Author Topic: Wealthfront or Vanguard?  (Read 6813 times)

bittheory

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Wealthfront or Vanguard?
« on: July 20, 2015, 11:40:21 AM »
Drawn by the "low" management fee, I opened up a Wealthfront account a couple months ago with a $6K balance. I've been reading, mostly here on the MMM forum, about the hidden fees that come with Wealthfront/Betterment. I am a complete investing novice (I max out my Employer IRA and Roth IRA, that's all I know) and wanted to dip my toe in a joint account to see how it performed over the next few years.

Should I close that account and move the money into Vanguard? Or should I just ride it out with Wealthfront for a while? Or should I not bother with either?

forummm

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Re: Wealthfront or Vanguard?
« Reply #1 on: July 20, 2015, 11:53:03 AM »
I would always just go with Vanguard. You can't go wrong there. It doesn't have those management fees--which are also not that low compared to Vanguard. And little fees add up to big dollars.

https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-cost
https://investor.vanguard.com/mutual-funds/low-cost

chippy

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Re: Wealthfront or Vanguard?
« Reply #2 on: July 20, 2015, 11:56:10 AM »
I've been thinking about a Wealthfront move recently. However it seems to me that I just don't have enough in terms of assets to make it worthwhile (100K taxable). Their assumptions on tax-loss harvesting are simply way too high. If they are what they claim, then I hope to see Vanguard offer something similar in the next few years. We'll see. Also keep in mind if you want to harvest your gains/losses, nothing stops you from doing so on your own across broad asset classes.

Also Wealthfront offers no real advantage to vanguard in tax-sheltered accounts, rather they charge you a fee for automatically rebalancing (which you don't need to do if you have one of the all-in-one vanguard accounts).

Maybe leave in the 6K as a "trial" and see what occurs?

bittheory

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Re: Wealthfront or Vanguard?
« Reply #3 on: July 20, 2015, 03:36:29 PM »
Maybe leave in the 6K as a "trial" and see what occurs?

I think that's what I'll do until early next year. But Vanguard is probably going to be my all-in-one investment service come this time next year. We'll see.

Thanks for the advice, everyone.

mrpercentage

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Re: Wealthfront or Vanguard?
« Reply #4 on: July 20, 2015, 10:55:12 PM »
Vanguard or Fidelity. I just jumped into Scottrade and now Robinhood-- but many of the brokers offer ETF and index purchases at no additional cost. Its worth looking into the different brokers to see what one best fits your personal goals. Having additional investment options is a good thing in my opinion.

FLBiker

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Re: Wealthfront or Vanguard?
« Reply #5 on: July 21, 2015, 07:58:55 AM »
Another vote for Vanguard (though my wife's stuff is at Fidelity and they have some good options, too).

johnny847

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Re: Wealthfront or Vanguard?
« Reply #6 on: July 21, 2015, 08:02:51 AM »
Drawn by the "low" management fee, I opened up a Wealthfront account a couple months ago with a $6K balance. I've been reading, mostly here on the MMM forum, about the hidden fees that come with Wealthfront/Betterment. I am a complete investing novice (I max out my Employer IRA and Roth IRA, that's all I know) and wanted to dip my toe in a joint account to see how it performed over the next few years.

Should I close that account and move the money into Vanguard? Or should I just ride it out with Wealthfront for a while? Or should I not bother with either?

1) You're never going to learn anything about investing with Wealthfront - they make almost all of the decisions for you.
2) Performance over a couple years is essentially meaningless. If the market crashes in that time frame, your portfolio is going to do terribly. So is basically everyone else's.

You should switch to Vanguard. Investing is actually pretty easy. And if you do index investing (which the vast majority of people should do, and you are on that track), it's got to be one of the most boring activities ever.

Scandium

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Re: Wealthfront or Vanguard?
« Reply #7 on: July 21, 2015, 10:25:25 AM »
Your gains are probably pretty small since the market has done little year to date. I would sell it and move to Vanguard now rather than when the tax hit is larger. I recently had to decide to take the tax hit of selling with gains to move from schwab to Vanguard for my taxable. In the end I think it was worth it for the broader funds and better ownership structure. I'm now happy in a committed relationship for life, rather than wondering what if..

GGNoob

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Re: Wealthfront or Vanguard?
« Reply #8 on: July 21, 2015, 10:36:25 AM »
You'll eventually move everything to Vanguard anyhow, so you may as well just move it all now. That's pretty much my situation...I liked Betterment and wanted to invest something there, but now I'm moving it all to Vanguard.

bittheory

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Re: Wealthfront or Vanguard?
« Reply #9 on: July 21, 2015, 02:02:37 PM »
Well, you guys convinced me otherwise. I'm going to transfer my Wealthfront acct to Vanguard. My ultimate goal is to have all my investment and retirement accounts at Vanguard, minus my employer's SIMPLE plan of course.

