Four Reasons Why I’m Choosing Wealthfront

Assuming you’ve already determined that you’d like to check out one of the major roboadvisors, the next question is: Which one?

Roboadvisors are super hot right now: everyone wants a managed account with low fees, even if it’s management by algorithm. To fill the demand, pretty much every major wealth management company, from Schwab to Vanguard, has their own robo. Currently, the most popular roboadvisors are Betterment and Wealthfront. They offer the best bang for the buck and have attracted the most investor capital.

Determining which robo is best is a question of which is best for YOU. I put together this list of facts on Betterment and Wealthfront to help you better determine which is the best fit: The Battle of the RoboAdvisors: A Fintech Revolution. For me, the clear choice is Wealthfront.

There are four reasons why I’m choosing Wealthfront:

  1. FEES: Below $10,000 the account is free. Both Betterment and Wealthfront have pretty much the same fee schedule otherwise, with Betterment being “better” (pun) at $2Mil+, where the fees go to zero. For the near future, Wealthfront is the better value.
  2. FULLY ROBO: Wealthfront has one of the only programs that has yet to incorporate some type of human interaction and advice. But you pay for that. Since I don’t need (and don’t want) human interaction (#antisocial), I prefer the fully robo roboadvisor (more word play).
  3. PORTFOLIO LENDING: “The Portfolio Line of Credit makes it possible for a much larger group of people to access a low cost way to address short-term financial challenges. We believe that the combination of its low interest rate and ease of access make it superior to HELOCs in all cases other than funding home improvements.” The thing is, my wife and I are selling our condo, and we have no credit cards. Not that I want to use debt, but should I need to, it would be nice to borrow from myself rather than selling stocks and paying taxes on gains.
  4. DIRECT INDEXING: At $100,000+ Wealthfront boosts portfolio returns by 1-2% annually through direct indexing. The amount of direct indexing is determined by account value. “Instead of using a single ETF or Index Fund to invest in U.S. stocks (such as VTI), Wealthfront’s Tax-Optimized Direct Indexing directly purchases individual securities on your behalf. This allows us to take advantage of the countless opportunities for tax-loss harvesting presented by the movement of individual stocks, to further improve your investment performance. For example, if a US stock owned in your Direct Indexing position is down, it becomes a candidate for being sold to harvest tax-losses even if the US stock market is up overall. In purely ETF/Index Fund portfolios, no tax-loss harvesting benefit would be available in this case unless the entire US stock allocation is down. Combined with our Daily Tax-Loss Harvesting service, we believe Tax-Optimized Direct Indexing could add as much as 2.03% to your annual investment performance.” Read Our White Paper.

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