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It seems like a lot of people are signing up for Wealthfront. There are no management fees for a portfolio worth < 10k. They charge 0.25% for portfolios worth >10k. I'm somewhat new to investing in US securities (I just moved to the US). Sooo, how's this look?  Anything look drastically wrong? Wealthfront has me set at a risk level of 4/10, 1 being the least risky. I'm in my mid 30s and I have no debts, nor do I own a home. My car is paid for and I have no children. I'm happy to delete this thread and move my question to the newbie investment thread if it's more appropriate.
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Apr 16, 2014 02:46
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Unless you're in the top tax bracket, you don't need municipal bonds.
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Apr 16, 2014 03:13
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I'd redistribute a good chunk of those bonds, especially into dividend stocks. Are their US funds that are more specific than "US Stocks?" That's an awfully broad category.
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Apr 16, 2014 03:22
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I was looking at both Wealthfront and Betterment and it seems Wealthfront used to be a startup that actually did something with actively managed hedge funds. It kind of made me second guess WF as an investment site that can really be trusted, although what they have up now looks good. I'm interested to see if anybody else uses Wealthfront or Betterment and what they recommend. Is WF or BM the one that rebalances with bands?
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Apr 16, 2014 04:13
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oRenj9 posted:I'd redistribute a good chunk of those bonds, especially into dividend stocks. Are their US funds that are more specific than "US Stocks?" That's an awfully broad category. This is what's in the US stocks. It's Vanguard Total Stock Market ETF. https://personal.vanguard.com/us/FundsSnapshot?FundId=0970&FundIntExt=INT What's the logic behind reducing my exposure to municipal bonds? Is it too conservative or just a lousy investment?
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Apr 16, 2014 04:13
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moana posted:I was looking at both Wealthfront and Betterment and it seems Wealthfront used to be a startup that actually did something with actively managed hedge funds. It kind of made me second guess WF as an investment site that can really be trusted, although what they have up now looks good. May I ask why you think it's bad that WF were involved with hedge funds? Does it imply their too close to being shyster sales people?
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Apr 16, 2014 04:14
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From the quora reply I read: "Wealthfront has changed its business model and focus many times since launching, from a Facebook game, to a social investing site called Kaching, to a separate account marketplace evangelizing active portfolio management, to an investment advisor technology and distribution platform, to its current solution as a software based advisor for the tech crowd evangelizing passive portfolio management, as well as more recently offering tech startup compensation guides and research. There is nothing wrong with a startup pivoting but there will always be a lot of uncertainty hovering over your Wealthfront account, since they have done complete 180s in the past about what they believe (i.e. building a platform touting active management as the best way to invest and then completely reversing track and marketing passive index based investing). Betterment has always had the same focus and model to make investing simpler and easier." Also this since I'm going to be investing over $100k: "They are both in the same price range, but the fee for Betterment gets lower as you add more money, which is customary in the investing space, whereas Wealthfront is free up to $25k and .25% after this, which doesn't entice you to add more money. However, Wealthfront says they have added tax loss harvesting functionality for clients with over $100k in taxable accounts which according to their research will save the client money: Tax-Loss Harvesting" I'm torn because of the tax-loss harvesting, which I think is beneficial, but haven't decided yet.
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Apr 16, 2014 04:53
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Cultural Imperial posted:What's the logic behind reducing my exposure to municipal bonds? Is it too conservative or just a lousy investment? You will find that, as if by magic, municipal bonds yield almost exactly what a comparable taxable bond would yield minus the top marginal tax rate. So if you don't pay the top marginal tax rate you're better off with taxable bonds.
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Apr 16, 2014 07:07
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moana posted:I'm interested to see if anybody else uses Wealthfront or Betterment and what they recommend. Is WF or BM the one that rebalances with bands? I'm going to split between the two and give them both a year, I think right now it's really just too close to tell.
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Apr 16, 2014 08:20
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Hobologist posted:You will find that, as if by magic, municipal bonds yield almost exactly what a comparable taxable bond would yield minus the top marginal tax rate. So if you don't pay the top marginal tax rate you're better off with taxable bonds. I blow my top when I see financial "advisers" putting my non profits into muni bonds. I advise the boards to fire them immediately. Plus every muni in the county is overloaded with retirement obligations and mismanagement and you really should not be giving them the zero risk rate.
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Apr 16, 2014 14:49
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Didn't municipal bonds outperform like crazy in 2012?