norcalmike

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Re: Wealthfront or Vanguard?
« Reply #10 on: July 21, 2015, 06:21:18 PM »
Just opened up a vanguard account yesterday. I'm only starting with $1000. I'm excited to have another investment account besides my 457.
Everything is sitting in Target funds until I learn what the hell I'm doing

tj

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Re: Wealthfront or Vanguard?
« Reply #11 on: July 24, 2015, 09:45:15 PM »
I don't really see the point of using Wealthfront when Betterment has a better allocation  Going direct with Vanguard is certainly just as, if not more reasonable.

forummm

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Re: Wealthfront or Vanguard?
« Reply #12 on: July 25, 2015, 05:33:00 PM »
Just opened up a vanguard account yesterday. I'm only starting with $1000. I'm excited to have another investment account besides my 457.
Everything is sitting in Target funds until I learn what the hell I'm doing

Target Retirement for the year you turn 65 is a great choice, even once you know what you're doing. There are other options too (e.g. I don't have Target Retirement), but that's definitely a good one. Just keep pumping money into it.

bittheory

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Re: Wealthfront or Vanguard?
« Reply #13 on: July 27, 2015, 07:16:51 AM »
Just opened up a vanguard account yesterday. I'm only starting with $1000. I'm excited to have another investment account besides my 457.
Everything is sitting in Target funds until I learn what the hell I'm doing

Target Retirement for the year you turn 65 is a great choice, even once you know what you're doing. There are other options too (e.g. I don't have Target Retirement), but that's definitely a good one. Just keep pumping money into it.

True, but what if you plan/hope to retire before 65? Still go with that, or choose your ideal target year?

Seppia

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Re: Wealthfront or Vanguard?
« Reply #14 on: July 27, 2015, 02:49:47 PM »
It's usually a better idea to go for the plan that targets the year you become 65, not the year you plan to retire.
The closer it gets to the date, the higher the % of bonds gets.
It does make sense if you are a 65 year old retiree (you may want to minimize volatility even if it comes at the price of some lost performance), but not if you are say 40 years old.
You might be retired already but you still have a long way to go

Mr.GrowingMustache

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Re: Wealthfront or Vanguard?
« Reply #15 on: July 28, 2015, 11:16:21 AM »
sigh.... I am in the same boat as OP. About 3 months ago I started to seriously pay attention to MMM, and opened my eyes.

What's been even more eye opening is reading this forum, and understanding that I am still a novice.

So lo and behold, I closed my savings and drained excess cash from my checking account and there I now have $25k in Betterment ( at %4 loss currently). One of my account is distributed in 90% stocks (basically Vanguard ETFs) and 10% bonds.

So can anyone dumb it down for me in a few sentences (or links) and explain why opening a Vanguard account would be better(is it all about the lower fee)? And what level of Vanguard management would I need to do(rebalance every month, tax loss harvesting, something else I am clueless about)?
Ditch Betterment entirely or rebalance to SafetyNet and go Vanguard for Building Wealth?

tj

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Re: Wealthfront or Vanguard?
« Reply #16 on: July 28, 2015, 01:38:11 PM »
If you just had extra cash hanging out in a checking account, I see no reason to liquidate betterment. You are the perfect example of someone who would benefit from a robo-advisor. Set it and forget it.

dandarc

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Re: Wealthfront or Vanguard?
« Reply #17 on: July 28, 2015, 02:03:19 PM »
So can anyone dumb it down for me in a few sentences (or links) and explain why opening a Vanguard account would be better(is it all about the lower fee)?
Short answer, yes it is all about the lower fee.  You'd have the same funds without the .25% or whatever it is that betterment tacks on.

Mr.GrowingMustache

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Re: Wealthfront or Vanguard?
« Reply #18 on: July 28, 2015, 03:33:58 PM »
If you just had extra cash hanging out in a checking account, I see no reason to liquidate betterment. You are the perfect example of someone who would benefit from a robo-advisor. Set it and forget it.
If you just had extra cash hanging out in a checking account, I see no reason to liquidate betterment. You are the perfect example of someone who would benefit from a robo-advisor. Set it and forget it.

Thanks! I did some reading too and the fee seems to be the deciding factor, and optimizing your returns in the long run. I have to read up on how to manage the Vanguard ETFs.

forummm

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Re: Wealthfront or Vanguard?
« Reply #19 on: July 29, 2015, 06:24:28 AM »
Just opened up a vanguard account yesterday. I'm only starting with $1000. I'm excited to have another investment account besides my 457.
Everything is sitting in Target funds until I learn what the hell I'm doing

Target Retirement for the year you turn 65 is a great choice, even once you know what you're doing. There are other options too (e.g. I don't have Target Retirement), but that's definitely a good one. Just keep pumping money into it.

True, but what if you plan/hope to retire before 65? Still go with that, or choose your ideal target year?

What Seppia said:

It's usually a better idea to go for the plan that targets the year you become 65, not the year you plan to retire.
The closer it gets to the date, the higher the % of bonds gets.
It does make sense if you are a 65 year old retiree (you may want to minimize volatility even if it comes at the price of some lost performance), but not if you are say 40 years old.
You might be retired already but you still have a long way to go

If you're too heavy in bonds at too young an age, you may not have the growth you need to carry you through for a very extended retirement period. cFIREsim failure rates get higher for heavy bond allocations with very young retirees.