March 21, 2013

WealthFront: Gain By Taking Losses, Tax Loss Harvesting

WealthFront: Gain by taking losses, Tax Loss Harvesting.

WealthFront is an investment manager aiming for clients in Silicon Valley.

WealthFront fees to manage your money - 0.25% per year.
e.g. $2,500 per year for a $1m account

WealthFront’s “main strategy” for managing your money - tax loss harvesting.

The strategy – keep taking losses periodically to offset any gains in the portfolio (to minimize taxes) and while reinvesting avoid IRS’s wash sale rule that says 
You cannot deduct losses from sales or trades of stock or securities in a wash sale unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities.
WealthFront has whitepapers and presentations on the strategy. There are charts. They say they have backtested the strategy * and “feel” it produces returns of about 1%.

Is that all WealthFront offers? There must be more?

An investment manager should be able to convey how they will make superior returns for your money and what has been their performance to date.

Missing. No information there.

Minimizing taxes is a given for any investment. And, WealthFront does more than minimize taxes (see below). 


UPDATE: In comments, Jeff points out correctly that WealthFront does much more than just tax-loss harvesting.

And, the performance of each portfolio will vary depending on its underlying assets. So, perhaps, there is no one model portfolio to point to.

If you don’t have the time to manage your money yourself (and it does take a lot of work), WealthFront will be very helpful in making sure your money is protected and grows over the long term. The performance of the Vanguard ETF’s offered has been good even in the last few crazy years.

Tags: wealthfront review, wealthfront tax loss harvesting, wealthfront performance, wealthfront returns, IRS wash sale rule, wealthfront fees, investment manager fees