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Let's say we kill proportional fee and replace it with a fixed fee. Well, then people with lower balances will end up most likely paying more than they do now.

Let's say we kill proportional fee and replace it with a fixed fee. Well, then people with lower balances will end up most likely paying more than they do now. Another issue, it is proportionally harder to execute a larger portfolio than a smaller one. So, proportional fee makes sense. Having said that, yes, it is true that it is not clear to me why as a Vanguard customer I should switch part of my portfolio to Wealthfront.

gphil 11y ago
The only thing any investor can control with any certainty is fees and taxes, so you might as well focus your effort on minimizing these. For the most part, Vanguard funds are the best at this that I know of.
- matwood 11y ago
  Vanguard definitely led the way, but Fidelity (maybe others) has low fee funds similar to Vanguard. Last time I checked, Fidelity looked like they priced their funds by doing Vanguard price minus .01 point.
  - kmonsen 11y ago
    Really? This is quite new and contradicts that: http://www.marketwatch.com/story/best-target-date-funds-fidelity-vs-vanguard-2015-04-15 http://www.marketwatch.com/story/best-target-date-funds-fide...
    - matwood 11y ago
      Not all funds obviously. I also use a boggle head portfolio so the target date funds are not much interest. For example, the total stock market index from Fidelity and Vanguard. FSTMX .10% http://financials.morningstar.com/fund/expense.html?t=FSTMX&region=usa&culture=en_US http://financials.morningstar.com/fund/expense.html?t=FSTMX&... VTSMX .17% http://financials.morningstar.com/fund/expense.html?t=VTSMX&region=usa&culture=en_US http://financials.morningstar.com/fund/expense.html?t=VTSMX&...
      - hchenji 11y ago
        Why not the ETF version (VTI) of VTSMX that has only 5bp ER?
        matwood 11y ago
        Also a great choice if in an account that allows ETF purchases. The point was VG forced much of the industry to at least try to offer lower cost index funds, and others have reluctantly followed. Schwab has one with a .04%. http://etfdb.com/etf/SCHB/ http://etfdb.com/etf/SCHB/
    - jeffbax 11y ago
      The article ignores the fact that Fidelity has passively managed target date index funds as well: FFFHX 2050 Actively Managed @ 0.75%: https://fundresearch.fidelity.com/mutual-funds/summary/315792416?type=sq-NavBar https://fundresearch.fidelity.com/mutual-funds/summary/31579... FIPFX 2050 Index Fund @ 0.24/0.16: https://fundresearch.fidelity.com/mutual-funds/summary/315793869?type=sq-NavBar https://fundresearch.fidelity.com/mutual-funds/summary/31579... I use FIPFX in an IRA, though I had previously used the managed one before realizing it… so perhaps there's some deviousness to them being harder to find, but I ultimately don't think you can go wrong with either Fidelity or Vanguard. My 401k was w/ Fido so I stayed there, and the mobile apps and website are generally nice than what I've seen of VG but again, they are both good options if VG probably being slightly better fund wise (though not without some worse aspects either, like customer support or physical locations) As for WF/Betterments etc, I've thought about it, but I think that I will just keep my toes in Fidelity's waters rather than spread all my financial information around. It's probably unfounded, but I'd rather stick with something more proven with my savings… as in something already financially stable and managing orders of magnitude more money than the upstarts, not that I don't root on their attempts to innovate.
- asift 11y ago
  Vanguard wins in the fee category, but from a tax standpoint, direct indexing wins by a wide margin.
jordan0day 11y ago
[insert whynotboth.gif] Seriously, though, it seems like it wouldn't be too difficult to market a "lesser of x% or $50" type of product? > Another issue, it is proportionally harder to execute a larger portfolio than a smaller one. Is this really true, on the individual scale? Especially for something like Wealthfront where all the investors as basically "lumped in" together anyway?
asift 11y ago
For the right person, there seems to be more benefits to direct indexing than are indicated in this article. Tax-loss harvesting is one potential benefit, but so are things like charitable gifting. Anyone who is in a high marginal tax bracket, maintains a substantial portfolio in a taxable account, and gives a considerable amount to charities can receive substantial benefits from direct indexing. Instead of your gifting being limited to the average appreciation of all stocks within a given index (as is the case with an ETF), you can pick out the stocks with the largest gains to give to charities. Unlike tax-loss harvesting, this type of tax strategy does not ratchet down your basis (thus deferring larger capital gains for the future) or create any wash sale issues (so you don't need to take the risk of not holding a particular security for a period of time).