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Apr 16, 2014 14:52
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I'll post more later, but here's a quick post for now: 1) Most of my assets are with Wealthfront and I'm quite happy with them. 2) I have more than 100k but less than 500k with them, so I qualify for tax-loss harvesting but not the 'WF500' 3) I haven't actually harvested any losses so I can't comment on that -- I've been with them since January and every component of my portfolio is up at least 2% since then. My allocation is more aggressive than yours (I think I'm a 7.5 or 8 on the risk scale). 4) Wealthfront definitely is aimed at high-income tech workers, hence the muni bonds. They are really popular out here (SF/the Bay Area). 5) IMO their claims of tax alpha are overblown but there is some small benefit to it. 6) I've read that quora article and that pivot is a bit scary, but it was a long time ago and they've clearly found their niche. 7) Their web app is good. Their iOS app is really good. 8) IMO the biggest benefit of Wealthfront to most people is that it encourages good investing habits. A diversified portfolio, automatic rebalancing, regular deposits, etc. That's probably worth 0.25% to a lot of people right there. 9) I expect them to get acquired in the not-too-distant future. 10) If you're signing up, I can send you a referral link -- both of us get an additional $5k managed free of fees.
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Apr 16, 2014 20:55
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Thanks blah_blah! I've already joined based on someone else's referral.
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Apr 16, 2014 21:15
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I'm in the same situation as Blah_Blah, they've been really good to me so far, and their re-balancing is doing pretty well for my fiancee and I. I love not having to micromanage the poo poo out of my portfolio, and the app is great. We're at 8.5/10, and our allocation looks very solid. (I'm 31, fiancee is 27) I haven't had any loss harvesting yet, and I think it'll be a while before I end up in the WF500.
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May 13, 2014 07:46
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muni bonds are still legit for the purposes of diversification of your bond portfolio. but they shouldn't be a dominant part unless the tax savings on their income will be worthwhile. 33% allocation is pretty steep unless you have at least 1.5-2M. i loaded up on muni bond CEFs during the 'taper tantrum' last june and have done pretty well with them.
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May 14, 2014 23:40
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Hobologist posted:Unless you're in the top tax bracket, you don't need municipal bonds. US muni bonds also have a lower default rate than higher yield corporate bonds. So two main selling points are good yield for higher brackets and also less risk compared to other US bond market investments. Of course the risk thing goes back into the classic saying of past performance is no promise of future behavior. http://www.nhhefa.com/documents/moodysMunicipalDefaultStudy1970-2011.pdf For younger people I would recommend to stick a with a higher risk level, main difference is it moves more money over to international markets. etalian fucked around with this message at 01:58 on May 27, 2014 |
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May 27, 2014 01:51
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"Higher risk level" is a cool catch phrase until an investment in an equity-based mutual fund loses over 35% of its value within a year. Impossible, right? Looking at the OP, ".6%" cash is worse than most fund managers. At a market cycle like this, you should have at least 15% in liquid cash for the inevitable crash that is looming on the horizon. I'd consider moving away from US-based equities and into fixed income and cash.
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Jun 28, 2014 22:21
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vssrio23 posted:"Higher risk level" is a cool catch phrase until an investment in an equity-based mutual fund loses over 35% of its value within a year. Impossible, right? It's not a catchphrase. A person who is young is able to withstand major equity shocks and does not need to withdraw from mutual funds in the long term. Furthermore, there is no reason to have 15% of your savings in liquid cash, assuming that you have the expenses to be able to live for at least 6-12 months. Moving to Us based equities and fixed income at a young age when you do not need to withdraw money will lead to wasting a lot of potential gains. Please at least read the long term investment thread.
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Jun 28, 2014 23:14
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vssrio23 posted:"Higher risk level" is a cool catch phrase until an investment in an equity-based mutual fund loses over 35% of its value within a year. Impossible, right? What are you basing this "inevitable crash" off of?
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Jun 29, 2014 00:41
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ntan1 posted:It's not a catchphrase. A person who is young is able to withstand major equity shocks and does not need to withdraw from mutual funds in the long term. Furthermore, there is no reason to have 15% of your savings in liquid cash, assuming that you have the expenses to be able to live for at least 6-12 months. Moving to Us based equities and fixed income at a young age when you do not need to withdraw money will lead to wasting a lot of potential gains. The point behind have a cash reserve is that it will allow you a buying opportunity for equities that are trading at a steep discount immediately following a crash. Simply keeping a long position on every equity you own with no regard for the general price of the market is a sure way to lose money. The proposition that equities will always go up no matter the time or economic environment is a smug disregard for the maxim that past returns do not indicate future performance. Jolly green Giant posted:What are you basing this "inevitable crash" off of? Nothing. You can sit there self-assured that you can in no way do anything to prepare for an adverse market correction or you can take steps to limit your downside in the 'unlikely' event that it does happen. It lets me sleep well at night knowing that a fair amount of my investment capital isn't tied to the emotional demands of other investor's fear and greed. If it lets you sleep well knowing you can catch a few more percentage points of gain from an already over-valued equities market, don't let me dissuade you.
