Investing is one of the best ways to achieve the dream of financial freedom. This is because when you invest, it’s your money that is doing all the work and not you.
This means that you’re basically earning 24/7 since money doesn’t need to take a break, go on vacation, eat, sleep, and so on.
This is the secret formula to achieve financial freedom and how rich people increase their wealth. They don’t only rely on their business or job to earn money; they also invest their money in order for it to grow.
Fortunately, you can also do this as there are a lot of different investment opportunities available out there that can help your money grow.
Now, many people prefer the hands-on approach when it comes to their investing activities as they want to be in control and minimize the risk involved with investing.
Yes, there are risks as not all investments will go your way, so there’s a possibility you’ll lose money instead of growing it.
If this seems scary for you and you think you might not really have the time to be a hands-on investor, don’t worry, as there are also automated investment opportunities.
These opportunities basically do everything for you, including lessening the risks involved. One such company that offers this opportunity is called Wealthfront.
It’s a company that offers an automated investment service that is designed to make investing easy and simple.
They just need some details and their computer will do the rest to provide you with an investment portfolio fit for what you are looking for.
The amount of money you can possibly make with this company is dependent on a lot of factors. But is Wealthfront really a legit company that offers investment opportunities or a scam to avoid?
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Wealthfront is A Legit Company that Offers Automated Investment Opportunities
Wealthfront was founded in 2011 and it is one of the largest independent robo-advisor companies out there with about $12 billion in assets under management.
The company offers automated investment services that are designed to make investing simple and easy.
With Wealthfront, you can easily invest your money online, automatically, as the company will be the one to manage it for you.
You just need to provide some details to help them provide a portfolio that fits your preference. Based on what I’ve seen so far, I can say that Wealthfront is a legitimate company that offers automated investment opportunities.
Though the company is not that old yet (having only existed for about 8 years) it is old enough to have proven itself a legit investment company that provides a good opportunity.
The fact that it is also one of the largest robo-advisors today is a sign that many people trust this company and that they have likely made some money from it.
However, this doesn’t mean that there aren’t any issues or complaints with this opportunity. One of the common issues I saw about Wealthfront is its lack of access to human advisors. In relation to this, the educational materials provided by the company is also a bit limited.
They also don’t offer fractional shares and there are some complaints about the company’s fee structures.
I’ll discuss all of these issues in more detail as we progress further in this review of Wealthfront.
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Who Uses Wealthfront?
Wealthfront is designed for people who want to start investing their money but don’t have the time and patience to be an active investor.
The company’s automated investment services make it easier and simpler for you to invest, without the need to manage it yourself.
Wealthfront will be the one to manage your investment for you. The only thing you need to do is to provide some details so they can come up with an investment portfolio that is fit for your preference.
Of course, the service they offer is not free, as you’ll need to pay a certain fee to use the companies automated investing service.
In the next section, I’ll discuss in more detail how much you need to pay for their service and what kind of services you can avail at Wealthfront.
How Does Wealthfront Work?
Wealthfront is one of the largest robo-advisor company with approximately $12 billion in assets under management.
But how does investing with them really work and how much should you expect to pay in fees when you decide to let the company manage your investment portfolio?
Now, the main service that Wealthfront offers is automated online investing. It is basically where you open an account, provide some details and they’ll do the rest.
Like a lot of the robo-advisors out there, the company uses Modern Portfolio Theory (MPT) when it comes to creating an investment portfolio.
This theory makes use of computer algorithms to build an investment portfolio based on details that you provide like risk tolerance, investment goals, and time horizon.
The goal of the theory is to provide an investment portfolio that can maximize gains and minimize losses based on the parameters you provide. The minimum amount needed to invest is $500.
When you open an account, the company will start by asking you a question, which will determine your risk tolerance, investment goal, and time horizon.
Once done, the next step is to provide your personal details like full name, email address, and a chosen password.
You’ll also need to provide a U.S.-based contact number, so this opportunity is only available to U.S. residents. After this, they’ll ask for your Social Security number, date of birth, citizenship or residency status, and employment details.
Documentation will likely be required as proof of your identification. Any government issued ID will usually be enough proof of identity.
Once done, you will need to deposit the money and the company will do the rest. You can use an ACH transfer from a linked bank account or schedule a recurring deposit.
Based on your answer, the company will invest your money between stocks, bonds, and other assets. Wealthfront also features a Tax-Loss Harvesting, where it takes advantage of market movements to capture investment losses to reduce your tax bill.
If you invest at least $100,000, you can also unlock other features the company offers like Stock-Level Tax-Loss Harvesting, where the harvesting will include movement in the stock market, and Risk Parity.
Risk Parity is basically a riskier MPT, where the returns are historically higher, but the portfolio is exposed to more risky assets.
Welathfront also has the Smart Beta, which is weighing the securities in your portfolio more intelligently to provide more returns on your investment. This feature is only available to customers who have at least $500,000 in a taxable account.
The fees that Wealthfront charges is only 0.25% annually for all of its portfolios. But if your portfolio is under $100,000, you’ll also pay 0.07% to 0.16% per year for the fund fees. Aside from these, the company also has traditional Roth, rollover, and SEP IRAs.
There are also trust accounts, and the 529 college account, which is a college savings plan that parents can open directly with Wealthfront.
Their latest service is a Cash Account, where you can put in money that you plan to invest in the future or use for something else. The offered interest rate for this account is at 2.24% and is FDIC insured.
Wealthfront also has a referral program, where fees for investments of up to $5,000 will be waived if a person you refer opens an account and invests money.
