Tag Archives: Vanguard

If You Like Vanguard, You’ll Love Wealthfront

I am often asked by people unfamiliar with our service, “Why should I use Wealthfront to buy a portfolio of Vanguard index funds, when I could buy the same funds directly from Vanguard without paying any advisory fee?” It’s a perfectly reasonable question, but it has a very simple answer.  Wealthfront can save you significantly more money in taxes than the 0.25% a year you’ll pay us in advisory fees — up to eight times as much, in fact. There’s also the comfort of knowing that you can take a “set it and forget it” attitude towards your investment, confident that professionals will be looking after the routine housekeeping tasks that are crucial for any investing strategy. Even Vanguard’s management […]

Why Do Vanguard ETFs Dominate Low-Cost Portfolios?


The rise of exchange-traded funds, or ETFs, has been a critical factor in the rise of automated investment services like Wealthfront. ETFs are on average cheaper, more tradable and more tax-efficient than traditional index funds (see Why Index ETFs Are The Automated Investment of Choice). They allow everyday investors to access the same high quality products at the same ultra-low prices as the largest institutional investors in the world. There are now more than 60 companies offering ETFs in the U.S. with a combined $2.1 trillion under management. If you look at the average Wealthfront portfolio, however, you’ll notice it’s dominated by ETFs from one firm: Vanguard. On average, upwards of 90% of our initial portfolio allocations go into Vanguard […]

Direct Indexing: The Next Generation of Index Investing

One year ago today, Wealthfront became the first and only automated investment service to offer direct indexing with the Wealthfront 500. Direct indexing allows you to own all the stocks that comprise a major index in your own brokerage account, which is far more tax efficient than owning the equivalent index fund. Our research indicated this could generate an incremental annual after-tax return of 2.46% over just owning the S&P 500®. Frankly, we were overwhelmed by the amount of positive feedback from both clients and industry experts. It has been only one year since the launch of the Wealthfront 500, and already over $500 million has been invested in Wealthfront 500 accounts. We thought we were launching a product, but it […]

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 […]

Burton Malkiel Joins Wealthfront As CIO

We’re honored to announce that famed economist Burton Malkiel, who helped launch the low-cost investing revolution with A Random Walk Down Wall Street, has joined Wealthfront as our Chief Investment Officer. Dr. Malkiel is one of the most important public voices in investment management and a leading light in the index investing movement. He’s an emeritus Princeton University economics professor, a former board member of Vanguard Group, and a former member of the President’s Council of Economic Advisors. As Chief Investment Officer, Burt will help Wealthfront continue to improve our investment services, including the choice of asset classes, the way we allocate among different classes, the choice of securities and the methods by which we evaluate risk and apply those […]

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 […]

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 […]

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 […]

Are There Socially Conscious Ways To Invest?

If you have a question for The Upfront Blog, please leave it in our comments section, e-mail betsy@wealtfront.com or send it via our twitter feed: @wealthfront. Are there socially conscious ways to invest? -Kara Bloomgarden-Smoke, 26 The short answer is yes. But before you decide to practice socially responsible investing, you should carefully consider what exactly it means to you – and how much you’re willing to sacrifice in terms of money and transparency to follow your conscience. Socially responsible investing, or “SRI,” is defined as investing in which both traditional financial factors and ethical concerns are taken into account. Most people, when thinking about socially responsible investing, go straight to the conventional window on the issue: drop your money […]

Introducing Wealthfront, The Online Financial Advisor

Today we’re unveiling our Online Financial Advisor service, which for the first time makes sophisticated investment advice accessible and inexpensive. Six months ago, we started hearing complaints from our Silicon Valley-based customers about the wealth managers lined up in their lobbies. These “suits” were taking advantage of the new wealth being created by the surge in IPOs. But our friends in technology companies didn’t trust the financial advisors, because of their high fees and biased advice. They started asking us if we could manage their entire portfolios in a quality way, but without all the costs. When we heard this, we realized that our local customers wanted exactly what we wanted for ourselves. As software engineers, we wanted good, rigorous […]