Tag Archives: Wealthfront

A Deep Dive into Direct Indexing

The most unique aspect of Wealthfront’s automated investment service is our Direct Indexing service. Direct Indexing is a classic example of Wealthfront’s strategy of using software to make investment services broadly available that were previously only available to the ultra wealthy. Depending on account size, Direct Indexing can add 0.20% – 0.50% to your annual after tax return above and beyond what’s achievable with our core service, which includes daily ETF-level tax-loss harvesting. With this post we hope to explain why Direct Indexing is so unique and how it’s possible to offer such compelling value. What is Direct Indexing? Direct Indexing is, in our opinion, the next-generation of investing. Direct Indexing allows Wealthfront investors to hold the individual securities that […]

Tax-loss harvesting as a behavioral tool

It’s extremely hard to invest when markets are down. We all know it’s the “right” thing to do, but it’s hard to act in the face of fear. Unfortunately, the popular media doesn’t help. As an investing culture, we have a gaggle of catchphrases that warn you away from buying when things get tough. Aphorisms like “don’t catch a falling knife,” “the trend is your friend,” “avoid value traps” litter the investing landscape. Each time the market gets topsy-turvy, CNBC posts images of a ravaging bear, claws and fangs ready to ravage your investment portfolio. As we wrote in How To Invest In A Falling Market, it’s no surprise that study after study finds investors tend to buy high and […]

Clawback Fees: How Brokers Pull Money From Your Wallet on the Way Out

At this point, it’s likely not a surprise to anyone that the brokerage industry keeps finding new ways to put its hands in your pocket. Charles Schwab, to take one example, publishes a 14-page document outlining all of its fees. And although they do make this document public, we are still surprised by some of their tricks when it comes to fees. But sometimes there is a practice that is so surprising, so despicable, it warrants a bit of attention. Today, we’re going to talk about clawback fees. Why It’s Called the Clawback Fee Wealthfront has the benefit of seeing clients transfer their accounts to us from a wide variety of brokerage firms. This gives us a front-row seat to […]

Physician, Heal Thy Balance Sheet

So it turns out there’s a good reason your mother wanted you to be a doctor. As a group, no other profession generates higher average annual income than physicians. In fact, U.S. government data shows that various medical specialties account for the nine highest-paying occupations in the country – anesthesiologists and surgeon rank #1 and #2, respectively, with oral surgeons close behind. (CEOs, by the way, rank #10.) Just five job categories in the government survey sport annual salaries north of $200,000 a year – and all of them require medical degrees. See, mother knows best. The catch, of course, is that it takes a long time for doctors to reach six-figure annual earnings power. Four years of college, four […]

Introducing Ashley Fieglein Johnson, Chief Financial Officer

As I often remind our team, Wealthfront has a once-in-a-generation opportunity to build an industry-defining company. And building an exceptional company begins with building an exceptional leadership team. At Wealthfront, we’re proud of our ability to bring together financial luminaries like Burt Malkiel and Charley Ellis with a software team led by executives from Apple, Facebook, Google and LinkedIn. Our management team includes six professionals who helped build billion dollar revenue companies that forever changed their industries. Today, we’re thrilled to announce yet another phenomenal executive, Ashley Fieglein Johnson, has joined our management team as Chief Financial Officer. Incredible Breadth of Experience Ashley comes to us from ServiceSource, where she played a critical role raising over $150 million as a […]

Dollar Cost Averaging: A Behavioral View

This is a guest post by Meir Statman. Meir Statman, PhD, is the Glenn Klimek Professor of Finance at the Leavey School of Business, Santa Clara University. He is also an advisor to the Wealthfront Investment Team and the author of “What Investors Really Want: Know What Drives Investor Behavior and Make Smarter Financial Decisions”. Investors with cash destined for stocks sometimes employ dollar-cost-averaging by dividing their cash into segments and committing to convert each segment to stocks according to a predetermined schedule. Investors with $120,000 might employ dollar-cost-averaging by committing to invest $10,000 in stocks on the 10th of each of the coming 12 months. The alternative to dollar-cost averaging is lump-sum investing: investing the entire $120,000 in stocks today. The […]

How Does Direct Indexing Work?

At Wealthfront, we’re proud of our record of innovation. From tax-loss harvesting to dividend-based rebalancing, we believe our innovations have increased returns for thousands of Wealthfront investors by driving down costs, increasing diversification and reducing taxes. Of all our innovations, however, we’re especially proud of our Direct Indexing service. Introduced in 2013 for accounts over $500,000, and expanded to accounts with $100,000 in assets last year, we call it The Next Generation of Indexing. No other automated investment service offers anything like it. Our Direct Indexing program allows clients to track the returns of the U.S. equity market by directly owning individual securities instead of by buying an exchange-traded fund. Specifically, instead of buying the Vanguard Total Stock Market ETF […]

How To Beat The Market

There are a million web sites, books and pundits who will tell you that you can’t beat the market. They’re all wrong. Or, at least, they’re not framing things correctly. And I think that’s a major problem. My Wife’s Disappointment This thought occurred to me the other day when I was hiking with my wife in the redwoods of Muir Woods National Monument, outside of San Francisco. We were hiking and talking and, as sometimes happens, we started talking about investing. I was telling her about automated investment services like Wealthfront and what they were doing for the world. I explained how they built broadly diversified, optimized portfolios that are managed at extraordinarily low costs. I talked about how they […]

Debunking The Myth of Magical Options Strategies

Earlier this month, Duncan Gilchrist and I wrote a blog debunking the idea that you can achieve high returns with limited downside using hedge funds. Our research compared the risk adjusted returns of a standard, broadly diversified Wealthfront portfolio with the average returns of hedge funds over the past ten years. The data showed that, despite all the hype, money and excitement hedge funds elicit, you would have achieved a far better risk-adjusted return with a Wealthfront portfolio. Specifically, the Wealthfront portfolio posted a Sortino ratio of 0.62 vs. 0.43 for the HFRI hedge fund index during the time period studied. Importantly, we also showed how much quicker the Wealthfront portfolio bounced back from the financial crisis of 2008, with […]

Why Did Wealthfront Hire A World-Class Research Team?

Readers of our blog know we are big advocates of passive investing. We believe that buying a broadly diversified portfolio and running it at extraordinarily low costs is the foundation of any sound investment strategy. Given how simple our approach is, you might ask why we employ a research team of six PhDs led by Burt Malkiel, the man who inspired the creation of the index fund. What, exactly, do they do all day? Well, for more than forty years, Burt has said that since you can’t beat the market you should focus your investment efforts on the three things that actually can make a difference to your investment returns: diversifying your portfolio, minimizing cost and minimizing taxes. Not surprisingly, […]