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What trading costs are involved in Smart Beta?

Transactions are generally subject to direct costs (bid-ask spread + commission) and indirect costs (price impact). At Wealthfront, we pay the commissions on your behalf.

When computing backtested results of the Smart Beta strategy, we assume a roundtrip transaction cost of 0.20% (measured as the cost of buying and then selling the security, expressed as fraction of the average buy and sale price). This represents the average bid-ask spread of large capitalization stocks over the period from 2000-2016.

For more details, see our Smart Beta White Paper.

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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.