Wealthfront Review: Investing, Simplified

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This Wealthfront review will help you show investing doesn’t have to feel overly complicated. You don’t have to know all the terminology and spend lots of time looking over your portfolio and adjusting. You just need to take the first step. This overview details the benefits of using the robo-advising service for your retirement planning.

Launched in 2011, Wealthfront is one of the big names in robo-advising and has over $3 billion in assets managed. They utilize the Modern Portfolio Theory (MPT) to create a diversified investment portfolio for a person based on their risk tolerance and investment goals.

Investing, especially investing in your 20’s, can feel intimidating. There are so many terms thrown around. Mutual funds. ETF’s. Index funds. Risk tolerance. It can be overwhelming and feel like information overload. Many people know investing is important but they put it off because of the time they think it takes to set up and manage investments.

Robo-advisors make investing less intimidating. With low minimums to open accounts and automated management, investing has become a lot more simplified. (which is pretty awesome! 🙂 ).

This Wealthfront review will help you get to know more about one of the most widely used robo-advisors and how the service can benefit you.

Getting Started with Wealthfront

1) Questionnaire

After clicking the ‘Invest Now’ button on the Wealthfront homepage, you are taken to a questionnaire where you answer questions asking what you look for in a financial advisor, your age, income, how you want to invest your money, and what you want to do when the stock market fluctuates.

2) Investment recommendations

After completing the questionnaire, Wealthfront will show you a recommended investment plan based on a risk tolerance score of 1-10. The risk tolerance score will be based around the answers you gave about your situation and goals.

You can enter your email address and get the investment plan emailed to you. The plans focus on low-cost ETF’s (exchange traded funds) to build and manage your portfolio. Different combinations of the following ETF’s go into your investment portfolio:

• VTI – Vanguard Total Stock Market ETF
• VEA – Vanguard Developed Markets ETF
• VWO – Vanguard Emerging Markets ETF
• VIG – Vanguard Dividend Appreciation ETF
• LQD – iShares Investment Grade Corporate Bong Fund ETF
• EMB – iShares Emerging Market Bond Fund ETF
• MUB – iShares Municipal Bond ETF
• SCHP – Schwab Treasury Inflation Protected Securities ETF
• VNQ – Vanguard REIT Index Fund ETF
• XLE – Energy Select Sector SPDR

Fees

With Wealthfront, you don’t have to pay high fees (like you would with a traditional financial advisor) for automated investment service that fits your goals and risk tolerance. The fees with a Wealthfront account are very appealing when compared to those of other robo-advisors.

You get your first $10,000 managed for free ($15,000 if you sign up through a referral). Any amount over the $10,000 threshold is managed at a flat rate of 0.25%. This is on top of the fees charged by the ETF’s in your portfolio, which average around 0.12%.

Features

Low Account Minimum: You can open an account with Wealthfront with as little as $500. This makes it a lot easier for a person to get started investing when they have little money. Many of the funds at online brokerages like Fidelity and Vanguard have $2,500-3,000 minimums.

Automated Rebalancing: When your investment portfolio fluctuates, you don’t have to worry about going in and rebalancing to get back to your desired allocation. Wealthfront does it for you.

Tax-Loss Harvesting: Wealthfront’s philosophy is all about maximizing returns on your investments and letting you keep more of the returns your portfolio makes. 

All taxable, non-retirement accounts come with daily tax-loss harvesting which helps you potentially minimize the taxes you pay and maintain the risk and returns you get. Investment losses are “harvested” (sold off) to offset taxes from your other gains and income.

No Commission/Trading fees: The first $15,000 is advised for free (when signed up through a referral). The only fees with Wealthfront are the 0.25% advisory fee on accounts over $15,000 and the ETF expense ratios which average 0.12%.

Low fee service for the new/passive investor: Wealthfront’s fees are low and reasonable when you consider the piece of mind you get from having an automated investment portfolio.

Disadvantages

No customization: What you see is what you get. Wealthfront’s recommended portfolios included a diversified set of low-cost ETF’s but you can’t add any different ones you may want.

The Wealthfront set of ETF’s are good, research-based recommendations but if you’re the type of investor who likes to fine-tune their portfolio themselves, you’re out of luck. Wealthfront is not for the DIY, hands-on type of investor

No fractional share purchases: Wealthfront only purchases whole shares of stocks, so you will likely have a bit of cash sitting in your account until it’s able to buy whole shares again. This is different from Betterment, which buys fractional shares and invests all of your cash.

Types of Accounts Offered

Wealthfront supports several taxable and non-taxable investment accounts: personal and joint non-retirement taxable accounts, Traditional and Roth IRA’s, including 401(k) rollovers, and SEP-IRA’s. They also recently announced support for 529 college saving plans.

Verdict

Wealthfront isn’t as flashy and out there as its counterpart, Betterment. Wealthfront makes up for it by the way of its fee structure and world-class investment team. While Betterment offers no account minimum, it’s fees, for account balances below $100,000, are higher than Wealthfront.

Wealthfront is more accessible and easier to new investors with little money. The first $15,000 of an account is managed for free. Because of this, Wealthfront makes for a really attractive option to get started investing with little money. Use my referral link below to learn more and open your account.

Are you confused about the world of investing and want to learn more? Enroll in my free 7-day Investing 101 For Millennials email course.

Just two years ago, I knew nothing about investing and kept all my money in a savings account earning 0.05% interest. Once I learned more about investing and it’s power to build wealth, I got started with it. Investing doesn’t have to be overwhelming or scary!

The course will walk you through the basics of investing, why it’s important, why everyone should be doing it, and how to set up and get your first investing account ready to go.

Click the image below to learn more!

What do you think of robo advisor services? Do you think it makes investing less intimidating and more accessible? 

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Colin // RebelwithaPlan

Colin Ashby is the writer behind Rebel with a Plan, a website dedicated to people who choose to rebel against the norm of living in debt and feeling financially unenlightened. He believes everyone has an eccentric quality to embrace and that lattes are sometimes a necessity (despite what the personal finance community tells you).

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