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Your financial plan is solid, you’ve even set aside a rainy day fund. Now what? How do you invest well? Get a better understanding of investing with ETFs, asset allocation, rebalancing, and tax-optimization strategies.



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 […]

Introducing Wealthfront 3.0

When we launched Wealthfront in December 2011, the idea behind our first generation service was simple: take the best practices of investment management like diversification, rebalancing, dividend reinvestment and tax-loss harvesting, and automate them so investors could get these benefits without the high fees and high minimums of the traditional industry. The advent of low-cost ETFs and the relentlessly improving economics of consumer software made Wealthfront 1.0 possible. In December 2013, we launched Wealthfront 2.0. Our second generation service built a series of high value-added services that previously were only available to the wealthy, and layered them on top of our basic service. These innovative services include our Direct Indexing Platform, Single-Stock Diversification Service, and Automated Tax-Minimized Brokerage Transfers. No […]

What long-term returns should I expect from US stocks?

It is virtually impossible to predict short-term movements in the stock market. Prices change from day to day in a more or less random fashion. But there are several methods by which reasonable estimates of future long-run (such as 10-year) equity returns may be forecasted. Three principal forecasting methods are widely used. While none should be considered even close to precise, all of them suggest similar outlooks at the present time. Future equity returns are very likely to be modest and well below the returns that have been achieved over the past century. Risk and Return Both market practitioners and academic economists have long believed that risk and return are related. On average, investors should receive a higher rate of […]

Qualified Small Business Stock Is An Often Overlooked Tax Windfall

Editor’s Note: This post was originally published on February 26, 2015. Given recent changes to the tax code, we are updating and re-publishing it. It’s no secret that small businesses have long been the growth engine of the US economy. With that in mind, Congress has packed the tax code with lots of breaks for those investing in small companies. One of the best, but little known breaks became permanent with the passage of the Protecting Americans from Tax Hikes (PATH) Act on December 18, 2015. I am referring to qualified small business stock (QSBS), a big reason for venture capitalists, angel investors, and entrepreneurs to smile in 2016 and beyond. What is QSBS? Like all things in tax, the IRS […]

How do I know my financial advisor is doing the right thing?

How do I know my financial advisor is doing the right thing? The recent significant drop in world financial markets has created a lot of anxiety – especially among people new to investing. In times like these, investors who outsource the management of their investments can’t help but wonder if they chose the right person or firm to manage their money. The challenge is it’s really hard to tell who is doing a good job when markets decline. The financial press is saturated with two false promises: the promise that there are people who can reliably beat the market, and the promise that there are people who can reliably protect you from a downturn. Despite overwhelming research to the contrary, […]

Important Lessons for New Investors

Wealthfront has grown rapidly by bringing the benefits of sophisticated investment management to a huge new generation of investors. For many of our clients, investing with Wealthfront is their first direct exposure to the stock and bond markets, and unlike savings accounts, stock and bond markets can rise and fall. For new investors, reviewing your account to find less money than you put in can be a rude shock. Where did the money go? Rationally, we all know that markets go up and down, but it feels different when you see the impact in your own account. It can even lead new investors to wonder why they made their investments in the first place – or whether services like Wealthfront […]

America’s $13.2 Trillion Problem

Every year, millions of investors open their brokerage statements and feel a wave of anxiety as they attempt to figure out how much they are really paying in fees. The challenge is it’s almost impossible to tell. One thing we can be sure of is investors are paying way too much in fees. State Street and Boston Consulting Group data estimates that US investors paid over $277 Billion in fees to manage their investments in 2014, and that doesn’t include advisory or maintenance fees. If this continues, investors could lose an estimated $13.2 trillion to fees alone over the next 30 years. That’s $13.2 trillion that could be used to buy new homes, pay for college educations or fund retirements. […]

The Biology of Good Investing

Investment pundits – ourselves included – write a lot about how checking your portfolio too frequently is hazardous to both your financial and mental health. The evidence is overwhelming that those who check their portfolios on a daily basis tend to underperform those who check their portfolios less frequently. The reason is simple: On any given day, there’s almost a 50-50 chance the market will be up or down. Because people dislike losses more than than they enjoy gains – a behavioral finding known as loss aversion – people who check their portfolios daily find the process painful. And just like your gut reaction to pain is to draw away from the source of that pain, your gut reaction to seeing […]

Your 401(k) May Not Be the Best Way to Save for Retirement

The Wealthfront blog has always made a commitment to focusing on data-driven, actionable advice. Sometimes the data challenges conventional financial advice. In this post, we look at the gospel that 401(k) accounts are the best way to save for retirement. As we will explain below, a significant number of investors could even be better off saving money in a taxable, automated investment account with direct indexing and tax-loss harvesting than they would in a 401(k). For many of you, particularly those who have long advocated for the benefits of 401(k) accounts, this might be hard to accept. However, the data clearly shows that the potential drag from high fees in 401(k) accounts and the powerful tax-deferral benefits of newly available […]