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Wealthfront review: Is automated investing right for you?
Designed with millennials in mind, this robo-advisor helps build an automated investment plan around your life and goals
For many people without experience, investing can be intimidating. How do you get started? Which type of investment should you choose? Should you manage your money yourself? And if you hire someone to grow your money, whom should you choose?
Founded in 2011 in California’s Silicon Valley, Wealthfront is an investment firm that removes the guesswork from investing. It helps you build a financial plan and reach your goals with the help of automated investments. Consider letting it grow your money if these philosophies resonate with you:
You believe in investing for the long term.
You want low fees.
You believe software can manage money better than humans.
Let’s dive into Wealthfront so you can see if it’s right for you.
Kevin Joey Chen is a credit cards, banking and investments writer whose work and analysis have appeared on CNN, U.S. News & World Report, Lifehacker and CreditCards.com. He's passionate about helping you get your finances in order and expertly navigate the cutting-edge financial tools available -- including credit cards, apps and budgeting software.
First $5,000 managed free when you open a new account
Wealthfront takes a user-friendly, all-in-one approach to investing, placing your money in a data-driven selection of assets that align with your financial goals:
Ease of use. Use Wealthfront‘s dashboard or mobile app to get a comprehensive overview of all your linked financial accounts anytime, anywhere.
Diversify your portfolio. Wealthfront invests your money in index funds and uses risk parity software to keep your investments diversified, allowing you to maintain the risk profile you’re comfortable with.
Keep taxes to a minimum. With software that executes trades strategically to keep your tax bite low, you’ll have more money left to grow over time.
Diverse product selection. Wealthfront allows you to open individual and joint accounts, trusts, 529 college savings plans, along with Traditional, Roth and SEP IRAs.
Resources. Wealthfront‘s blog provides a suite of educational resources to help you better understand investing.
Security. Wealthfront is backed by SIPC insurance, which protects up to $500,000 of your money in the event that Wealthfront runs into financial trouble.
How much does Wealthfront cost?
While the minimum deposit is $500, it’s free to open a Wealthfront account. Plus, you won’t pay fees for withdrawals, account closure, account transfer or trades.
Wealthfront charges an annual advisory fee of 0.25% — lower than the industry average of 1%, and it doesn’t charge trading commissions.
What are the benefits of Wealthfront?
Investing on autopilot. Investing your money with Wealthfront will allow you to set up your investment and forget it. You won’t need to manage your portfolio, make trades or anything else.
Free financial planning. Wealthfront‘s Path tool will analyze your financial data — everything from bank accounts to credit cards, loans, your home’s value and even Social Security — and assemble a custom plan to grow your money. Use it to save for a house, college, retirement and more, or get instant answers to more than 10,000 financial questions.
High-yield cash account. With the Wealthfront Cash Account, your money can earn a 1.82% APY with no fees and FDIC insurance up to $1 million.
Simple — and low — fees. Wealthfront charges an annual advisory fee of just 0.25%.
Calculated strategies. Wealthfront uses industry-leading Smart Beta technology in its PassivePlus investment suite for accounts with $500,000 or more to build a personalized portfolio that will maximize growth potential through intelligent weighting of stocks. For an additional 0.03%, it also uses Risk Parity for accounts of $100,000 or more to minimize risk by diversifying across multiple asset classes.
Automatic deposits and easy transfers. You can schedule free weekly, biweekly, monthly or quarterly deposits into your Wealthfront account, and transfers of cash or stock into or out of your account are fast and free.
Keeps your risk profile intact. Whatever your personal tolerance for risk, Wealthfront will constantly rebalance your portfolio to match it.
Reduces your tax bill. Wealthfront‘s PassivePlus uses a strategy called tax-loss harvesting to keep your taxes to a minimum. This involves strategically selling some exchange-traded funds (ETFs) at a loss so you can offset income on your tax return. If you have at least $100,000 in your account, you’ll qualify for Stock-Level Tax-Loss Harvesting, which is a more advanced version of tax-loss harvesting.
Fast, flexible line of credit. If your account contains at least $100,000 and isn’t a tax-advantaged retirement account, you get automatic access to a Portfolio Line of Credit that lets you borrow up to 30% of your account value without any paperwork or credit check, and often within 24 hours.
What to watch out for
It’s your money, and you want to protect it. Before signing up, understand what Wealthfront is all about and what downsides you should look out for:
Software-based investment decisions. Wealthfront uses algorithms and software to invest your money, so you won’t get human advice or management like you would with a bank-issued investment portfolio.
