Why do my allocations among asset classes remain the same independent of amount invested?
Wealthfront’s investment methodology is based on Modern Portfolio Theory. It states that returns are best maximized for any level of risk through the optimal mix of asset classes. Your allocations are a function of your risk tolerance, not the amount you invest. One of the “objective” factors in your risk tolerance is your Liquid Net Worth. We use your Liquid Net Worth (along with your age and current income) to estimate if your income at retirement is likely to be greater than your retirement spending needs. The greater your retirement income relative to your retirement spending, the more risk you are able to take. Therefore your risk tolerance should increase as your Liquid Net Worth increases, which should increase your allocation of equity ETFs, but is independent of the amount invested.
This communication has been prepared solely for informational purposes only. Nothing in this communication should be construed as an offer, recommendation, or solicitation to buy or sell any security or a financial product. Any links provided to other server sites are offered as a matter of convenience and are not intended to imply that Wealthfront or its affiliates endorses, sponsors, promotes and/or is affiliated with the owners of or participants in those sites, or endorses any information contained on those sites, unless expressly stated otherwise.
Wealthfront offers a free software-based financial advice engine that delivers automated financial planning tools to help users achieve better outcomes. Investment management and advisory services are provided by Wealthfront Advisers LLC, an SEC registered investment adviser, and brokerage related products are provided by Wealthfront Brokerage LLC, a member of FINRA/SIPC.
Wealthfront, Wealthfront Advisers and Wealthfront Brokerage are wholly owned subsidiaries of Wealthfront Corporation.
© 2020 Wealthfront Corporation. All rights reserved.
Comments are moderated prior to publication
Still need help?
Our support team has your back.Contact us