small advisers that were profitable charging lower fees...it makes no sense).

deleted 6y ago
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skybrian 6y ago
They make claims of better tax efficiency via tax-loss harvesting [1]. I don't know or care enough to evaluate it, but maybe it's better for some people, even if the allocation is no better than an ETF? Even if it worked, I wouldn't bother to do it manually. This doesn't matter for a retirement account, though. [1] https://support.wealthfront.com/hc/en-us/articles/209348486-What-is-Tax-Loss-Harvesting- https://support.wealthfront.com/hc/en-us/articles/209348486-...
- hogFeast 6y ago
  That is going to depend on what the rules are, and what rates you pay. But is tax-loss harvesting beyond the wit of everyone but WealthFront? No. If you aren't bothered to do it manually then it can't be a big benefit for you...it is always amazes me that companies manage to base their products around utterly pointless/marginal features that no-one uses, like why do you care? It is like people choosing an advisor because of their charts...yep, they got the charts from a third-party charting provider for $10/month, and you are going to pay tens of thousands (or more) over a lifetime. Smh.
  - skybrian 6y ago
    I don't personally care. I'm just saying that it's not crazy to want to do this sort of thing without figuring it out yourself. Maybe it pays for itself in some cases?
  - Thorrez 6y ago
    >If you aren't bothered to do it manually then it can't be a big benefit for you... Wealthfront has economies of scale to write a program to perform tax loss harvesting automatically. Just because it's not worthwhile for me to do it manually myself doesn't make it not worthwhile for a program to do it automatically. Wealthfront does daily tax loss harvesting on individual stocks. That would be a tremendous amount of work for me to do manually. That said, I don't know whether Wealthfront's benefit outweighs their 0.25% fee. I guess what we really need is a well-regarded open source program that hooks into brokerage's API and does this advanced tax loss harvesting.
    - freetime2 6y ago
      > Wealthfront does daily tax loss harvesting on individual stocks Does WealthFront do anything at the individual stock level? My understanding from looking at their landing page [1] is that they basically just allocate your money across a number of publicly traded ETFs: > How do you choose my investments? > We choose exchange-traded funds (ETFs) that track an index, such as the S&P 500 or emerging markets. Wealthfront chooses the ETFs with the lowest costs and proper tracking of their index. Also, you pay the expense ratios of those ETFs in addition to the fees that WealthFront charges: > What are the costs to invest? > We’re glad you asked. Our annual advisory fee is 0.25%. On average, you’ll also pay a low 0.06%–0.13% expense ratio. Companies who run investment funds charge this fee, and it comes straight out of that fund’s performance (you aren’t billed directly). Everyone who invests in ETFs pays this fee. I think would be fairly easy for any ETF investor to approximate WealthFront's tax-loss harvesting strategy in their own brokerage accounts. E.g. simply go in once a quarter and sell any lots of VOO for a loss where possible, and replace with an equivalent like SPY. [1] https://www.wealthfront.com/investing https://www.wealthfront.com/investing
      - 6y ago
akor 6y ago
> ...but what most investors don't know is that WealthFront have zero chance too. So the aim is to equal what they do without their mad fees... Can someone help me understand this comment as to my knowledge WeathFront (WF) fees were the lowest in the industry. For example people talk about Vanguard fees as also being low but they're between 0.25% and 1% [1]. If it makes a difference I'm specifically coming at it from the lens of IRA retirement contributions. Is the parent post saying the alternative is to figure out what specific stocks/ETF/index WF is purchasing and then purchase those with something like eTrade? TIA [1] https://investor.vanguard.com/mutual-funds/fees https://investor.vanguard.com/mutual-funds/fees
- freetime2 6y ago
  Those vanguard fees that you reference aren't really applicable in a comparison with WealthFront. Those are one-time fees when you buy and sell shares, and only apply to a very small number of mutual funds (emerging markets bonds, international real estate, etc). Most vanguard investors don't invest in these funds or pay those fees, and I believe WealthFront doesn't even offer equivalent investments. On the other hand, you pay that 0.25% fee that WealthFront charges every year, regardless of the performance of your portfolio, and it can pretty quickly amount to thousands of dollars per year. Most brokerages (Vanguard, Schwab, Robinhood, etc) don't charge any sort of equivalent fee - they are free to open and maintain. And yes it is fairly easy to construct an equivalent portfolio made up of ETFs in a standard brokerage account. You would be losing out on the convenience of WealthFront's automated rebalancing and tax-lost harvesting, though. Is the convenience of automated investment, rebalancing, and tax-lost harvesting worth paying 0.25% of your total account balance every year? For me, no. But I know some people who are really happy with services like WealthFront and Betterment. Especially for someone just getting started with investing, I would have no issues recommending those services. Edit: also just noticed you are referring to a retirement account. In that case, WF's tax-loss harvesting feature would not be applicable (since retirement accounts are tax-free), so even less of an incentive to go with WF vs. DIY.
martinflack 6y ago
> this turns on it's head all the innovation since the early 90s... Would you mind just mentioning what that is?

