We can manage accounts from $500 to $5,000 differently than accounts funded with over $5,000, but with no net effect on long-term investment performance.
When you sign up for a Wealthfront account, you answer a series of questions to arrive at a target investment mix for your risk profile which is based on an account funded with over $5,000. This is the target allocation we try to match as closely as possible when you fund your account, add funds, receive dividends, or your portfolio experiences a significant change in the market.
If you open an account with less than $5,000, there can be more deviation from your target than usual. This is primarily because there is less cash to work with when constructing your diversified portfolio of ETFs.
To address this, Wealthfront’s Portfolio Optimizer searches the universe of securities available to Wealthfront portfolios and chooses the combination with the best possible tradeoff between tracking error from your target portfolio and cash remaining in your account.
We’ve run extensive backtests on the Portfolio Optimizer algorithm, and our research shows that these deviations make essentially zero difference in long-term investment performance. We’ve also designed these portfolios to add additional asset classes and move closer to the investment plan as they grow from as little as $500 to much larger sizes. While accounts funded with less than $5,000 behave a little differently than our larger accounts, your long-term outlook with Wealthfront should largely be the same.
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.