What is wealth front

A comprehensive wealthfront review

If you have a bit of cash to spare and you want it to work harder than a deposit or savings account, what are your options? One option is to invest with one of a growing number of robo-advisors, automated portfolios based on algorithms. One such offer is from Wealthfront.

Wealthfront is a robo-advisor specializing in tax efficiency. Many of this new wave of automated investors have specific strengths and weaknesses, Wealthfront is what makes bribes.

About Wealthfront

Wealthfront was founded in 2011 and is based in California. While it wasn't the first robo-advisor, it was the first company to reach a $ 1 billion investment and currently manage over $ 7 billion. Wealthfront manages your portfolio and Apex Clearing Corporation holds it. Apex is a big player and works with a number of fund managers and robo-advisors as far as I can tell.

Products offered include retirement plans in traditional IRA, Roth IRA, SEP IRA and 401 (k) rollover, college savings accounts, trusts and investments both individually and collectively. There are also a number of loan options and sales and investment plans for company stocks.

Wealthfront's Robo-Advisor uses the Modern Portfolio Theory algorithm to manage your money and invest in Exchange-Traded Fund (ETF) index funds. This is the primary way many such managers work, which is an idle, slow burning investment method that allows you to invest intelligently with minimal effort and financial expertise.

MPT is used to build a portfolio based on your assets and risk tolerance. It will not list individual stocks, but will create a diversified portfolio over the long term and automate this with the algorithm.

How does wealthfront work?

To use Wealthfront, you need to sign up for an account and fill out a questionnaire that will help you determine your financial goals and risk tolerance. It is important to answer the questions accurately because your portfolio's performance will be based on the answers you give.

Wealthfront then creates a portfolio based on around 8 classes of assets that consist of a mix of domestic and international stocks and bonds. They will all be Exchange-Traded Fund (ETF) index funds as this is where Wealthfront trades. The classes include US stocks, foreign stocks, emerging markets, real estate, dividend stocks, emerging market bonds, municipal bonds, TIPS, and natural resource classes.

The distribution of these classes is determined by this questionnaire, which is why the exact answer is so important. Your tax status will also affect the types of investments selected as tax efficiency is paramount in wealth management at Wealthfront.

  1. Go to Wealthfront and select Invest Now in the top right corner.
  2. Fill out the questionnaire.
  3. Assess the overview of where your portfolio is. If you agree, select “Looks good! Go to My Account.
  4. Complete your information and select Next to continue.
  5. Select the type of account you want Wealthfront to manage.
  6. Complete your personal data.
  7. Fund your account. You can use a wire transfer, bank transfer, or bank transfer. This takes between 1 and 10 working days.

Once you've funded your account, nothing happens until the money arrives at Wealthfront. During this time, your account may be checked by Wealthfront and you will be verified. Once approved, you can log into Wealthfront and manage your account and read the documentation provided.

The account creation process is very simple. The questionnaire lets you think about your long-term goals, but does not contain any difficult technical questions. They serve to assess how you assess risks, how you can deal with losses and what you want to achieve in the long term.

Approval can take a few minutes or a few days. Since nothing can happen until your account is funded, you won't lose any time or opportunity while this is happening. I've never heard anyone's account get approved, but I'm assuming it has to happen. Most ordinary investors shouldn't have a problem.

Key features of Wealthfront

The main advantage of robo-advisors is that they are cheap to run and they take most of the investment out of the market. They are ideal for smaller investors for whom using a broker would be too expensive or not worth the effort.

They fill that lucrative balance between savings and deposits, managing stocks through brokerage for those of us without the patience to learn about investing.

No fees for accounts under $ 10,000

A key benefit of Wealthfront is that management is free for investments under $ 10,000. Use the Referrals program and that increases to $ 15k. Once you exceed that amount, the administration fee will be 0.25% (September 2017) on balances above that original $ 10 or $ 15k.

Low initial investment

Another useful feature is a low barrier to entry of $ 500. This is the minimum balance that is allowed to use the service without me being able to find a maximum. That opens up to all of us and means anyone from almost any background can plan effectively for the future.

Competitors like Betterment or WiseBanyan may not have minimum balance requirements, but $ 500 is much lower than the $ 5,000 required by Charles Schwab or Fidelity or the $ 50,000 required by Vanguard.

Tax efficiency

Wealthfront is all about tax efficiency. It offers daily tax loss harvest, a tax-minimized brokerage account transfer service and tax-optimized direct indexing.

The Tax-Minimized Brokerage Account Transfer service leverages existing investments held by Wealthfront and holds transferred securities wherever possible to maximize the efficiency of capital gains. The tax-optimized direct indexing buys stocks directly on your behalf in order to enable tax loss accumulation options through stock movements.

path

Path is a new service launched this year. It's a new automated financial planning program that links to other financial accounts and tracks expenses, income, investments and savings, and provides ideas and guidance on how to maximize your knowledge. It's another automated robo-advisor, but it seems believable.

Path also enables you to set and approach goals and tell you what kind of retirement to look forward to with your current financial planning strategy. It works like a financial advisor like Wealthfront's main account as your virtual broker and is well worth checking out as you look into the future.

Automated portfolio rebalancing

The robo-advisor will automatically balance your portfolio so that there is an even share of the asset classes at all times. The focus is on managing your risk tolerance while remaining as diverse as possible. This is all done as part of the algorithm on a daily basis.

Traditionally, you would meet your broker annually and look at your current standing and rebalancing for the next twelve months. Using a robo-advisor to do this on a daily basis might be overkill for smaller investors, but considering that it's part of the package and doesn't cost anything extra, it could be beneficial.

529 plan management

One standout feature of Wealthfront that many other robo-advisors don't currently offer is the savings potential. This is a huge financial obligation for many families and your options are often limited if you don't want traditional bank-based savings plans.

The college savings plans available here will walk you through the process, including setting goals, managing diversifications, and spreading. Fees currently range from 0.43 to 0.46% for anything beyond that initial free $ 10k. Remember, if your state offers withholding tax or credits to use their plans, if you use Wealthfront, you will lose.

Who could benefit from Wealthfront?

Wealthfront is designed for smaller investors who prefer the hands-off approach. Families or individuals who want to invest and make their money grow but have no financial knowledge or the patience to manage finances on an infinite scale. If you don't think you need guidance or human interaction, robo-advisors are ideal.

Wealthfront specializes in long-term investments from small balances. This makes it ideal for most families across the country. It also specializes in being tax efficient so you can minimize your tax bill while staying on the right side of the law and avoiding all dim avoidance schemes.

Larger investors may not be ideal candidates for Wealthfront. Neither someone with trading knowledge nor someone who wants to play the market. These are investments that automate all movements. You won't be moving much here if you want to get your hands dirty.

After all, Wealthfront is one of the top rated robo-advisors out there. That doesn't mean much by itself, but it does give you an indication of how others have experienced the service.

If you're looking to start financial planning or start saving for the future, Wealthfront seems like a believable way to go. They can balance your portfolio as needed, design plans that will bring you the future you want, and even help you save for your kids' college education. Considering the first $ 10-15k is free and you can only start for $ 500, I think it's worth a try.

Sticky Note: Neither I nor TechJunkie are financial advisors. This is a review of the service and not a recommendation. Always seek professional advice before making any significant financial commitment.

Have you tried wealthfront? Do you have any experiences you want to talk about? Is there any advice for TechJunkie readers on using robo-advisors? Tell us about it when you do!