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Jun 29, 2014 01:30
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vssrio23 posted:You can sit there self-assured that you can in no way do anything to prepare for an adverse market correction or you can take steps to limit your downside in the 'unlikely' event that it does happen. It lets me sleep well at night knowing that a fair amount of my investment capital isn't tied to the emotional demands of other investor's fear and greed. If it lets you sleep well knowing you can catch a few more percentage points of gain from an already over-valued equities market, don't let me dissuade you. My boss has been singing this song for the past 18 months. I think he's missed out on a pretty good 25-30% gain over that time period. If it was as obvious and as sure as you make it out to be, the market would have already corrected itself. What metric are you basing your position on? P/E? F P/E? Whatever metric you are using, what is the fair value? When will you jump back in? kansas fucked around with this message at 02:52 on Jun 29, 2014 |
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Jun 29, 2014 02:33
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vssrio23 posted:It lets me sleep well at night knowing that a fair amount of my investment capital isn't tied to the emotional demands of other investor's fear and greed. What specific events will trigger to to convert your 15% cash to stock?
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Jun 29, 2014 02:48
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vssrio23 posted:The point behind have a cash reserve is that it will allow you a buying opportunity for equities that are trading at a steep discount immediately following a crash. Simply keeping a long position on every equity you own with no regard for the general price of the market is a sure way to lose money. The proposition that equities will always go up no matter the time or economic environment is a smug disregard for the maxim that past returns do not indicate future performance. That depends on the equity you own... If you bought an s&p 500 etf and kept it for 10 years, you generally would be high (assuming you don't buy high and sell low). vssrio23 posted:You can sit there self-assured that you can in no way do anything to prepare for an adverse market correction or you can take steps to limit your downside in the 'unlikely' event that it does happen. It lets me sleep well at night knowing that a fair amount of my investment capital isn't tied to the emotional demands of other investor's fear and greed. If it lets you sleep well knowing you can catch a few more percentage points of gain from an already over-valued equities market, don't let me dissuade you. But that's like saying "its going to rain in San Francisco one of these days". Rises and falls and especially sharp rises and falls are a given, welcome to risk in the stock market... If you're going to base your information on anything other than data then you may as well hide your money under a mattress because that is essentially what long term high cash in a mutual fund means. Jolly Green Giant fucked around with this message at 04:19 on Jun 29, 2014 |
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Jun 29, 2014 04:07
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kansas posted:My boss has been singing this song for the past 18 months. I think he's missed out on a pretty good 25-30% gain over that time period. If it was as obvious and as sure as you make it out to be, the market would have already corrected itself. What metric are you basing your position on? P/E? F P/E? Whatever metric you are using, what is the fair value? When will you jump back in? I am not your boss. In fact, I don't know anything about your boss's personal portfolio and I doubt you do either. I never advocated jumping out of the market completely. That would be equally as foolish as putting every cent you own into it so as to continue speculating on future price growth in equities. What I did advocate was, to the OP, to set aside a conservative amount of money for liquid cash and maintain his proportion of fixed income investments to offset the risk (you know, the thing a well diversified portfolio is supposed to mitigate) that the equity market could lose 50% in the next quarter. Will it lose 50% in the next quarter? Will the stock market go on to gain 50% 52 weeks from now? Both of those questions are irrelevant if a person is concerned foremost with preserving their initial investment and making a reasonable return on their money while mitigating extreme downside risks. If your only goal is to speculate with Wall Street analysts and their legions of cheerleaders, go right on ahead and stay fully invested in fully priced securities. Don't let people who are making a few percentage points less than you in this 5th consecutive bull-market year be a damper on your exuberance about the stock market or American corporations. Droo posted:What specific events will trigger to to convert your 15% cash to stock? When your price target for Corporation XYZ has been met with a considerable margin of safety for your capital. I can't tell you what your requirement would be because that is a personal question for yourself.
