Tag Archives: ETFs


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 […]

Missing the Obvious on Fees

I have a personal confession. For nearly 50 years, I’ve missed the “obvious” reality: Fees for investment management are not low. They are high; very high. When investors recognize this “new reality” — that fees are not trivial but are crucial — the beautiful “inside” world of fund management will experience a powerfully disruptive revolution. It may not be sudden, but it is inevitable. Investors are not captives of the conventional practices of “performance” investing. They have proven alternatives. The process of getting to the “Ah ha!” moment can come through a few examples of how easy it is to miss (or misinterpret) reality. Missing the obvious Sometimes it’s due to deliberate deception — as when a magician has you […]

When to Diversify Across Financial Advisors

Last month Wealthfront hosted an event that featured our chief investment officer, Burt Malkiel.  It’s wonderful to listen to Burt, because he discusses the markets with such clarity. Markets go up, and markets go down.  You can’t control them. As an investor, you should instead focus your efforts on the three things you can control that will make a difference:  Diversify your portfolio, minimize fees and minimize taxes. During our Q&A session, one of our clients asked Burt, “Does it make sense to diversify across financial advisors?” Burt’s answer was simple: “There is no real benefit to diversifying advisors if your advisor follows my advice of diversifying your portfolio across index funds that represent a variety of asset classes. Hiring […]

The Unexpected Impact of Commissions

The recent enhancement to our tax loss harvesting service prompted a few readers to privately ask if it’s possible for us to use Dimensional Fund Advisors’ (DFA) mutual funds rather than ETFs to implement our service. Prior to our launch in December 2011, we considered both Vanguard and DFA products as they offer what we believe are the best net of fee returns in the industry. Before we launched our service we met with DFA sales reps and learned that on average DFA funds generate the same return as Vanguard on a net of management fees basis. In other words DFA funds earn a higher gross return, but their much higher management fees end up negating that advantage. We went […]

Five Ways ETFs Surpass Index Funds

We often get the question from clients: What is the difference between an index fund and an ETF? Even people who understand ETFs don’t understand the difference between these two kinds of investment products. We believe ETFs are index funds, evolved. To understand why ETFs represent such an advance over index funds, you have to look a little deeper than the most basic explanation of the difference between them. Financial advisors will tell you that an ETF is different from an index fund because it trades like a stock, throughout the day. Index funds, which are a kind of mutual fund, can only be purchased or sold at the end of the day after market close. Most ETFs, like most […]

If ETF Fees Are Falling, Why Do Advisors Cost So Much?

In the last few weeks, there have been two new developments in the ETF price wars that are important to Wealthfront clients and investors in general – moves by Vanguard and BlackRock that will significantly lower ETF fees. At the same time, we’re starting to see the media raise the question that’s been on my mind lately: Why do traditional advisors charge so much when the underlying investment products (the ETFs) are getting cheaper and cheaper? Two weeks ago, Vanguard announced it will change the indexes it uses for 22 of its index funds and ETFs. For instance, it will now use FTSE for international indexes in place of its previous index provider, MSCI. Most people don’t realize the publishers […]

Are Rental Properties Good Investments?

Over the past six months, Wealthfront has given a seminar on how to invest well to more than 50 Bay Area-based companies, including Facebook (FB), LinkedIn (LNKD) and Yelp (YELP). The seminar helps the audience learn how to use Modern Portfolio Theory[1] to better manage investment portfolios. (Here’s a link to our slideshare presentation covering some of the same ground and to our seminar page) As you might expect, we talk about the idea that investing in individual stocks actually hurts portfolio returns over time. At almost every seminar, we get a question from the audience related to how someone should think about investing in real estate – not the home in which a person lives, but real estate rental properties. The […]

The Schwab and Vanguard ETF Price War

There they go again … Last week, Vanguard announced another reduction in its ETF and index fund fees. It was the Valley Forge, Pa.-based company’s 3rd such announcement since the beginning of the year. Four of the ETFs Wealthfront uses (VTI, BND, VWO and now VNQ) have seen their fees lowered in that series of announcements. The steadily falling fees have brought down the average ETF fees for a Wealthfront portfolio to 0.14%. We love this, of course, because it lowers our clients’ overall costs and provides better performance after fees. (See our previous post on Keys To Picking An ETF.) But why would Vanguard lower fees on products that were growing rapidly under its old fee structure? I don’t […]

Wealthfront In the News

Wealthfront in the News

Wealthfront: The Antidote To The Wealth Management Zombies On Jan. 16, in the new Pandodaily, Sarah Lacy wrote about the culture clash between Wall Street and Silicon Valley. Like Zombies single-mindedly trolling an apocalyptic wasteland for brains, the wealth managers are coming. They’re staggering all over Silicon Valley with dollar signs in their sunken, dead eyes, muttering, “New millionaires.” … But there’s another way to combat the zombies: Manage your new riches on Wealthfront instead. Last December, the site launched a new Online Investment Advisor aimed at precisely this audience. I’ve long been bullish on Wealthfront, because I like the company’s long-term focus and its emphasis on killing middlemen who extract ridiculous and hard-to-understand fees. Sooner or later the Internet […]

Lessons from 2011 And Ideas For Investing In 2012

The first week of the New Year was marked by plenty of stories that talked about the outlook for the capital markets in 2012. Investors should ignore most of them. If you need evidence of why you should ignore most of them, look back to the turn of 2011, when nine out of 10 stock market strategists polled by Barron’s predicted S&P gains of 7-17%. Yikes. Glad you didn’t shift all of your money into stocks based on those predictions. The S&P ended the year almost exactly flat. If you are looking for some thoughtful pieces on how to invest the money we hope you will make this year, check out these three pieces: Business Insider’s Henry Blodget is picking […]