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What financial planning basics should you consider to maintain a healthy financial life? Join the conversation on common financial planning strategies on education, retirement, taxes and estate planning.

Not all software is created equal

I am constantly amazed at how often people ask me, “Why can’t any bank or broker with a large budget hire a bunch of engineers and easily replicate Wealthfront?” The answer is simple: not all software is created equal. If it were, you probably wouldn’t be doing all your searches on Google and buying most things from Amazon. We believe our software is simply better than our competitors’. Real World Example: Tax-Loss Harvesting A great example of our superior software is tax-loss harvesting, an important feature Wealthfront pioneered in October 2012. The goal of our daily tax-loss harvesting service is to minimize investment taxes for our clients. The service does this by selling securities that are trading at a loss […]

Financial Advice for Young Lawyers in Debt

What to Do First? Invest or Pay off Debt? Among the many decisions facing young professionals as they embark on their careers is how to begin a lifetime of financial planning. And young attorneys have an especially tough call. Most of them leave law school with significant student debt, but without the sort of starting salary necessary to quickly pay off their loans. At the same time, they are usually smart enough to appreciate that they need to start saving for major life events, including a home, college for their children, and their own retirement. So what to do? Pay off their loans, or start in on a nest egg? The answer for young lawyers, just like it is for […]

The Miracle of Compound Interest

Your Most Powerful Investment Ally is Time If you’ve ever heard compound interest described as “the most powerful force in the universe,” it’s probably on account of a quote to that effect attributed to Albert Einstein. As it happens, the quote itself is probably an urban legend. But if Einstein didn’t make such a reference, (or, as an alternative version has it, call compound interest “the most important invention of all time,”) it was probably because he was too busy with E=MC2 to give the matter much thought. E=MC2 is the formula that describes converting mass into energy. Compound interest, by contrast, is the formula that describes converting time into money. Lots and lots of money. Compounding Turns Time Into […]

The Right Way and the Wrong Way to Benchmark a Diversified Portfolio

One of the biggest challenges for an investor is to determine how well her diversified portfolio is performing. The two most common benchmarks featured in published advice are: S&P 500 A 60/40 Stock/Bond portfolio Unfortunately, most published advice is incorrect. That’s because it usually encourages comparison to an irrelevant index or too generic of a model portfolio. In our opinion, the right way to benchmark a diversified portfolio is to take into account risk and taxes. Let’s Start with Indexes Most individual investors think they should benchmark their diversified portfolios against a stock index like the S&P 500®. That’s probably because such indexes are the only indexes with which they are familiar or the only indexes their financial advisors used in […]

It’s About Automation, Not Fees

Automated investment services are successful because they are automated, not because they are low priced. They are low priced because they are automated, but that’s not why most people choose them. Broadly, preference for automation is a generational thing, much like music. Baby Boomers who grew up on rock ‘n roll didn’t transition their musical taste to classical when they got older. They were conditioned as a generation to like a particular style of music, and stuck with it. We believe the same is true for the way people interact with the Internet. While older people like the convenience of the Web, they also like talking to people “in person.” In contrast young people who grew up “digitally native” prefer […]

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 […]

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 […]