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Jun 29, 2014 04:33
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Jolly Green Giant posted:That depends on the equity you own... If you bought an s&p 500 etf and kept it for 10 years, you generally would be high (assuming you don't buy high and sell low). I never advocated hiding money inside a mattress. My argument was to allocate 15% of his deployable capital to liquid cash to mitigate any extreme stock market correction and provide an opportunity for long-term profit afterward. Based on the SPY ETF, the S&P returned a nominal value of roughly 72% from 25 JUNE 2004 to 27 JUNE 2014. This back-dating, however, is irrelevant. If I had shorted the entire financial sector with all of my capital in the middle of 3rd quarter of 2007, I would be a millionaire multiple times over today by that same hindesight.
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Jun 29, 2014 04:53
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vssrio23 posted:The point behind have a cash reserve is that it will allow you a buying opportunity for equities that are trading at a steep discount immediately following a crash. Simply keeping a long position on every equity you own with no regard for the general price of the market is a sure way to lose money. The proposition that equities will always go up no matter the time or economic environment is a smug disregard for the maxim that past returns do not indicate future performance. In a thread about Wealthfront, a company with a investment philosophy that was founded on the principles of Malkiel and Bernstein, I'd recommend that you at least appear to have read their books or be able to logically argue about their claims before giving away advice. Please go back to the Stock Trading thread and avoid necroing a dead thread that has already been answered.
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Jun 29, 2014 05:07
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ntan1 posted:In a thread about Wealthfront, a company with a investment philosophy that was founded on the principles of Malkiel and Bernstein, I'd recommend that you at least appear to have read their books or be able to logically argue about their claims before giving away advice. Please go back to the Stock Trading thread and avoid necroing a dead thread that has already been answered. The OP asked for a critique of his presented portfolio and I gave him one. The only thing you've presented thus far is a rebuke of my original advice to him on the grounds that he may not keep up with the Jones' portfolio.
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Jun 29, 2014 12:47
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vssrio23 posted:The OP asked for a critique of his presented portfolio and I gave him one. The only thing you've presented thus far is a rebuke of my original advice to him on the grounds that he may not keep up with the Jones' portfolio. The reaction from people is that you are advocating trying to time the market. You didn't say that in general keeping 10-15% of your assets in non-equities is a tool to increase a risk-adjusted rate of return (which is true). You said that equities are overvalued and there is an inevitable crash coming. There have been countless empirical studies going back for decades showing that on average market timing results in lower performance.
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Jun 29, 2014 17:40
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kansas posted:The reaction from people is that you are advocating trying to time the market. You didn't say that in general keeping 10-15% of your assets in non-equities is a tool to increase a risk-adjusted rate of return (which is true). You said that equities are overvalued and there is an inevitable crash coming. There have been countless empirical studies going back for decades showing that on average market timing results in lower performance. Yeah vanguard also found that the dollar cost averaging tactic isn't any safer than a lump sum investment.
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Jun 29, 2014 19:31
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kansas posted:The reaction from people is that you are advocating trying to time the market. You didn't say that in general keeping 10-15% of your assets in non-equities is a tool to increase a risk-adjusted rate of return (which is true). You said that equities are overvalued and there is an inevitable crash coming. There have been countless empirical studies going back for decades showing that on average market timing results in lower performance. That's a distortion of what I said. I told him that him that having 15% of his investment portfolio in liquid cash and maintaining his current amount of fixed income investments is the prudent action in an overvalued market. He, like any investor, should be looking at the price level of an investment and deciding whether it is fully valued, undervalued, or overvalued. Because he asked anyone to critique his portfolio, he necessarily must be subject to my opinion in order for me to do that. My opinion, obviously, is that this market is overvalued and further equity investments will result in future losses. The opinion I'm generally seeing in this thread is that a person should remain fully invested without thought to risk of unrealized capital loss. That is fairly absurd in context with the last crash that was seen 6 years ago. There is no guarantee that one's investment will always recoup its value after a crash in the long run of 5, 10, 15, or whatever amount of years. Staying fully invested with no comment given to risk or aversion of risk implicitly assumes that an investment in equities will always provide a positive 8-10% annualized return over a person's lifespan. It would be height of self-delusion to assume that this is true simply because it has so far been the case in numerous back-tested studies.
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Jun 29, 2014 21:18
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I am not saying you aren't entitled to your opinion. I am saying that numerous white papers have empirically, objectively, shown that market timing lowers performance so that it is poor advice. An investor shouldn't have the concept of 'fully' or 'non-fully' invested. They should pick a balanced portfolio of asset classes (equities, fixed income, cash) that suits their risk profile and then periodically re-balance. Trying to make market valuations at a macro level and outsmart the rest of the market isn't possible because if it was so easy an amateur could do it, the market would have already adjusted. I'm curious - what is your background? What makes you confident you can beat the market? Have you read any of the literature (e.g. four pillars, Jack Bogle, etc) that makes this with mounds of data and if so what is your reason for why they are wrong?
