This review is actually a cheat. Wealthfront does not try to create a video game mentality in traders. It is, however, aimed entirely at Millennials. As with Motif, there has been a lot of hype. The usual "tech disruption" theme has been playing. Supposedly, Wealthfront is the agile new competitor putting companies like Charles Schwab and T. Rowe Price out of business. I remain firmly in the skeptical camp.
Wealthfront looks glitzy. And the investment strategy it proposed for me was sound. It recommended, based on a questionnaire, that I allocate 20% of my portfolio to an aggressive domestic index fund, 11% to an aggressive international index fund, 10% to a slightly less aggressive domestic index fund, and a smattering of bonds, targeted funds and municipals for the remainder. That's practically textbook for my age group.
In fact, it's a formula devised by the traditional brokerages such as Charles Schwab and T. Rowe Price. It safely bets the risks of aggressive stocks against the stability of conservative stocks and bonds. It is the closest thing to a guaranteed return in stock market investing, especially when adhered to with fidelity.
I fail to see how something with a long track record is "disruptive." The wheel was disruptive 5,000 years ago, but by now a person selling a "disruptive" wheel is probably a con man. The gun was disruptive 500 years ago (ask the Aztecs), but today "disruptive" weapons are things like rail guns. Portfolio theory is one of the few stable factors in the entire investing world. How is a new algorithm that plans my portfolio precisely the way every reasonably competent advisor would advise anything close to disruptive? True, software charges less than a human advisor, but index funds were already practically free anyway (no, 0.1% fees do not really count).
So go ahead and invest in Wealthfront. Or Charles Schwab. Or T. Rowe Price. Or E-trade. Or Scottrade. Or USAA. Or...actually, bag it. Scrape together $200,000, buy yourself a seat on the NYSE, and start your own "disruptive" portfolio advisory service. Just don't invest in anything fancy and glitzy thinking it will give you a superior return because it is more visual stimulating and has some fancy buzzwords.
Wealthfront looks glitzy. And the investment strategy it proposed for me was sound. It recommended, based on a questionnaire, that I allocate 20% of my portfolio to an aggressive domestic index fund, 11% to an aggressive international index fund, 10% to a slightly less aggressive domestic index fund, and a smattering of bonds, targeted funds and municipals for the remainder. That's practically textbook for my age group.
In fact, it's a formula devised by the traditional brokerages such as Charles Schwab and T. Rowe Price. It safely bets the risks of aggressive stocks against the stability of conservative stocks and bonds. It is the closest thing to a guaranteed return in stock market investing, especially when adhered to with fidelity.
I fail to see how something with a long track record is "disruptive." The wheel was disruptive 5,000 years ago, but by now a person selling a "disruptive" wheel is probably a con man. The gun was disruptive 500 years ago (ask the Aztecs), but today "disruptive" weapons are things like rail guns. Portfolio theory is one of the few stable factors in the entire investing world. How is a new algorithm that plans my portfolio precisely the way every reasonably competent advisor would advise anything close to disruptive? True, software charges less than a human advisor, but index funds were already practically free anyway (no, 0.1% fees do not really count).
So go ahead and invest in Wealthfront. Or Charles Schwab. Or T. Rowe Price. Or E-trade. Or Scottrade. Or USAA. Or...actually, bag it. Scrape together $200,000, buy yourself a seat on the NYSE, and start your own "disruptive" portfolio advisory service. Just don't invest in anything fancy and glitzy thinking it will give you a superior return because it is more visual stimulating and has some fancy buzzwords.
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