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 […]

Categories: Investing Insights

What Role Should Bonds Play in Your Investment Portfolio?

According to a recent report by the Bank of International Settlements the amount of global debt passed an ignominious milestone last year, rising from $70 trillion in mid-2007 to over $100 trillion by the middle of 2013. Global borrowing has soared since the financial crisis as central banks suppress interest rates to spur growth and corporations take advantage by raising capital at low cost. This matters because yields on investment grade bonds are near all time lows. The investment returns for those bonds over the next 10 years will almost certainly be lower than over the last 10-30 years. Putting today’s bond market into context “Don’t fight the Fed!” is surely sensible advice as the Federal Reserve has skillfully, tenaciously […]

Categories: Stock Options & RSUs

IPO 101: The Inside Scoop on IPOs

Twitter’s recent IPO filing is the talk of the town. Unfortunately many of the articles and blog posts about the offering are from authors who lack direct experience with the IPO process. Our frequent readers know this is exactly the kind of topic we love to explain. What follows is a short series of posts that attempt to pull back the covers on a process that few truly understand. In this series, we will cover: IPOs: Why do companies go public? IPOs: How do companies go public? IPOs: What happens to employees after the big day? Whether you’re fortunate enough to work at a company that will go public one day, or are just curious about the IPO process from […]

Categories: Investing Insights

Angel investing? Rental property? What to do with your play money

An oft-heard request here at Wealthfront, at least among a significant portion of our client-base, has been a desire to set aside some play money. Just to be clear, we are referring to the Silicon Valley iteration of this concept whereby clients would like to invest some of their money outside of the rebalanced diversified portfolio of low-cost index funds we have created for them. Perhaps they have heard from friends or received suggestions or pitches to invest in rental property or become an angel investor. Such ideas are driven by a desire, innate in some of us (especially so among many bright young Valley professionals) to be active investors. Sure, our clients are more aware than most of the […]

Categories: Investing Insights

After The Year Of The Yo-Yo

James Surowiecki wrote this week about the effect of the volatile market on investors. In a New Yorker article titled Year of the Yo-Yo, he said investors are abandoning the stock market after a year in which they were whipsawed by the volatility. This flight from stocks is probably not a good thing for people’s retirement accounts—after all, in a capitalist country owning some capital is usually a smart way to make money. But it may well be a good thing for investors’ psychological well-being. In effect, they’ve decided that, in a market as volatile as this one, the only way to win the game is simply not to play. But the research shows that the bowing out of the […]

Categories: Investing Insights, Planning & Taxes

How To Build An Investment Portfolio With ETFs

Many investors are shifting their allegiance from mutual funds to ETFs. ETFs offer more transparency and, almost always, lower fees than mutual funds. The question for the thinking investor is how to combine ETFs to build a portfolio that makes sense – meaning, one that has the best chance of achieving the returns you want, with a level of risk you can stand. Wealthfront recently created a slide show presentation, which we show to various companies around Silicon Valley through our seminar program, offering a primer in how to use Modern Portfolio Theory to combine ETFs. We hope that watching it helps you put your own diversified portfolio together, or enables you to ask an investment advisor better questions. Engineer […]

Categories: Investing Insights, Planning & Taxes

People in Their 20s & 30s: Become a Savvy Investor

People in their 20s or 30s, you face some of the biggest challenges and the biggest opportunities of any investor. (See Preventive Medicine for One Young Doctor’s Growing Portfolio). If you have a solid income stream, you face a bewildering array of demands on your money. You may want to save to buy a house; you probably have college loans to pay off; and you’re already thinking about socking money away for “big ticket” items in your future like cars, vacations and kids’ college! One crucial realization you’ll have as a young investor is that different goals will require different investment vehicles. Key Investment Vehicles The Rainy Day Fund There’s no clear consensus among experts as to exactly how much […]

Categories: Investing Insights

10 Signs Of A Bad Investment Advisor

In times of market turbulence, investors are apt to reconsider their relationships with their advisors, or reconsider their status as DIYers. You may not make a move till things settle out, but it’s a good idea to look with a critical eye at the way your investments are being managed in this testing environment. Excluding criminals, there are two kinds of bad investment advisors: well-meaning advisors without the wherewithal to keep up with the science of the fast-evolving profession, and those whose main focus is not on managing their clients’ assets well, but on gathering assets under management in order to grow their own practices. How do you tell if you’re sitting across from either one of these types of […]

Categories: Investing Insights

The Markets Are Diving. Here’s Who Should Sell, According To Money Managers

When the market takes a sharp dive, two groups of people worry: those who ought to, and those who shouldn’t. If you are an investor comfortable with your portfolio allocations and your risk profile, now is not a time to panic. You can look to the professionals for some clues. Many are treating this shift as an opportunity to buy equities. “We believe this sell-off will provide opportunities to tweak our portfolio to buy more of good companies that have been oversold and sell good companies that have held up well. Since we are fully invested, we can’t buy ‘more’, but we can upgrade the quality and characteristics of the portfolio at this time,” says Glenn A. Dever, president of […]

Categories: Investing Insights

What Personal Finance & Investing Blogs Do You Follow?

Many of us were raised without a financial education. We may know a little bit about the basics if our parents shared how to balance a checkbook, or save on groceries, but typically we aren’t taught basic personal finance, and investing. With the advent of blogging there are now thousands of blogs covering everything coupons and deals to high risk investing. To help you sift through and find the best advice we put together a list of the best blogs to help you keep your finances on track.