Wealthfront Review [2024]: Powerful Hands-Off Investing

Wealthfront: The basics

Investment account minimum	$500
Management fees	0.25% annual advisory fee
Fund fees	0.06% to 0.13% expense ratio
Account types	Individual/joint/trust taxable brokerage accounts, traditional/Roth/SEP IRAs, 401(k) rollovers, 529 college savings accounts, cash management accounts, automated bond ladders, automated bond portfolios, portfolio lines of credit
Asset classes	ETFs, U.S. stocks, foreign stocks, emerging market stocks, dividend stocks, global stocks, commodities, real estate, treasuries, municipal bonds, corporate bonds, U.S. government bonds, cryptocurrencies
Features	Automatic rebalancing, tax-loss harvesting
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What is Wealthfront?

Wealthfront is a robo-advisor, which means it manages your investments using software that can automatically rebalance your portfolio, minimize your risk, and diversify your holdings. While traditional investment managers are humans who manually buy and sell securities for you with a hands-on approach to building and balancing your portfolio, robo-advisors like Wealthfront offer hands-off, completely automated investing. Robo-advisors are great if you tend to get twitchy when checking your investment accounts and can’t help but trade stocks when you’re nervous about the market.

Unlike some other robo-advisors, Wealthfront offers several accounts in addition to its investment options. These include a high-yield cash management account with a supremely competitive APY, lines of credit, and bond ladders using U.S. Treasurys. It also stands out for providing individual stock investing, including fractional shares.

How does Wealthfront work?

When you sign up for an automated investing account with Wealthfront, the robo-advisor uses an algorithm to build a diversified portfolio of low-cost exchange-traded funds (ETFs). It customizes an investment portfolio for you according to your risk tolerance, which you indicate in a brief questionnaire while setting up your profile.

To invest using Wealthfront, you can:

• Invest in the personalized portfolio recommended to you
• Customize a pre-built portfolio
• Start a new portfolio and build it yourself from scratch
• Bring an existing portfolio over from another brokerage

No matter how you create your portfolio, Wealthfront’s tech monitors and automatically rebalances it to maximize long-term returns.

Portfolios

Wealthfront offers three expert-built portfolios:

• Classic: This portfolio contains a wide range of low-cost index funds that are diversified across various global asset classes, including stocks and bonds.
• Socially Responsible: This portfolio’s holdings are focused on companies/industries that do more to support socially responsible values — including sustainability, equity, and diversity — than most.
• Direct Indexing: This option is only for folks with more than $100,000 in their accounts. Wealthfront curates it with a focus on tax-saving stock picks, but you can adjust your risk level and add/remove investments to suit your goals.

You’re welcome to just choose one of these and run with it, no customization needed. But if you want to be a little more involved, you can adjust the weightings of your investments or add/remove some as you see fit. You can also update your risk preference or move from a customized portfolio to a recommended one. If you personalize a portfolio or build one yourself, Wealthfront will help you stick to your preferred risk level and let you know if any of your investments are outside of that.

Wealthfront bases its portfolio holdings on Modern Portfolio Theory, a mathematical way to diversify investments to get the most return for a certain level of risk. Human experts curate each portfolio.

Investment types

Wealthfront offers 17 asset classes across 11 investment categories, including:

• Bond ETFs
• Commodity ETFs
• Foreign/emerging market ETFs
• Global stock ETFs
• Investing strategy ETFs
• Sector ETFs
• Socially responsible ETFs
• Tech/innovation ETFs
• U.S. stock ETFs
• Wealthfront exclusives, including risk parity funds and U.S. direct indexing
• Cryptocurrency trusts, such as the iShares Bitcoin Trust ETF (IBIT) or the iShares Ethereum Trust ETF (ETHA)

Tax-loss harvesting

Wealthfront’s automatic investing software monitors your portfolio to find investments to sell to minimize your taxes and maximize tax efficiency. This is called tax-loss harvesting, and it can save you a lot of money. Plus, I like that Wealthfront does this daily, unlike other investment management firms that only do it once at the end of the year.

Here’s what I mean. Say you bought 10 shares of stock from Company A at $100 each, but their value has dropped to $50 each. Wealthfront’s robo-advisor might sell all 10 shares at a loss (-$500). At tax time, that loss can offset any taxable capital gains you may have from selling other stocks that did well. The money received from the sale of the investment could then be used to purchase a similar investment, so your risk and potential returns stay constant.

Wealthfront estimates that 97% of customers could fully offset their advisory fees with tax savings in 2023.

