How we choose ETFs for Wealthfront recommended portfolios

When choosing ETFs for our recommended portfolios, we look for ETFs with low annual expense ratios, minimal tracking error, and sufficient liquidity. Unfortunately, many investors only focus on cost and end up with an ETF that doesn’t track its benchmark well. This defeats the purpose of optimizing the mix of asset classes. Choosing an ETF with poor liquidity can create real problems when it comes time to buy a house or pay for your kids’ college.

Do you recommend the same ETFs to everyone?

Yes. Wealthfront’s investment methodology for its recommended portfolios is based on Modern Portfolio Theory (MPT). MPT states that returns are best maximized for any level of risk through the optimal mix of asset classes, not through security selection. Therefore we believe the ETF that best meets our selection criteria for a given asset class is the best ETF for everyone.

We realize, however, that many clients wish to customize their portfolios and choose their own ETFs. We make that possible, too. Learn more.

Will you ever change the ETFs in recommended portfolios?

Possibly. Our research team is constantly reviewing all ETFs available for one with lower fees, higher liquidity, or a lower tracking error to the underlying index. Over time, we may switch an ETF in your recommended portfolio for if our research leads us to believe it is a better option.


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