gphil 11y ago

The only thing any investor can control with any certainty is fees and taxes, so you might as well focus your effort on minimizing these. For the most part, Vanguard funds are the best at this that I know of.

matwood 11y ago
Vanguard definitely led the way, but Fidelity (maybe others) has low fee funds similar to Vanguard. Last time I checked, Fidelity looked like they priced their funds by doing Vanguard price minus .01 point.
- kmonsen 11y ago
  Really? This is quite new and contradicts that: http://www.marketwatch.com/story/best-target-date-funds-fidelity-vs-vanguard-2015-04-15 http://www.marketwatch.com/story/best-target-date-funds-fide...
  - matwood 11y ago
    Not all funds obviously. I also use a boggle head portfolio so the target date funds are not much interest. For example, the total stock market index from Fidelity and Vanguard. FSTMX .10% http://financials.morningstar.com/fund/expense.html?t=FSTMX&region=usa&culture=en_US http://financials.morningstar.com/fund/expense.html?t=FSTMX&... VTSMX .17% http://financials.morningstar.com/fund/expense.html?t=VTSMX&region=usa&culture=en_US http://financials.morningstar.com/fund/expense.html?t=VTSMX&...
    - hchenji 11y ago
      Why not the ETF version (VTI) of VTSMX that has only 5bp ER?
      - matwood 11y ago
        Also a great choice if in an account that allows ETF purchases. The point was VG forced much of the industry to at least try to offer lower cost index funds, and others have reluctantly followed. Schwab has one with a .04%. http://etfdb.com/etf/SCHB/ http://etfdb.com/etf/SCHB/
  - jeffbax 11y ago
    The article ignores the fact that Fidelity has passively managed target date index funds as well: FFFHX 2050 Actively Managed @ 0.75%: https://fundresearch.fidelity.com/mutual-funds/summary/315792416?type=sq-NavBar https://fundresearch.fidelity.com/mutual-funds/summary/31579... FIPFX 2050 Index Fund @ 0.24/0.16: https://fundresearch.fidelity.com/mutual-funds/summary/315793869?type=sq-NavBar https://fundresearch.fidelity.com/mutual-funds/summary/31579... I use FIPFX in an IRA, though I had previously used the managed one before realizing it… so perhaps there's some deviousness to them being harder to find, but I ultimately don't think you can go wrong with either Fidelity or Vanguard. My 401k was w/ Fido so I stayed there, and the mobile apps and website are generally nice than what I've seen of VG but again, they are both good options if VG probably being slightly better fund wise (though not without some worse aspects either, like customer support or physical locations) As for WF/Betterments etc, I've thought about it, but I think that I will just keep my toes in Fidelity's waters rather than spread all my financial information around. It's probably unfounded, but I'd rather stick with something more proven with my savings… as in something already financially stable and managing orders of magnitude more money than the upstarts, not that I don't root on their attempts to innovate.
asift 11y ago
Vanguard wins in the fee category, but from a tax standpoint, direct indexing wins by a wide margin.

jordan0day 11y ago

[insert whynotboth.gif] Seriously, though, it seems like it wouldn't be too difficult to market a "lesser of x% or $50" type of product? > Another issue, it is proportionally harder to execute a larger portfolio than a smaller one. Is this really true, on the individual scale? Especially for something like Wealthfront where all the investors as basically "lumped in" together anyway?

asift 11y ago

For the right person, there seems to be more benefits to direct indexing than are indicated in this article. Tax-loss harvesting is one potential benefit, but so are things like charitable gifting. Anyone who is in a high marginal tax bracket, maintains a substantial portfolio in a taxable account, and gives a considerable amount to charities can receive substantial benefits from direct indexing. Instead of your gifting being limited to the average appreciation of all stocks within a given index (as is the case with an ETF), you can pick out the stocks with the largest gains to give to charities. Unlike tax-loss harvesting, this type of tax strategy does not ratchet down your basis (thus deferring larger capital gains for the future) or create any wash sale issues (so you don't need to take the risk of not holding a particular security for a period of time).