What Brexit Can Teach Us About Investing

This post is based on an original post by Andy Rachleff, published on the Wealthfront blog on July 22, 2015. It has been updated based on the recent referendum in the United Kingdom. Over the last few weeks, the financial news has been filled with predictions of what might occur based on the recent referendum in the United Kingdom. Over the last 24 hours, the financial news cycle has been escalated to a fever pitch based on the results. Overnight market futures dropped significantly in several major markets, including hitting the 5% limit for overnight S&P 500 market futures. The British Pound dropped more than 10%. The Prime Minister has resigned. The FTSE 100 declined 3.15% today, but finished the […]

529 Series, Part 2: The Benefits of Superfunding

On June 1, 2016, Wealthfront announced its new 529 College Savings Plan. This post is the second in a three-part series updating our previous advice on saving for college using 529 plans. This post is based on an original 2014 post by Adam Nash. One of the largest financial obligations that many parents decide to take on is funding their child’s college education. With the current four-year cost of a California public education at UCLA at $136,000 and a private education at Stanford at $267,000, this can be a daunting task even for professionals with high-paying careers. The 529 plan is the most popular of several deferred savings plans for college. While contributions to a 529 plan are not deductible […]

The 529 Series, Part 1: Five Simple Questions When Saving for College

On June 1, 2016, Wealthfront announced its new 529 College Savings Plan. This post is the first in a 3-part series updating our previous advice on saving for college using 529 plans. This post is based on an original 2012 post by Jeff Rosenberger, PhD. For most households, the birth of a child represents a wide range of conflicting emotions and new found responsibilities. From an investment standpoint, it is at this moment that many parents confront a familiar, and yet suddenly urgent financial goal: how to save for the ever-increasing financial burden of a college education. Saving for college can be a daunting financial goal. If you have a newborn daughter, you’ll need roughly $540,000 to pay for her […]

Introducing the Wealthfront 529 College Savings Plan

On December 31, 2015, my wife Katharine and I welcomed our first child Beatrix into the world. As anyone who has had the privilege of becoming a parent knows, we found ourselves overwhelmed by both the indescribable joy that comes with the birth of a child and a certain trepidation about the enormous responsibility for this little person’s life, well-being and future. One of the most important ways that parents can provide for their child’s future is funding a quality college education. The challenge of setting aside large sums of money to fund a college degree is not news to any parent, but the price tag associated with higher education has become staggering. According to data compiled by the College […]

Demystifying Venture Capital Economics, Part 5: When Should New Entrants Partner with Incumbents

At some point in its evolution, every startup faces the question of whether or not it should partner with a large company to accelerate its growth. On the surface, partnering almost always looks like a great idea. Unfortunately, the reality is seldom as rosy. Partner Motivation: The Chesbrough Framework In my experience, understanding your potential corporate partner’s motivations will tell you a lot about how likely it will behave post investment. In my product/market fit class at the Stanford Graduate School of Business, I use Hank Chesbrough’s outstanding framework to describe the motivations that drive corporate partnerships (Hank is a professor at the University of California’s Haas School of Business). Like most compelling frameworks, it is based on a simple […]

Why Wealthfront is a wise choice for finance professionals

At first blush, the suggestion that finance professionals should choose an automated investment service like Wealthfront to manage their investments seems to make little sense. Wouldn’t folks who monitor 30-day moving averages and asset class correlations for a living prefer to actively manage their investments? Don’t they have pockets full of arbitrage trade ideas just waiting to be executed? As someone who formerly worked in fixed income derivatives, I can tell you that these idealized versions of how financial professionals handle their own portfolios rarely, if ever, occur in real life. One reason is the NYSE’s Rule 407, which applies to any employee of a firm that does business with NYSE Euronext, is a member of FINRA, or is registered […]

Investment Fees Matter, But Taxes Matter Even More

For more than 40 years, our Chief Investment Officer Burt Malkiel has been telling investors that you can’t outperform the market, so you should buy index funds and focus on the three things over which you do have control: minimizing fees, minimizing taxes and staying diversified. Minimizing fees gets a lot of attention from personal finance bloggers, but minimizing taxes gets almost none. That’s because these tax-minimization strategies are often hard to understand and even harder to put into practice, and thus have mainly been used by high net worth individuals who are serviced by well-paid financial advisors. And that’s bad news for the portfolios of average investors like yourself, because as I will show in this article, taking steps […]

Demystifying Venture Capital Economics, Part 4: What Analysts Get Wrong About Innovation

In 2014 our CEO, Adam Nash, caused quite a stir when he said “In the next 10 years, everyone will be using some form of automated investment service.”  Frankly, many market analysts thought he was nuts. Twenty-five years in the venture capital business leads me to believe Adam is right. As a matter of fact, I think automated investment services will ultimately attract more than $2 trillion of assets. So what leads to the enormous difference of opinion Adam and I have with market analysts? In my experience, industry observers consistently make the same mistake. They evaluate innovations based on their magnitude of adoption, rather than their rate of adoption. Put another way, they over-emphasize the current size of the […]

Last Minute Advice on Retirement Accounts

Ordinarily, important investment decisions shouldn’t be rushed. But this week presents an exception, because you only have a few days left to contribute to your retirement account and get a credit for the amount on 2015 taxes. You need to do so by Monday, April 18, 2016, the same day taxes are due, which is three days later than the traditional filing date, on account of April 15 being a holiday in Washington D.C. And if you don’t already have a retirement account, you’re also going to need to open one by Monday. (The deadline to do so with Wealthfront is Friday, April 15.) Retirement accounts are a somewhat complex topic, with so many permutations that most people can’t absorb […]

What Should the Investor Do About The Bond Market?

Professional investment advisors as well as academic financial economists have traditionally advised investors to hold widely diversified portfolios. Indeed diversification has often been called “the only free lunch” available to investors. Broad diversification is recommended to provide investors with a reasonably secure rate of return while containing portfolio risk. Diversified portfolios have normally included some bonds. The role of bonds has been to provide a safety net during the inevitable times when equities suffer sharp losses. Especially since bond returns are often negatively correlated with stock returns, bond holdings make investment portfolios more stable. That stability can help investors to stay invested during periods of extreme volatility. Probably the biggest mistake that investors make is to sell out their equity […]