Fees

Wealthfront’s low-cost ETFs come with an expense ratio between 0.06% and 0.13%. An expense ratio is an annual fee charged by the company that runs the investment fund. I recommend always checking the expense ratio before investing in any mutual fund or ETF. If you can, stick to a fund with a ratio below 0.10%. For an ETF to be considered low-cost, it should have a ratio below 0.25%.

Wealthfront also charges an advisory fee of just 0.25%, compared to an industry average of around 1% for human advisors. That’s on par with Betterment’s advisory fee, which is also 0.25% for its digital plan. However, Betterment charges an advisory fee of 0.65% for personal, human advice.

Other Wealthfront offerings

In addition to its automated investment accounts, Wealthfront offers a variety of other account options.

Wealthfront Cash Account

The Wealthfront Cash Account offers an APY of 5.00%.² With so many other high-yield savings accounts dropping their APYs lately, Wealthfront’s rate is tempting. I especially like that it has no account fees because I hate paying just to have an account.

Unlike traditional savings accounts, which are typically insured up to $250,000 by the FDIC, Wealthfront Cash accounts offer up to $8 million in FDIC insurance by using one or more partner banks for your cash holdings.³

Bond ladders

Wealthfront also offers automated bond ladders as an investment option. The Wealthfront app helps you select from various U.S. Treasuries that offer different time frames, automatically reinvesting for you after they mature.

Individual stock purchasing

Wealthfront also allows you to buy individual stocks or fractional shares. You can choose a stock on your own or from a collection centered around themes such as “dividend blue chips” or “cloud computing.” Not many robo-advisors let investors buy individual stocks.

Portfolio line of credit

If you have a Wealthfront portfolio with at least $25,000 in a taxable account, you can borrow up to 30% of it with a portfolio line of credit with no credit check. The interest rate on the line of credit is 5.91% (as of October 24, 2024).

Keep in mind that this portfolio line of credit is considered a margin product, and borrowing on margin carries risks. Try to get expert advice before borrowing against your portfolio.

Who is Wealthfront best for?

• Beginners who want hands-off investing
• Experienced investors looking for tax-loss harvesting
• Investors who want curated portfolios centered around a theme

Wealthfront is a robo-advisor, which makes it best for hands-off investors. I think it’s best for beginner investors who don’t want in-depth control over their portfolio allocation and are comfortable managing their money online.

I would also recommend Wealthfront for experienced investors who want control over their portfolio’s holdings but don’t want the hassle of rebalancing it themselves. What I like about Wealthfront compared to other robo-advisors is that it gives you so many options for fine-tuning your portfolio just the way you want. They offer 239 investments, broadly diversified across various sectors, assets, and geographies, so that you can go crazy customizing. Then, you can sit back and let Wealthfront’s software manage it in the background.

Wealthfront alternatives

While Wealthfront offers an automated and tax-efficient approach to investing, you might need something else. Consider other investment accounts if that's the case.

• Stash: Stash is an investing app that’s best for beginners. It offers two subscription options, costing $3 or $9 per month. Like Wealthfront, you can invest in individual stocks and ETFs. Stash is known for letting you invest in fractional shares, which means you can get started with any dollar amount. However, Stash doesn’t have as many account or investment options, and it charges monthly fees instead of a percentage of your assets. Compare Stash vs. Wealthfront to decide which one suits you best.⁴⁵⁶
• Betterment: If you’re deciding between Wealthfront and Betterment, consider how much you want to invest. The minimum required deposit to open an account with Wealthfront is $500, while Betterment has no minimum opening deposit requirement (but costs $4 per month for an investment account). Both services charge similar fees, and both invest in low-cost ETFs. The other main difference is that Betterment also offers phone access to licensed advisors with its higher-priced Premium plan.
• Fundrise: Fundrise is best if you prefer investing in real estate instead of stocks. With Fundrise, you can invest in low-cost, diversified portfolios of real estate projects that Fundrise manages on your behalf. Fundrise offers four plans, and you can invest starting at just $10. However, Fundrise’s real estate investment trusts (REITs) are much less liquid and, therefore, more complex to get out of than the assets you can buy with Wealthfront.

See more of our picks for the best investment apps.

Is Wealthfront safe?

Wealthfront outlines its approach to investing in its investment methodology white paper so you can better understand how your money is invested. In addition, you can withdraw your funds at any time without fees if you no longer want to use the service.

Although there is no protection against loss of market value of your investments, your investment account is insured by the Securities Investor Protection Corporation up to $500,000 in total against loss if Wealthfront fails.

FAQs

Bottom line

With low advisory fees, free planning tools, and an automated investment strategy, I feel Wealthfront is a good investment service for both beginners and experienced investors who want tax benefits and the ability to customize as much or as little as they want. Compared to other robo-advisors, it provides more features and account types.