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Wealthfront is an automated online investment brokerage that makes it easy for anyone to get access to world-class, long-term investment management – without the high fees or steep account minimums previously associated with this level of service. I’m singing their praises more and more these days whenever discussing investing with friends – they’re building the most amazing set of services I’ve ever seen offered to everyday investors. If you’re currently investing, and you HAVEN’T looked into Wealthfront? You owe it to yourself to do so. New to investing? Got a few bucks and don’t know what to do with it? Read on, and give Wealthfront a look… (You can start with as little as $500, and with this referral link you’ll get your first $15,000 managed for free – zero fees!)

Up until now, I’ve avoided discussing money on this blog. I’ve preferred focusing my writing on the other things that interest me – money’s not my primary focus. Money is just a means to an end, something that enables me to do the things in life that are important to me. But I’ve always found the mechanics of investing fascinating. Successful investing = more money = more ability to do things in life. And making money work FOR me, instead of me just working for money? Yup, that’s got a lot of appeal.

This isn’t a completely new domain for me. When I was in school, in addition to computer science, I studied finance and investing. Once I graduated and started earning an income during the day from the computer science part of my education, I put the finance part of my education to work in the evenings as well. I did my best to invest my money as wisely as possible, using a mixed style of “wannabe day trader” for individual stocks, combined with holding index funds like a true Burton Malkiel superfan (I was a big admirer of his when I was in school, and still have my university-issued copy of “A Random Walk Down Wall Street” on my shelf.)

Over the last 25 years of investing I’ve picked some winners, and I’ve picked some real losers as well. Overall I’ve done well with my portfolio, but if I had to go back and do things over again? I’d ditch the “day trader” part of my style, and double down on the Burton Malkiel technique – just buy and hold index funds. In hindsight, the stress and time required to actively manage my portfolio simply wasn’t worth it, and I would’ve probably been better off with an automatic “set it and forget it” method that would have reliably (and safely) gotten similar or better returns. Day trading is fun, especially when you win. But when you don’t… Ugh.

Luckily, I can change my ways going forward! And with the new investment tools available I can still use a bit of both styles, without having to go nuts watching my portfolio every day. I’ve put a big chunk of my portfolio into Vanguard index funds, but recently I’ve been using a new and exciting investment service that combines the granularity of owning individual stocks with the safety of an index fund – with the added bonus of automated management.

The investing landscape has improved dramatically since I started out in the early 1990’s. Consumer-grade computing technology has combined with Burton Malkiel’s modern portfolio theory teachings to create a new way to allow everyday individuals to invest using methods previously only available to Wall Street professionals. I’m talking about the rise of the Robo-Advisor  – and specifically, about Wealthfront – one of the pioneers in this space.

Wealthfront was founded in 2008 in Redwood City, California. They started out as a mutual fund analysis firm, but they later pivoted into doing money management themselves. They even brought on – gasp – my hero! Burton Malkiel is their Chief Investment Officer! Talk about stacking your leadership team:

A low fee brokerage firm, that’s got Burton on board? TAKE MY MONEY. (Note: They did! 🙂 )

So why do I invest my money with Wealthfront?

• Low fees – Most firms charge 1 to 3 % for their services. Wealthfront? Just a fraction of that – 0.25% Less than 1 percent! And there are NO trade commissions – just a flat percentage fee. So you can rest easy letting their system churn through daily trades and automatic buy/sell rebalancing actions – because at the end of the day you only pay a small percentage on the total balance of your account. There’s no penalty for “churn” like you’d have with a traditional broker. Don’t underestimate this benefit – trade commision fees add up fast and slowly drag down your returns. Wealthfront has some of the lowest fees around. They can do this because algorithms and automated systems are cheaper to run than hiring a staff of paid financial advisors. 🙂
• Customizeable risk profiles – answer a few questions, and they’ll pick a portfolio balance that matches your needs. Then automatically keep it balanced to your predefined risk tolerance level. And since there are no trade commission fees (see above), this automated activity doesn’t cost you.
• Automatic monthly deposits – just set up a monthly amount, add your bank info, and forget about it. Set it and forget it. Your investments happen automatically each month.
• Automated Daily Tax Loss Harvesting – this idea isn’t new – it’s been offered for years by various other money management firms – but typically only for more high-value accounts – $5 million and up. Now ordinary investors can benefit from this also. I’m writing this review after preparing my 2016 income taxes and it’s *amazing* to read my Wealthfront 1099 form and see how much activity they did “behind the scenes” on my behalf, selling off losers from my portfolio to incur losses to offset my gains – and reduce my taxable income. In the past I’d have to do that myself, spending way too much time trying to set up the right buy/sell limit orders, and hoping I got it right. But now, robots are doing it all for me automatically, every day.
• Automated Direct Indexing – rather than buying index funds or ETF shares to diversify, Wealthfront creates your own dynamic index of up to 1000 individual stocks, and purchases direct shares of each security. So you get the benefits of owning the individual stocks, without having to worry about the overhead of manually tracking them individually. It’s like having your own index fund that runs to your specifications.
• Separate accounts for different needs – I’ve got a personal account, and 529 college savings accounts set up for each of my kids. Each account has their own different risk profile and investment mix. They also offer IRA accounts if you want to rollover an old 401k to them.
• Portfolio tracking via Web and Mobile App – they’ve got a set of excellent and intuitive visual tools (recently rebranded as “Path“) that make it a snap to do “what if” analysis, track your current progress, project your future values, etc. etc. – and while it’s generally not wise to stare at your portfolio every day – Wealthfront makes it fun.

(Note – screenshots not from my accounts / not my data…) 

Wealth Management for the Everyday Investor

I’m constantly amazed by the ways computers and technology have disrupted industries, leveled the playing field of competition, and improved the lives of regular people. I love it when companies create products and services that put amazing tools into the hands of regular people – giving them access to things that were previously reserved only for the wealthy few. Wealthfront is democratizing the field of money management – putting modern portfolio theory into consumable form, lowering the barriers to entry, then simplifying and automating things that used to be beyond the reach of the average investor. I believe “robo-advisor” services like Wealthfront are going to make investing accessible to millions of people who never before thought it was possible. As recently as 2 years ago, you couldn’t get this kind of investment service for less than a $1 million minimum balance. Now, it’s $500. Take advantage of it.

I’m a huge fan of Wealthfront – if you want to give it a try yourself, you can click my referral link and get your first $15,000 managed for free.

Hope this post was informative! Leave a comment if you’ve got questions and I’ll do my best to answer / update the post to accommodate.