Updated
Wealthfront's S&P 500 Direct
S&P 500 Direct was designed to track the performance of the S&P 500® Index closely while also improving the tax efficiency and after-tax return of your portfolio through tax-loss harvesting (TLH).
Instead of using an ETF (such as SPY or VOO), S&P 500 Direct purchases up to 500 (depending on your account size) individual stocks to track the performance of the S&P 500®. This allows us to continuously look for opportunities to harvest losses in individual stock holdings, which can be used to offset capital gains and/or income, thus lowering your tax bill.
To learn more, read our S&P 500 Direct white paper.
What is the account minimum?
An initial deposit of at least $20,000 is required to open an S&P 500 Direct account. This minimum is based on the dollar amount required to hold enough individual US stocks to reasonably track the performance of the S&P 500® Index. Generally, the higher the total value of the portfolio, the more stocks we will be able to hold in the account and the closer we can track the index.
What does it cost?
The annual advisory fee for an S&P 500 Direct account is 0.09%.
How is this different from US Direct Indexing in an Automated Index Investing Account?
*This represents the incremental fee of USDI. If the client customizes the Automated Investing Account to only USDI then the client effectively pays 0.25% for USDI.
To learn more, please read each product's white paper.
Can I have both an S&P 500 Direct portfolio and an Automated Investing Account with US Direct Indexing?
Yes, you can use Direct Indexing in both account types and Wealthfront will automatically coordinate trades between your accounts to avoid creating wash sales.
Can I move individual stocks from an Automated Investing Account to an S&P 500 Direct portfolio and vice versa?
No, you can’t transfer securities between Wealthfront accounts at the moment, or convert a portfolio to a different account type. We hope to add this feature in the future and we’ll update this FAQ when we do. In the meantime, you are welcome to open a new S&P 500 Direct account for any new deposits and we'll coordinate wash sales.
Can I transfer securities from another firm into an S&P 500 Direct account?
No, you cannot currently transfer stocks or ETFs held at another firm into an S&P 500 Direct account. We expect to add support for this type of transfer through the ACATS system in early 2025. Until then, S&P 500 Direct accounts can only be funded with cash.
The effectiveness of the tax-loss harvesting strategy to reduce the tax liability of the client will depend on the client’s entire tax and investment profile, including purchases and dispositions in a client’s (or client’s spouse’s) accounts outside of Wealthfront Advisers and type of investments (e.g., taxable or nontaxable) or holding period (e.g., short-term or long-term).
Tax-loss harvesting involves certain risks, including, among others, the risk that the new investment could have higher costs than the original investment and the strategy could introduce portfolio tracking error into your account. Tracking error is a measure of financial performance that determines the difference between the return fluctuations of an investment portfolio and the return fluctuations of a chosen benchmark. There may also be unintended tax implications.
Wealthfront Advisers’ investment strategies, including portfolio rebalancing and tax loss harvesting, can lead to high levels of trading. High levels of trading could result in (a) bid-ask spread expense; (b) trade executions that may occur at prices beyond the bid ask spread (if quantity demanded exceeds quantity available at the bid or ask); (c) trading that may adversely move prices, such that subsequent transactions occur at worse prices; (d) trading that may disqualify some dividends from qualified dividend treatment; (e) unfulfilled orders or portfolio drift, in the event that markets are disorderly or trading halts altogether; and (f) unforeseen trading errors. The performance of the new securities purchased through the tax-loss harvesting service may be better or worse than the performance of the securities that are sold for tax-loss harvesting purposes.
Tax loss harvesting may generate a higher number of trades due to attempts to capture losses. There is a chance that trading attributed to tax loss harvesting may create capital gains and wash sales and could be subject to higher transaction costs and market impacts. In addition, tax loss harvesting strategies may produce losses, which may not be offset by sufficient gains in the account and may be limited to a $3,000 deduction against income. The utilization of losses harvested through the strategy will depend upon the recognition of capital gains in the same or a future tax period, and in addition may be subject to limitations under applicable tax laws, e.g., if there are insufficient realized gains in the tax period, the use of harvested losses may be limited to a $3,000 deduction against income and distributions. Losses harvested through the strategy that are not utilized in the tax period when recognized (e.g., because of insufficient capital gains and/or significant capital loss carryforwards), generally may be carried forward to offset future capital gains, if any.
Wealthfront Advisers and its affiliates do not provide legal or tax advice and do not assume any liability for the tax consequences of any client transaction. Clients should consult with their personal tax advisors regarding the tax consequences of investing with Wealthfront Advisers and engaging in these tax strategies, based on their particular circumstances. Clients and their personal tax advisors are responsible for how the transactions conducted in an account are reported to the IRS or any other taxing authority on the investor’s personal tax returns. Wealthfront Advisers assumes no responsibility for the tax consequences to any investor of any transaction.
The S&P 500® index is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and has been licensed for use by Wealthfront Advisers LLC. Standard & Poor’s®, S&P®, S&P 500®, US 500 and The 500 are trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Wealthfront Advisers LLC. Wealthfront’s S&P 500 Direct Portfolio is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® index.
Wealthfront Advisers is compensated for its advisory services by charging an annual account fee of 0.09% on the net market value of a Client’s account.
Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Please see our Full Disclosure for important details.
Investment management and advisory services are offered by Wealthfront Advisers LLC, an SEC registered investment adviser. Brokerage products and services offered by Wealthfront Brokerage LLC, member FINRA / SIPC.
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