Automated Bond Portfolios

*Note that the Automated Bond Portfolio is currently in a limited beta. We expect to roll this out to everyone in the near future. If you’d like to be added to our waitlist for early access, you can reach out to our team at support@wealthfront.com* 

What is Wealthfront’s Automated Bond Portfolio?

Wealthfront’s Automated Bond Portfolio is designed to earn a higher yield than our Cash Account with less risk than investing in equities, via a diversified lower-risk, higher-yield portfolio of bond ETFs. Based on a client’s tax situation, our goal is to recommend an optimal allocation for them that maximizes after-tax earnings.

How is it personalized to my tax situation?

Interest from Treasury bonds is typically exempt from state income tax, so we include more of them for clients in higher state tax brackets. In order to recommend the most tax-efficient portfolio for you, we estimate your tax rates based on your tax filing status, household income, and state of residence. Based on your estimated tax rates, we recommend the portfolio that aims to deliver the highest after-tax yield.

Is there a fee?

Yes, this portfolio is subject to our annual advisory fee of 0.25% that we charge on all of our Automated Investing Accounts. The blended 30-day SEC yield that we publish is net of this fee. 

What is a blended 30-day SEC yield?

The 30-day SEC yield is a standard metric defined by the US Securities and Exchange Commission (SEC) for the purpose of comparing bond funds fairly. It represents an annualized yield based on the interest and dividends earned by the fund over the last 30 days, after accounting for fund expenses.

We created the blended 30-day SEC yield for our bond portfolio by calculating the weighted average of the 30-day SEC yields of the underlying bond ETFs in the portfolio using their allocation weight and deducting the Wealthfront advisory fee of 0.25%.

Please note that the 30-day SEC yield is not an indicator of the portfolio's overall performance or future returns. The yield simply provides a snapshot of the income generated by the ETFs in the past 30 days, and it is subject to change. Keep in mind that, like any investment, the price of the ETFs in the portfolio may fluctuate daily.

Can I easily withdraw my money?

Yes. Unlike some types of traditional bonds, bond ETFs are liquid just like any other ETF. This means that you can withdraw your money anytime. Learn more.  

Is this account automatically managed?

Yes. Like any of our automated investing products, the Automated Bond Portfolio includes automatic rebalancing, tax-loss harvesting, and tax-optimized dividend reinvesting.

Are there any downsides of bond ETFs vs. purchasing bonds directly?

Bond ETFs are easy to buy and sell, make it simple to stay diversified, and free you from waiting for maturity dates. That said, the performance of a bond ETF may not perfectly match the performance of its underlying index, due to tracking error and management fees.

Where can I learn more about the investing strategy?

Check out our white paper! It explains why we chose ETFs over individual bonds, how we tax-optimize your portfolio with your estimated tax rates, and more.