Menu

Updated

Can I use Wealthfront to time the market?

Wealthfront is not designed for market timing. If you try to time the markets by using existing Wealthfront features, you are likely going to be disappointed with the results. Wealthfront is designed to provide a long-term, low-cost diversified portfolio.

Wealthfront does not provide for market timing for good reason. Several empirical studies have tried to measure the cost of bad market timing decisions. They all agree that investors that try to time the market tend to do much worse than a buy-and-hold investor who avoided market timing altogether. A well-known study of the so-called “behavior gap” by Dalbar Associates estimates that it may be as large as 5 to 6 percentage points annually over the past 20 years. Other studies have estimated somewhat smaller gaps, but all of the studies agree that harmful investor behavior is extremely costly.

If you are interested in timing markets, Wealthfront is not the right service for you. A traditional brokerage firm that allows you to trade individual securities and guarantees self-directed trade execution is likely better suited to meet your expectations.

Nothing in this blog should be construed as tax advice, a solicitation or offer, or recommendation, to buy or sell any security. Financial advisory services are only provided to investors who become Wealthfront Inc. clients pursuant to a written agreement, which investors are urged to read carefully, that is available at www.wealthfront.com. All securities involve risk and may result in some loss. For more information please visit www.wealthfront.com or see our Full Disclosure. While the data Wealthfront uses from third parties is believed to be reliable, Wealthfront does not guarantee the accuracy of the information.

Was this article helpful?