Tag Archives: rebalancing


Choosing Asset Classes Is Another Form of Market Timing

Any reader of our blog will know that we are not fans of market timing. As our CIO Burt Malkiel is fond of pointing out, research consistently proves it’s almost impossible to outperform the market by attempting to time it. Burt has won great acclaim since he first wrote about this phenomenon 40 years ago in A Random Walk Down Wall Street. The lessons of 40 years ago are just as appropriate today, which is why the book is still a best seller and soon to be released in its 11th edition. We have written about many ways to time the market on this blog — choosing individual securities, investing in individual real estate properties, timing when to withdraw from […]

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 […]

Minimize Your Investment Taxes

Our Chief Investment Officer, Burt Malkiel, famed author of “A Random Walk Down Wall Street”, has spent the past 40 years explaining that investors can’t control the market, so they should focus their efforts on the three investment tactics within their control: Diversify and rebalance your portfolio Minimize fees Minimize taxes Previously, we’ve published strong opinions on the value of diversification and advisor fees. However, too often the industry avoids talking about one of the most important aspects of maximizing your long-term investment results: minimizing taxes. The Four Ways to Minimize Taxes There are four ways that financial advisors can significantly reduce your investment taxes: Index Funds Intelligently rebalance your portfolio with dividends Different asset allocations for taxable & retirement […]

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 […]

What To Do In A Falling Market

The global equity markets have been increasingly turbulent over the past few weeks. After peaking on May 21st, the S&P 500® fell in June by more than 5%, and emerging market equities have declined by over twice that amount. Many of our clients are asking us: “What should I do in a falling market?” There are three rational actions to take in response to a falling market, actions that research shows will serve you well in the long run: Keep investing. Rebalance. Harvest your losses. But investors aren’t solely rational. They’re human: When there is turbulence in the markets, people typically have one of three emotional responses. • You want to sell everything in an attempt to “limit” the loss. […]

Automated Tax-Loss Harvesting by Wealthfront

Today, Wealthfront adds automated tax-loss harvesting to its suite of investment services, putting a benefit long used by the rich to reduce tax bills and maximize investment returns into the hands of typical Americans. Free tax-loss harvesting is another way Wealthfront is democratizing access to high-quality financial advice. Our research shows that automated tax-loss harvesting would have increased your after-tax returns by an average of more than 1% a year between 2000 and 2011. Over the next 20 years that could add more than $54,000 on a $100,000 portfolio. For more on how tax-loss harvesting works, here’s our video:   The Competitive Advantage The wealthy have always had a competitive advantage when it comes to the U.S. tax code: They […]

How Target Date Funds May Mislead Investors

Q: I have a target date fund in my 401(k) plan. Can I rely on it to keep me rebalanced? (This question came from a young investor attending a seminar given by Wealthfront CEO Andy Rachleff at New York University). Because target date funds are specifically sold as a way to keep people rebalanced as they head toward retirement, you would think the answer would (and should) be an unequivocal “Yes.” The answer, unfortunately, is an unequivocal “No.” As with all investing products, you need to look under the hood of the investment before you can decide if the asset allocation and expense ratio suits your own risk tolerance and financial plans. Assure yourself the Target Date Fund (TDF) is […]

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 […]

Either We Are In For A Lehman Crash, Or A Big Rebound

So the media is busy issuing contradictory advice this week. According to one thread online, the markets are in a repeat of 2008. (i.e., the sky is falling). According to another school of thought, we are on the verge of a big rally because investors are sitting on piles of cash – a situation that historically is the precursor to a rebound. My takeaway from all this, similar to Jeffrey Kosnett’s: Don’t let panic derail your long-term strategy. If you are set to rebalance at the end of the quarter (as some people may be), go ahead and do so, even if it hurts to sell bonds and buy stocks. On a side note, one of the visual aids being […]

Why Watching Media Reports On The Market Is A Waste Of Time

Americans concerned about their portfolios (everybody) woke up to more bad news Thursday, as headlines about a global selloff permeated the media. If you believe, as we do, that it’s important to invest for the long term, rebalance in a disciplined way, and limit your emotionally driven moves to the level of tweaking (if you really need to), then getting consumed in these reports is counterproductive. Here’s a great piece on the topic: There’s no reason why stocks are down today. Check out the graph at the bottom of the post that shows the long-term gain in U.S. equities. Thanks to Abnormal Returns for the link. Investors are taking out their fear and frustration with the political system on the […]