Pros
- Low fees
- Excellent goal planning
- A lot of investment options
- Tax loss harvesting
Cons
- No fractional shares
- Advanced features requiere a minimum amount of $100,000
Attention!
For those interested in long-term investments, I now wholeheartedly recommend Bitcoin as the primary option to consider.
However, it’s essential to educate yourself about this digital asset before diving in, as it can take time to fully grasp its intricacies and potential.
A fantastic starting point is the book “The Bitcoin Standard” (Amazon), which provides an in-depth look at the history, principles, and technology behind Bitcoin.
Once you’re ready to invest, most major exchanges offer similar fees and services, so choose one that best suits your needs. Personally, I use Crypto.com.
It’s crucial to transfer your Bitcoin to a secure wallet once you’ve made your purchase, as leaving it on an exchange can pose risks.
To truly make the most of your investment in Bitcoin, take the time to study and understand its workings. Your financial journey will benefit from a well-informed approach.
I wish you the best in your endeavors.
Sincerely
Michael J. Peterson
.
You’ve likely heard of Wealthfront, as it’s one of the most popular robo-advisors available today. Is it worth it or is yet another scam just to make some money off you?
I signed up and explored all that Wealthfront offers and I’m sure you’ll be surprised at what I learned.
Check out my review below.
What is Wealthfront?
Wealthfront is a digital investment advisor that manages your investments for a low management fee. Its goal-setting technology surpasses those of many other robo-advisors, and its Path financial planning tools help you forecast, change, and improve your financial situation.
Wealthfront situates itself as more than a robo-advisor, but more of a financial planning tool that helps beginner and advanced investors achieve their financial goals.
| Interesting: Weahlthfront used to be “KaChing”, an online game that was released in 2007. It was basically what you could call a Fantasy League for aspiring investors.
Investors could see the picks of top wealth managers who are able to beat the market and “compete” with them. The idea was to identify amateur expert traders and then recruit them as fund managers. In the end only 7 amateur managers made the cut. The company later completely shifted focus and was renamed to Wealthfront. But one thing hasn’t changed: It still lets regular investors have access to highly skilled investment managers. |
Wealthfront at a Glance
How does it work?
Signing up for Wealthfront is easy. It took me only a matter of minutes. After providing your personal identifying information, you complete a questionnaire. Pay close attention to this step, as it determines your risk tolerance and financial goals.
Wealthfront creates a portfolio with several asset classes. It chooses an ETF for each asset class chosen, again, based on your risk tolerance and goals. For example, if you have a long-term goal, it may choose slightly more aggressive investments for the time being until you get closer to your target date. At that point, it may make the portfolio more conservative to avoid the last-minute loss.
Deposits and withdrawals
Wealthfront makes it easy to deposit and withdraw funds. If you’re depositing into your cash account, you can deposit as little as $1, but your investment account deposits must be in increments of $100. You can make manual deposits or set up automatic deposits, depending on your preferences.
I set up recurring deposits via ACH (checking account transfers). This way I don’t have to think about making my contributions – it’s done for me.
You may withdrawal from your cash account at Wealthfront at any time and in any increments. If you want to withdraw from your assets, though, you may only withdraw in $250 increments, so keep that in mind.
Withdrawals take a few days, depending on the type of withdrawal:
- Cash withdrawals – Complete in 1 – 3 business days depending on your bank’s speed
- Asset withdrawals – Complete in 3 – 4 business to allow time to settle the trade
Account access
Wealthfront is available on the web and Android or iPhone apps. You can access your account anywhere you have internet access. Your account updates in real-time, so you have the most current information no matter which device you use.
What can you trade?
Wealthfront works across 11 asset classes. Wealthfront typically trades ETFs, but you may find some mutual funds in there too. Depending on your risk tolerance, your ETFs may contain some or all of the following asset classes:
- Domestic stocks
- Foreign stocks
- Emerging stocks
- Dividend stocks
- TIPS (Treasury Inflation Protected Securities)
- Bonds – corporate, municipal, and government
- Emerging market bonds
- Natural resources
- Real estate
What are the costs?
Wealthfront, like many other robo-advisors, charge an annual management fee equal to 0.25% of the assets under management.
If you just open a cash account, there are no fees, but it doesn’t make much sense to open just a cash account and not invest it.
