Tag Archives: Burton Malkiel


Why Did Wealthfront Hire A World-Class Research Team?

Readers of our blog know we are big advocates of passive investing. We believe that buying a broadly diversified portfolio and running it at extraordinarily low costs is the foundation of any sound investment strategy. Given how simple our approach is, you might ask why we employ a research team of six PhDs led by Burt Malkiel, the man who inspired the creation of the index fund. What, exactly, do they do all day? Well, for more than forty years, Burt has said that since you can’t beat the market you should focus your investment efforts on the three things that actually can make a difference to your investment returns: diversifying your portfolio, minimizing cost and minimizing taxes. Not surprisingly, […]

The Stock-Pickers’ Market Myth

Earlier this month, Barron’s ran a cover story that made the case that 2015 was likely to be a “stock pickers’ market.” Active portfolio managers were expected to “recapture their lost glory” as interest rates were predicted to rise. Unfortunately, we have heard similar claims at the start of every year. In early 2014 The Wall Street Journal ran an article predicting that 2014 would be a stock pickers’ market as the correlation between the S&P 500® index and its component stocks was declining. Indeed, in every year one can find similar predictions for the year ahead. Money managers have a number of clichés they use to promote their high-priced services, and “stock pickers’ market” is one of their favorites. […]

Has Indexing Become Too Popular?

Indexed investment strategies (passively holding portfolios that simply buy and hold all the securities in a particular market) continue to increase in popularity. Currently more than 35% of investment portfolios use index funds to gain exposure to the U.S. stock market.1 And according to Morningstar Investment Research, more than 55% of the moneys invested in equity mutual funds during 2014 went into index funds — rather than actively-managed funds. Given this success, people often ask whether index funds have become too popular. Could we be entering a period when active portfolio management will become more advantageous? And could the very size of index funds interfere with their ability to produce exceptional results? My answer to both questions is a clear […]

14 Things to Consider for Your Year-End Financial Checklist

The last few weeks of the year are always a mad rush to wrap up loose ends, often in a frantic fashion. In the spirit of the season, we thought it a good time to share a checklist of important items to consider before the calendar year ends, all related to your investments and finances. We also wanted to reiterate some key topics we’ve already discussed, but that are especially important to review by end-of-year. Here are some brief pieces of financial advice on several fronts that could benefit you and yours in multiple ways, and that could ultimately add to your long-term bottom line, not to mention peace of mind. 1. Establish or Tune Up Your Emergency Fund If you […]

Invest Despite Volatility

Many facets of investing are counterintuitive. Investment strategies that feel right seldom are. A classic example of this is how to deal with market volatility. During a recent investment seminar I gave to Dropbox employees, I asked the audience which type of market they would prefer to invest in periodically each year if they didn’t intend to withdraw their money until 10 years from now. I showed them the three charts below and asked them to vote.           You probably won’t be surprised to learn that Behavior Chart A  was the vote’s biggest winner while Behavior Chart C  garnered the fewest votes. However, you may be surprised to discover that Behavior Chart C  actually displays the best […]

Indexing and the Curious Case of Alibaba ($BABA)

It has now been 40 years since I published the first edition of A Random Walk Down Wall Street. The book, about to come out in its 11th edition, had a very simple message: Investors would be better off buying a broad-based index fund that simply held all the stocks in the market. As a result, it might surprise some to hear that not all index funds will serve investors well. Not all index funds are the same, and it is important to understand how indexes are constructed and what stocks they contain. The recent Initial Public Offering of Alibaba stock, the biggest IPO in history, and the failure of many indexes to consider including it, underscores how important it […]

Introducing Ali Rosenthal

At Wealthfront, we believe that everyone deserves sophisticated financial advice. To deliver on that belief, we need more than an audacious mission — we need to build a world-class company. To achieve that goal, we need to attract world-class talent in three major areas: investment research, software development and management. Thus far we’ve made some pretty good progress. We’ve been fortunate to attract financial luminaries like Burt Malkiel and Charley Ellis to our investment team. Our software team includes some of the best from companies like Apple, Facebook, Google and LinkedIn. Our management team includes five professionals who helped build billion-dollar revenue companies that forever changed their industries. Today, we’re thrilled to announce yet another phenomenal executive, Ali Rosenthal, has […]

Indexing and the 2014 “Stock-Picker’s” Market

In January of this year it was widely believed 2014 would be a “stock-picker’s” market. While the S&P 500® index of large U.S. stocks produced an extremely generous return of more than 30% in 2013, an indexing strategy was deemed unlikely to be effective in 2014 — or so active managers argued in an attempt to justify their high fees. While several months remain we can still take a preliminary look at the results. The stock market was not quite as favorable this year as it was last year. The S&P 500 produced a rate of return of only  about 7% during the first six months of 2014. But did active managers finally demonstrate their superior skills? The answer is […]

Smart Beta

Fads and fashions have always been part of the financial markets. Around the turn of the century Internet-related stocks were regarded as reliable instruments for growing and preserving wealth. During the early 2000s, real estate was the instrument of choice for savvy investors. Today “Smart Beta” is the mantra of legions of securities salesmen who claim that broad-based low-cost index funds are sub-optimal and that better results can be obtained by biasing portfolios toward a number of characteristics that promise higher returns. There is no universally accepted definition of “Smart Beta.” What most people using the term have in mind is that it may be possible to gain excess (greater than market) returns using a variety of relatively passive investment […]

Wealthfront Named ETF Strategist of the Year

Today I am proud to announce that Wealthfront has been named the “ETF Strategist of the Year” by ETF.com (formerly IndexUniverse), the world’s leading authority on exchange-traded funds. We are especially gratified to be chosen for this award from among all investment management firms that use ETFs, not just new entrants. At Wealthfront, we strive to build a world-class investment service and we’re proud to have assembled an unparalleled investment team led by Burton Malkiel. Over the past year, we added asset classes, released an improved and more diversified investment mix, delivered different asset allocations for taxable vs. retirement accounts to improve after tax returns, and launched the Wealthfront 500. In short, we aim to relentlessly improve our service to […]