You will also get free access to automated financial planning tools, where you can plan for big purchases like buying a house, saving for college or for retirement etc.
You just need to provide all the necessary details that the tool requires and they will analyze the numbers and give you an estimate of how much you will need and how much you need to invest.
The beauty of this tool is that it is available in both desktop and mobile, and you don’t need to open an account with Wealthfront to use it.
What are People Saying about Wealthfront?
The reviews about Wealthfront have generally been positive, with many reviewers saying the company offers a good investment opportunity.
It’s a good opportunity for both beginners and experienced investors. Of course, this doesn’t mean that the company doesn’t have its issues or problems.
As mentioned above, there are several issues with Wealthfront and it starts with the lack of access to human advisors.
Though robo-advisors make investing easier and automated, many people still prefer to deal with a real person when it comes to investing.
The beauty of dealing with real people is that it allows you to have a back and forth discussion, giving you the opportunity to ask questions and clarify things. This is something that a robo-advisor cannot do.
Speaking of clarifying things, another issue with Wearlthfront is their lack of educational materials.
They do have a blog with investment articles and some videos you can watch. There’s also a help center, which is like a FAQs page.
Other than that, you have to figure everything out yourself. The articles and videos also lack practical investing tips and advice and mostly just discusses the basics.
The company also doesn’t offer any option for fractional shares, which means the company doesn’t invest in just a portion of a share.
If your account doesn’t have enough balance to purchase an entire share, then the company cannot invest it and you’ll have some cash left on your account that is not moving.
In relation to this, Wealthfront also leaves a portion of your balance in your account. The amount of money left is equivalent to the fees you need to pay.
So the company is not really investing the entire amount of money you deposited in your account, which lessens the earnings that your investment will get.
These issues basically puts a limit on the amount of money you can really invest. So if you put in $500, don’t expect that the entire amount will be used for investing, as a portion will be left to cover your fees.
There will also likely be a portion that will be left uninvested as there are no fraction shares.
The last issue I saw about Wealthfront is that there are some who are complaining about the fee structure.
The company’s fee structure, is flat, which means as your account increases in size, the fees you pay will also increase, the rate doesn’t decrease when you put in more money.
For example, you put in $1,000, so times 0.25%, your annual fee is $2.5. If you put in $10,000, your fee $25. And this amount will increase the more money you put in since the percentage stays flat across all portfolios.
You also have to remember that if you’re going to put in the time to manage your own investment, you won’t have to pay any fee. Though this might not be a problem for all, it is clearly an issue for some people.
What I Like about Wealthfront
Now that we know what Wealthfront is and what they are offering, it’s time to discuss what I like about this opportunity.
- One of the first things that I like about Wealthfront is that tax-loss harvesting is available to all accounts. This is good as many robo-advisors offer this feature only to their high net worth investors. So it’s welcome that this is offered even to people who only put in $500.
- I also like that Wealthfront offers free automated financial planning advice to people. They have a tool that you can access via desktop or mobile that allows you to see how much you’ll likely need to achieve your savings goal, whether it’s for retirement, purchasing a new house, or saving for college. The best part about this is that this tool is accessible to everyone, even if you don’t have a Wealthfront account.
- Another thing that I like is that Wealthfront offers a portfolio credit line, which allows you to borrow money against your portfolio without any hassle.
- I also like that Wealthfront provides an option for you to open a college plan with them, instead of opening one outside, you just link it to your Wealthfront account.
- I also like Wealthfront’s new product, the Cash Account. It’s basically a savings account that has a high-interest rate compared to what banks usually offer. It’s also FDIC insured for up to $1 million. This seems a better place to put your savings compared to the bank.
What I Dislike about Wealthfront
Of course, not everything about Wealthfront is great, as there are also several things about this opportunity that I don’t like.
- The first thing that I don’t like about Wealthfront is that they don’t have an option for you to speak to a human financial advisor. Though I believe their robo-advisors are more than adequate, they still can’t really replace humans. The good thing about human financial advisors is that you can have a conversation with them. Discuss the investment, ask questions, hear stories, and so on. This is something very valuable, especially for newbie investors. Having the option to talk to a real person will help you understand more clearly what you are investing in, and how it can really benefit you.
- I also don’t like that Wealthfront doesn’t have fraction shares, which means the money you put in can only invest in full shares. So if you don’t have enough money in your account, it will just sit there waiting for you to increase it or for the money invested to earn so a share can be purchased. But with a fraction share, you won’t have a lot of idle money left.
- In relation to that mentioned above, I’m also not a fan of Wealthfront not investing all of the money you put in. They will leave a portion, equivalent to the fee that you need to pay, in your account. Though I understand the reasons for doing this, I’m just not a big fan of it.
Do I Recommend Wealthfront?
After learning more about Wealthfront and what they can really bring to the table, I can say that it is an investment opportunity that is worth checking out.
This is especially true if you are someone who doesn’t really have the time to personally manage your investment.
As a robo-advisor company, Wealthfront can manage your investment for you automatically. You just need to provide them with some details so they can come up with a portfolio that suits your preference.
The starting investment is not that high, as you can begin investing at just $500 and the fees are affordable.
But if you are someone who prefers having the option to talk to a real person, then Wealthfront might not be for you.
They don’t provide that option, so you have to be comfortable working with robo-advisors if you plan to invest with them.
You also have to consider that the company doesn’t have fraction shares, so your money needs to afford full shares or else it’ll be left idle on your account.
Lastly, I always advise people to only invest money that they can afford to lose. Remember, no investment is guaranteed, so there will likely be some losses, as well as gains.
It will really depend on how the market performs and how good the company is at managing investments.