They deduct the annual management fee monthly. So if you have $5,000 in your investment account, you’d pay $1.02 per month. Wealthfront deducts it from your account automatically.
You may also pay ETF expense ratios. Wealthfront tries to limit its offerings to low-cost ETFs, ranging from 0.06% to 0.13%, but there are fees nonetheless.
Additional features
- Tax favorable investments – Wealthfront automatically uses strategies to lower your tax liabilities while increasing your earnings.
- Financial planning – Wealthfront does more than manage your investments. They help you plan for your financial future too. Using their Path tool, you can estimate how much you need to buy a house, save for retirement, or achieve any other financial goal.
- Cash account – Normally, a cash account creates an opportunity cost, but at Wealthfront, they pay 0.35% APY on your cash balances. While it’s not a ton, it helps you earn a little while you figure out what to do with your money.
- Types of accounts – Wealthfront offers a variety of account types including taxable, college savings, and retirement savings.
- Customer service – Even though it’s a robo-advisor, Wealthfront offers access to human customer service agents Monday – Friday 7 AM – 5 PM PT.
- Education – Wealthfront has a hefty learning center that provides plenty of articles and videos on retirement savings, investing, and college savings. They also offer financial guides for specific strategies including financial health, home buying, and equity strategies.
Screenshots / Tutorial
This is probably easiest explained by a video. Check out this great tutorial from Carlo Santo Ana to get a better feel for the platform.
Wealthfront Pros and Cons
FAQ
Can you use Wealthfront for free?
No. There is an account minimum of $500 however you don’t have to open an investment account. Anyone can link their bank and brokerage accounts to Wealthfront and use their financial planning tool Path.
Is there a fee for tax-loss harvesting?
No, Wealthfront includes tax-loss harvesting strategies in their annual management fee.
How can you transfer other investments to Wealthfront?
Some assets may automatically transfer over to Wealthfront. If they don’t match with Wealthfront’s investments, though, they may have to sell your current assets and re-buy assets that align with Wealthfront strategies.
What is Wealthfront’s college planning tool?
Not only can you set up a college savings plan at Wealthfront, but you can use its College Planning tool to get recommended contribution amounts, and conservative investment advice to help you have the funds needed for college.
Who can take out a Wealthfront line of credit?
If you have at least $25,000 in your Wealthfront account, you may borrow up to 30 percent of your portfolio’s value. You don’t need to go through a credit check or even complete an application – it’s automatic for investors with $25,000.
Does Wealthfront have a rebalancing schedule?
Wealthfront doesn’t rebalance at predetermined times. They rebalance when the portfolio significantly drifts from its goals.
Can you open a Roth IRA and a traditional IRA?
Yes, Wealthfront offers both Roth IRA and traditional IRA options. If you’d rather have the tax advantages when you retire, the Roth IRA may be the better choice.
Alternatives
Wealthfront vs Betterment
Wealthfront and Betterment go hand-in-hand, as they have the same management fees and similar structures.
However, Betterment doesn’t require a minimum opening deposit and allows you to set up multiple goals. Betterment offers human financial advice in its premium plan, but it costs 0.4% annually.
Wealthfront vs Vanguard
Vanguard has a much higher minimum balance requirement of $50,000. It also charges 0.30% of assets under management and has a tougher set-up process, but it includes the use of a human financial advisor.
Wealthfront vs Robinhood
Robinhood doesn’t have a minimum opening balance requirement, and it offers free stock trades, without an annual management fee. You may only open a taxable account at Robinhood and you have access to customer service via phone from 9 AM to 6 PM ET.
Worth It or a Scam?
Is Wealthfront worth it? It’s definitely not a scam as Wealthfront has made quite a name for itself. Its low management fee, a large number of asset classes and low-cost expense ratios make it great for beginners and experts alike.
Summary
If you want a low cost, hands-off approach to investing that focuses on goals and rebalancing your portfolio to get you there, Wealthfront is a good choice.
While it has tough competition out there, Wealthfront is upfront about its fees, I couldn’t find any hidden fees and the process to start and stay invested is user-friendly and functional.
Michael is a senior writer at The Robo Investor. He earned his master’s at the Craig Newmark School of Journalism at CUNY, and is currently taking CFP courses at the University of Scranton. He has been an avid finance enthusiast ever since he started investing at the age of 23. Meet the Team