No physical branches. If you prefer a traditional banking experience, you might be disappointed to learn that Wealthfront doesn’t have any physical branches you can visit or certified financial planners you can call up.
No fractional shares. Wealthfront invests your money in ETFs, which must be purchased as a whole. And since ETFs generally range from $30 to $100 per, some of your money could be left as cash sitting in your portfolio and not growing.
Fund management fees. While Wealthfront only charges a 0.25% annual fee, the underlying ETFs will have management fees that you’ll be responsible for.
Relatively high minimum deposit. Wealthfront’s $500 minimum deposit is on the high end compared to what other robo-advisors require. For example, Betterment — one of Wealthfront’s closest competitors — has no minimum deposit.
Case study: Amy’s experience
Amy Stoltenberg Writer
Wealthfront’s design seems inspired by the “resources” page from your favorite civilization game and eschews financial jargon in favor of plain English. But while Wealthfront’s condensed user outlook encourages patting yourself on the back, I’m aware that the processes have been simplified for a distracted millennial mind. Due to its hyper-personalized approach, Wealthfront feels more like a glorified savings account than any kind of investment portfolio.
Even though opening an account with a traditional brokerage firm may appear more complicated on the surface, at least it holds the promise that you can one day visit a branch location, set a fully vetted plan in place for retirement and even learn a thing or two about how the sausage is made.
Compare with other robo-advisors
How to get started
Visit the Wealthfront website and click Invest Now.
Complete the questionnaire, which includes questions such as why you want to invest, what kind of financial advisor you want, your pre-tax income, your tax filing status and your risk tolerance. After completing the questionnaire, you’ll receive a diversified investment plan. Click Open My Account to continue.
Create an account by entering your name and email address and creating a password.
Enter your mobile phone number for security verification.
In order to open a Wealthfront account, you’ll need to meet a few eligibility requirements:
Have a valid Social Security number
Have a US residential address
Be a US citizen
Make an initial deposit of at least $500
Throughout the application process, you’ll be asked to provide to provide the following information:
Name and date of birth
I’ve signed up. Now what?
Now that you’ve signed up and established your profile and risk tolerance, you should take advantage of everything Wealthfront has to offer.
Manage your preferences. After you sign up, you’ll have the option to add more information so that Wealthfront can provide more accurate investment recommendations.
Set up new accounts. While you can choose which account you’d like to open when you first sign up, consider setting up new accounts for different financial goals.
Monitor your portfolio. Use the app or dashboard to track progress and monitor your portfolio over time.
Read the blog. Check the Wealthfront blog for helpful investment information, interesting tips and more.
How to get help
If you need to get in touch with customer service, you can send an email through the Wealthfront website or log in to your account to set up a phone call.
Wealthfront is an innovative company that’s built on passive investing, a strategy that’s praised by many. In fact, legendary investor Warren Buffet, advises most consumers to invest in index funds — a common form of passive investing. With low fees and automated portfolio management, it’s no surprise why millennials and many other beginner investors choose Wealthfront. But if you’re looking for a more traditional or hands-on approach to investing, this company might not be right for you. Compare your options to find a robo-advisor that can help you meet your financial goals.
Frequently asked questions
A robo-advisor performs the same services as a traditional financial adviser, just using complex algorithms and technology instead of human brainpower. It uses online platforms to track investment trends, follow an algorithm designed specifically for a client’s portfolio preferences and then recommends opportunities to save or invest.
ETF stands for exchange-traded fund. ETFs can include assets like stocks, bonds and commodities, and they’re traded on stock exchanges.
A passive-investing firm like Wealthfront invests in ETFs because they typically track indexes, like the S&P 500. This means your money is broadly exposed to the market and your investment carries less risk.
You must deposit at least $500, but beyond that the amount is up to you. Wealthfront says it’s best to keep a rainy-day fund that pays for six months of living expenses in case of emergencies. Once you have that in place, you can invest the rest of your savings in a diversified investment portfolio.
You can withdraw a minimum of $250 as often as you’d like as long as your account balance stays above $500.
Yes. If you’re already a Wealthfront customer, you can simply follow the steps after clicking “Transfer/rollover” on your account dashboard. If you aren’t already a customer, you can select the transfer option during signup to get help moving your assets to Wealthfront.
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