deleted 6y ago

[deleted]

skybrian 6y ago

They make claims of better tax efficiency via tax-loss harvesting [1]. I don't know or care enough to evaluate it, but maybe it's better for some people, even if the allocation is no better than an ETF? Even if it worked, I wouldn't bother to do it manually. This doesn't matter for a retirement account, though. [1] https://support.wealthfront.com/hc/en-us/articles/209348486-What-is-Tax-Loss-Harvesting- https://support.wealthfront.com/hc/en-us/articles/209348486-...

hogFeast 6y ago
That is going to depend on what the rules are, and what rates you pay. But is tax-loss harvesting beyond the wit of everyone but WealthFront? No. If you aren't bothered to do it manually then it can't be a big benefit for you...it is always amazes me that companies manage to base their products around utterly pointless/marginal features that no-one uses, like why do you care? It is like people choosing an advisor because of their charts...yep, they got the charts from a third-party charting provider for $10/month, and you are going to pay tens of thousands (or more) over a lifetime. Smh.
- skybrian 6y ago
  I don't personally care. I'm just saying that it's not crazy to want to do this sort of thing without figuring it out yourself. Maybe it pays for itself in some cases?
- Thorrez 6y ago
  >If you aren't bothered to do it manually then it can't be a big benefit for you... Wealthfront has economies of scale to write a program to perform tax loss harvesting automatically. Just because it's not worthwhile for me to do it manually myself doesn't make it not worthwhile for a program to do it automatically. Wealthfront does daily tax loss harvesting on individual stocks. That would be a tremendous amount of work for me to do manually. That said, I don't know whether Wealthfront's benefit outweighs their 0.25% fee. I guess what we really need is a well-regarded open source program that hooks into brokerage's API and does this advanced tax loss harvesting.
  - freetime2 6y ago
    > Wealthfront does daily tax loss harvesting on individual stocks Does WealthFront do anything at the individual stock level? My understanding from looking at their landing page [1] is that they basically just allocate your money across a number of publicly traded ETFs: > How do you choose my investments? > We choose exchange-traded funds (ETFs) that track an index, such as the S&P 500 or emerging markets. Wealthfront chooses the ETFs with the lowest costs and proper tracking of their index. Also, you pay the expense ratios of those ETFs in addition to the fees that WealthFront charges: > What are the costs to invest? > We’re glad you asked. Our annual advisory fee is 0.25%. On average, you’ll also pay a low 0.06%–0.13% expense ratio. Companies who run investment funds charge this fee, and it comes straight out of that fund’s performance (you aren’t billed directly). Everyone who invests in ETFs pays this fee. I think would be fairly easy for any ETF investor to approximate WealthFront's tax-loss harvesting strategy in their own brokerage accounts. E.g. simply go in once a quarter and sell any lots of VOO for a loss where possible, and replace with an equivalent like SPY. [1] https://www.wealthfront.com/investing https://www.wealthfront.com/investing
    - 6y ago

akor 6y ago

> ...but what most investors don't know is that WealthFront have zero chance too. So the aim is to equal what they do without their mad fees... Can someone help me understand this comment as to my knowledge WeathFront (WF) fees were the lowest in the industry. For example people talk about Vanguard fees as also being low but they're between 0.25% and 1% [1]. If it makes a difference I'm specifically coming at it from the lens of IRA retirement contributions. Is the parent post saying the alternative is to figure out what specific stocks/ETF/index WF is purchasing and then purchase those with something like eTrade? TIA [1] https://investor.vanguard.com/mutual-funds/fees https://investor.vanguard.com/mutual-funds/fees

freetime2 6y ago
Those vanguard fees that you reference aren't really applicable in a comparison with WealthFront. Those are one-time fees when you buy and sell shares, and only apply to a very small number of mutual funds (emerging markets bonds, international real estate, etc). Most vanguard investors don't invest in these funds or pay those fees, and I believe WealthFront doesn't even offer equivalent investments. On the other hand, you pay that 0.25% fee that WealthFront charges every year, regardless of the performance of your portfolio, and it can pretty quickly amount to thousands of dollars per year. Most brokerages (Vanguard, Schwab, Robinhood, etc) don't charge any sort of equivalent fee - they are free to open and maintain. And yes it is fairly easy to construct an equivalent portfolio made up of ETFs in a standard brokerage account. You would be losing out on the convenience of WealthFront's automated rebalancing and tax-lost harvesting, though. Is the convenience of automated investment, rebalancing, and tax-lost harvesting worth paying 0.25% of your total account balance every year? For me, no. But I know some people who are really happy with services like WealthFront and Betterment. Especially for someone just getting started with investing, I would have no issues recommending those services. Edit: also just noticed you are referring to a retirement account. In that case, WF's tax-loss harvesting feature would not be applicable (since retirement accounts are tax-free), so even less of an incentive to go with WF vs. DIY.

martinflack 6y ago

> this turns on it's head all the innovation since the early 90s... Would you mind just mentioning what that is?