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What is Wealthfront's investment strategy?

Our investment management team, led by Dr. Burton Malkiel, renowned economist and author of A Random Walk Down Wall Street, designed a software-based service that starts with a portfolio diversified across relatively uncorrelated asset classes, customized for your particular risk tolerance. We invest with an equity orientation seeking to maximize long-term returns. Each of our selected asset classes is primarily represented by a low cost, passive ETF. Using software, we continuously monitor and periodically rebalance your portfolio seeking to maximize your chance of investment success for the long run. Our software also attempts to minimize your taxes by analyzing the taxes likely to be generated by any given asset class, and then allocating different asset classes in taxable and non-taxable (retirement) portfolios.

We use Modern Portfolio Theory (MPT) to identify the portfolio that has the maximum expected return for your chosen level of expected risk. The economists who developed MPT, Harry Markowitz and William Sharpe, received the Nobel Prize in Economics in 1990 for their groundbreaking research. Today, MPT is the most widely accepted framework for managing diversified investment portfolios. MPT has its limitations, especially in the area of very low probability significant downside scenarios, but we believe it is the best framework on which to build a compelling investment management service.

To give your investments a further edge, Wealthfront created PassivePlus®, our signature suite of investment features designed to deliver more returns without more expected risk. PassivePlus includes Tax-Loss HarvestingStock-level Tax-Loss HarvestingSmart Beta and Risk Parity.

For more details on our investment strategy please read our Investment Methodology white paper.  For a description of the risks associated with our investment strategy, please click here.  

 

PassivePlus® is a registered trademark and property of CSSC Investment Advisory Services, Inc. (“CSSC”) and is used under license. CSSC and Wealthfront are not affiliated companies.

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Wealthfront prepared this article for informational purposes and not as an offer, recommendation, or solicitation to buy or sell any security. Wealthfront and its affiliates may rely on information from various sources we believe to be reliable (including clients and other third parties), but cannot guarantee its accuracy or completeness. See our Full Disclosure for more important information.

Wealthfront and its affiliates do not provide tax advice and investors are encouraged to consult with their personal tax advisor. Financial advisory and planning services are only provided to investors who become clients by way of a written agreement. All investing involves risk, including the possible loss of money you invest. Past performance does not guarantee future performance.

PassivePlus® is Wealthfront’s signature suite of investment features. Designed by Wealthfront’s Research Team to optimize for efficiency and deliver additional risk-adjusted returns, each strategy is based on rigorous, time-tested academic research.

Wealthfront prepared this article for informational purposes and is not intended as tax advice nor as an offer, recommendation, or solicitation to buy or sell any security. Wealthfront does not represent that any strategy will result in any of the outcomes described, including the effectiveness of any strategy in reducing tax liability, as this depends on an investor’s specific tax and investment profile. Investors are encouraged to consult their personal tax advisors regarding their unique circumstances and any outcomes/consequences that may result from any investment strategy. Investors and their personal tax advisors are responsible for how the transactions in an account are reported to the IRS or any other taxing authority.

Wealthfront and its affiliates may rely on information from various sources we believe to be reliable (including clients and other third parties), but cannot guarantee its accuracy or completeness. See our Full Disclosure for more important information. Financial advisory and planning services are only provided to investors who become clients by way of a written agreement. All investing involves risk, including the possible loss of money you invest. Past performance does not guarantee future performance.

Financial advisory, planning, and investment management services are offered by Wealthfront Inc. (“Wealthfront”), an SEC registered investment adviser. Brokerage products and services offered by Wealthfront Brokerage Corporation, member FINRA / SIPC, and a wholly-owned subsidiary of Wealthfront.