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ETFs, index funds, and crypto trusts
ETFs, index funds, and crypto trusts
- Low annual fee for investment accounts; crypto trust investments available
- Tax-loss harvesting, portfolio lines of credit, 529 college savings plans available
- Cash account
- Mobile app and investing and retirement tools
- You need at least $100,000 to utilize additional investment strategies
- No human advisor access
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- Consider it if: You’re balancing several goals and want to streamline your finances.
Is Wealthfront right for you?
Wealthfront is an automated investing platform offering ETFs, index funds, crypto trusts, portfolio lines of credit, socially responsible portfolio options, and more. It’s best for hands-off investors who don’t want to trade on their own.
You’ll need at least $500 to get started, and you’ll incur a 0.25% annual fee (not including fund fees).
Wealthfront vs. Betterment
Wealthfront and Betterment have both been in business since 2008. Both primarily offer robo-advice, and both support several account types, including individual and joint accounts, trusts, IRAs, and cash accounts.
One big difference to note is that Wealthfront offers more investment types. You can invest in ETFs, index funds, and crypto trusts (it currently offers the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE)). Betterment only offers ETFs.
But Betterment has Wealthfront beat when it comes to financial advisor guidance. It offers ongoing Certified Finanial Planner (CFP) access with its premium account, and digital plan users can even buy a one-time CFP consultation package if needed. Wealthfront doesn’t offer advisor guidance.
Wealthfront vs. Vanguard
Wealthfront and Vanguard serve different purposes. Wealthfront is strictly for hands-off investors who want a computer algorithm to manage their portfolios for them. Vanguard, however, offers both self-directed brokerage accounts and automated investing.
You’ll need less money to set up an automated account with Wealthfront than you would with either of Vanguard’s automated accounts; Vanguard Digital Advisor and Vanguard Personal Advisor Services require $3,000 and $50,000 minimums, respectively.
Vanguard could be the better choice for those who want to work one-on-one with financial advisors. Its Vanguard Personal Advisor Services account gives you access to both automated investing and guidance from a Vanguard
Ways to invest with Wealthfront
Wealthfront offers a range of automated account types. These include individual accounts, joint accounts, trusts, and IRAs (it currently supports traditional IRAs, Roth IRAs, and SEP IRAs). And though its minimum is higher than many robo-advisors (Betterment, Ellevest, SoFi automated investing, and Ally Invest Managed Portfolios all have $0 minimums), it offers access to the following features:
- Tax-loss harvesting: With this strategy, Wealthfront replaces any securities that have suffered loss and reinvests the profits into other assets that match your portfolio’s target. You can them write off those losses on your tax return, lowering your tax bill.
- US Direct indexing (formerly called stock-level tax-loss harvesting): Wealthfront says it works to harvest even more losses by searching for price changes within individual stocks in the US stock index. You’ll need a minimum of $100,000 to utilize direct indexing.
- Risk parity: This approach uses an asset allocation strategy that aims to boost your risk-adjusted returns. As with US Direct Indexing, you’ll also need a minimum of $100,000 for this strategy.
- Smart beta: Wealthfront focuses on increasing your returns by weighting your portfolio’s assets more strategically. You’ll need at least $500,000 in your account to use this feature.
As for its other products, Wealthfront also offers a high-yield cash account and portfolio lines of credit that let you borrow up to 30% of your portfolio (its lines of credit are only available for those with at least $25,000 in their account).
And it currently allows for an allocation of crypto trusts of up to 10% of your portfolio to protect against risk. While its crypto offering is uncommon for robo-advisors, investors who want to solely focus on crypto should consider other platforms.
Socially responsible portfolios
Wealthfront’s socially responsible option is best for investors who want to make an impact with their money. These portfolios rely on Blackrock funds that track socially responsible indices defined by MSCI.
Note, though, that expense ratios for the funds can range from 0.05% to 0.29%.
529 college savings plans
You can also save toward higher education for dependents with Wealthfront’s automated 529 plan. The robo-advisor simplifies this process in three steps:
- Cost layout: It uses Department of Education data to display how much your desired college will cost when your dependent is expected to start school. Wealthfront also says this projection accounts for inflation, while including tuition, expenses, and how much financial aid may be available.
- Goal-setting: Wealthfront helps you set a monthly savings goal that aligns with your expected future education costs.
- Recommendations: If you have other goals beyond saving for education, Wealthfront will offer advice on how to successfully work toward both while staying on track financially.
You won’t have to pay any federal taxes on withdrawals you make, as long as they’re for qualified education expenses. Fees for this account range up to 0.46%.
Wealthfront: Is it trustworthy?
The Better Business Bureau gives Wealthfront an A- rating to reflect its opinion of how well the robo-advisor interacts with its customers. BBB ratings range from A+ to F, so this is one of the highest ratings a company can receive.
While BBB ratings don’t guarantee a company’s reliability or performance, they take into account several factors, including type of business, time in business, licensing and government actions, customer complaint history, and advertising issues.
According to BBB data, Wealthfront has closed three complaints in the last 12 months and currently has no unresolved complaints.
Wealthfront — Frequently Asked Questions (FAQ)
Is Wealthfront worth the fee?
That depends on what you’re looking for. You’ll need a minimum of $500 to get started, and you’ll be responsible for a 0.25% annual fee (including fund fees). But these fees give you access to multiple investment types (ETFs, index funds, and crypto trusts), tax-loss harvesting, US direct indexing, socially responsible portfolio options, and much more.
And although the robo-advisor doesn’t offer ongoing advisor guidance, you can still contact its product specialist team at any time. The team consists of certified financial planners (CFPs), chartered financial analysts (CFAs), and certified public accountants (CPAs).
Can you lose money with Wealthfront?
Yes. As with any investment platform, your investments’ value may increase or decrease due to market factors outside of Wealthfront’s control. See a full list of the potential risks here.
How trustworthy is Wealthfront?
Wealthfront is a reputable platform and has been in business since 2008. The platform also currently has an A- with the Better Business Bureau.