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Jun 30, 2014 01:56
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kansas posted:
I never claimed that my goal was to beat the market. Keeping cash in an investment portfolio is to provide a buffer against loss of capital in the event of a downturn, not to "beat" the market. I am fully comfortable being beaten by the market (whatever amorphous definition that means) as long as I have the security that if the market does crash tomorrow, my entire portfolio won't be wiped out with percentage draw-downs of >35% like were seen in 2008. You're kidding yourself if you think fixed income and international equities are going to shield you from a collapse in domestic (US) equities. They'll decline as well even if not to the same degree. On Jack Bogle, it is humorous that you recommend his literature when it is so obvious that it all benefits his company and the fees it collects on passive investors looking for something easy to believe in. The best sales pitch is the one which is simple to understand and easy to facilitate for the mark.
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Jun 30, 2014 03:54
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So you're trying to time the market, but not trying to beat the market...  Please explain to mean how trying to time the market is not trying to beat it? By definition you are trying to avoid a crash so that you fare better than the market.vssrio23 posted:Keeping cash in an investment portfolio is to provide a buffer against loss of capital in the event of a downturn, not to "beat" the market. I am fully comfortable being beaten by the market (whatever amorphous definition that means) as long as I have the security that if the market does crash tomorrow, my entire portfolio won't be wiped out with percentage draw-downs of >35% like were seen in 2008. It sounds like you're risk adverse and feel much more comfortable keeping a large % of cash in your portfolio and that is fine. It is better to know your own risk tolerance than panic when it does crash and pull it out after its too late. But you aren't advocating that, you're recommending cash because in your opinion the market is overvalued right now. This implies you fluctuate you cash holdings to try and time the market based on your valuation metrics. vssrio23 posted:You're kidding yourself if you think fixed income and international equities are going to shield you from a collapse in domestic (US) equities. They'll decline as well even if not to the same degree. You are correct there is certainly a correlation, especially with intl equities. However bonds, especially certain types, can provide the low-beta that helps with diversification. Plus with some commodities and cash you can build a diversified portfolio that maximizes the risk adjusted rate of return (Sharpe). vssrio23 posted:On Jack Bogle, it is humorous that you recommend his literature when it is so obvious that it all benefits his company and the fees it collects on passive investors looking for something easy to believe in. The best sales pitch is the one which is simple to understand and easy to facilitate for the mark. Bogle isn't the only one. Many books and papers make the case for low-cost passive investing through data. Read the Bogle articles for what they are which mostly just points to research papers that have nothing to do with Vanguard. A lot of the papers are by top academics from world class research institutions around the world including a couple who have won the Nobel prize in economics. These aren't fly-by-right 'research' papers put out by sketchy investing websites. I have not seen one paper that has made the opposite case based on any data. If you have one please share it, I would be very interested to read it.
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Jun 30, 2014 06:05
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vssrio23 posted:On Jack Bogle, it is humorous that you recommend his literature when it is so obvious that it all benefits his company and the fees it collects Vanguard is non-profit. Your strategy is to underperform the market in order to not feel bad when there is a correction. Other people's strategy is to just leave their funds invested for 30 years and track the market as close as possible, ignoring the dips and by definition outperforming your strategy. I know which one I prefer.
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Jun 30, 2014 06:29
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izorpo posted:Vanguard is non-profit. Not correct. Vanguard is owned solely by its funds, so it's purely investor owned.
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Jun 30, 2014 11:52
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I see, thanks for the correction. The point stands though.
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Jun 30, 2014 12:22
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etalian posted:Yeah vanguard also found that the dollar cost averaging tactic isn't any safer than a lump sum investment.
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Jun 30, 2014 13:16
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izorpo posted:I see, thanks for the correction. The point stands though. Yeah, Bogel only has on the order of 80mm net worth. Compare him to someone like Peter Lynch who was all about active management and he's got almost 400.
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Jun 30, 2014 15:52
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Ani posted:Can you link to this? (not that I doubt you) Vanguard did a study on lump sum investment and dollar cost averaging below: https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/InvResDollarCostAve Dollar cost average was somewhat effective at controlling short term risk but over the standard long term investment window didn't do as well. Bloody Queef posted:Yeah, Bogel only has on the order of 80mm net worth. Compare him to someone like Peter Lynch who was all about active management and he's got almost 400. Mainly because Bogel never demanded big compensation packages and also gives away most of his money to charity. etalian fucked around with this message at 16:46 on Jul 4, 2014 |
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Jul 4, 2014 16:43
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