Tag Archives: Wealthfront Research

Why Risk Tolerance Matters

Every year, a top-notch research firm called DALBAR releases a study that shows that the average mutual fund investor underperforms the market, often by a lot. Last year, the difference between the average mutual fund investor and the market was nearly 8 percentage points.[1] Why the difference? People are making the classic investing mistake of allowing their emotions to dictate when they buy and sell. When they open their portfolio statements to see that stocks are growing, they happily dump more money into stocks. When the market gets choppy or drops, they worry, and end up shifting money into other asset classes – like bonds or cash. “Investors succumbed to their fears (in 2011),” DALBAR reported, explaining why the markets […]

Winning VC Strategies To Help You Sell Tech IPO Stock

It’s well known that 20% of venture capitalists’ portfolio companies generate 80% of their returns. What most people don’t realize is the same 80/20 ratio holds true for public tech investing. The imbalance is even more profound for tech IPO investing. We found that for companies that went public between 2002 and 2008, 21% of the companies generated 96% of the gains. Just like in venture capital, a majority of the companies that went public during this period (56%) turned out to be losing investments. Venture capitalists and professional public company tech investors train for years and collaborate with other talented partners to identify the 20% of the companies that generated 80% of the upside. Imagine how difficult it must be for tech employees to decide if they should […]

What To Do When Your Stock Lockup Ends

Effect of Post-IPO Lockup on Tech Stock Price

A flood tide of shares is hitting the market in May and June, as a number of the high-profile tech IPOs from the fall emerge from lockup periods, including Jive Software (JIVE), Zynga (ZNGA) and Angie’s List (ANGI). If you’re one of the employees of the 28 companies whose lockups are expiring in May or June, you’re wondering how to diversify your portfolio and when to sell. Here’s our research on the question of what to do in the days immediately following the lockup expiration, presented visually to help you see the dip that typically follows the end of the lockup.* You’ll also notice that it shows the big difference between top-performing and bottom-performing stocks, as well as the average. […]

Real Data-Based Guidance On Selling Stock Post-IPO

Today, we’re releasing an analysis that suggests employees in IPO companies making decisions about how and when to diversify their portfolios should take into account whether the companies missed their first two earnings estimates. Companies that missed one or both of their first two quarterly earning estimates had a 70% chance of continuing to trade down in the three months after their lockups had expired, an analysis of 104 technology IPOs showed. The IPOs were from the years 2005-2011, the only years for which data is available. The conclusion could be an important touchstone for employees trying to figure out how rapidly to sell and diversify their portfolios after an IPO. If there’s only a slim chance that a company’s […]

Wealthfront Conference: Think Bigger. Think IPO.

Do these ideas seem familiar? It’s harder than ever to have a technology IPO. Private markets are removing the need for IPOs. Only big companies can go public now because of the high costs. The media is filled with misperceptions and oversimplifications about IPOs. On April 4, from 4-6 p.m. at the Rosewood Sand Hill, Menlo Park, Wealthfront is presenting a distinguished panel of Silicon Valley experts to give founders and CEOs the other side of the story. The conference will include expert views on why IPOs matter, why the difficulties of being a public company have been overblown, and how companies reach the IPO stage. You can apply for an invitation at http://thinkipo.eventbrite.com/. The conference is part of Wealthfront’s ongoing […]

Move Over Man Bacon, Let The Women Investors Sizzle

As we’ve written before, research suggests that women tend to be better investors than men, because they trade less often and take fewer risks. But women are prone to one big mistake: They don’t participate enough in the market. If you tie up your money in cash instead of a diversified portfolio, your returns will most likely suffer in the long term. See our post on Investing Mistakes Men and Women Make. (Men, who tend to be active investors, fall into the number-one investing trap: trading too often, as detailed by Terrance Odean. Not only are there costs associated with making trades, like commissions, but the human tendency is to buy and sell at the wrong times. The more often you […]

Strategies For Selling Stock Post-IPO

Strategies for Selling Your Stock Post IPO

One of the most important and difficult decisions you’ll make after your company navigates a successful IPO and lockup period is when and how much of your stock to sell. After numerous Wealthfront clients asked the question, Jared Jacobs, one of the engineers here at Wealthfront, created a simulation to help employees at new public companies visualize different approaches to selling some or all of their stock. As far as we know, it’s the first publicly available simulator of its kind. […]

After The Year Of The Yo-Yo

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 […]