What does rules-based investing mean?

Wealthfront exclusives (US Direct Indexing, Smart Beta, and the Risk Parity Fund) are investment services based on rules that are rooted in academic research and have withstood the test of time. They aim to deliver clients more value on an after-tax, after-fee, risk adjusted basis than buying and holding an index fund.

In every decision, we consider what's best for our clients (the industry calls this the "fiduciary standard"), so when we consider which investing strategies to offer to our clients, we look for strategies that are:

  • Based in academically-sound, peer-reviewed research published in reputable academic journals
  • Shown to deliver statistically-significant economic value to clients in the real-world over multiple years
  • Can be automated through software and delivered at little-to-no incremental cost to the client

Our research team uses these criteria to identify highly effective strategies, and works with our investment advisory board to decide which will best serve our clients. And through a software-driven approach, we constantly look for opportunities to automate these strategies to make them available at the lowest cost possible for our clients.

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The PassivePlus investment features include Tax-Loss Harvesting, Stock-level Tax-Loss Harvesting, Smart Beta, and Risk Parity. These strategies, along with portfolio rebalancing, can lead to high levels of trading and the effectiveness of any strategy in reducing tax liability depends on an investor’s complete tax and investment profile. Investors are encouraged to consult their personal tax advisors regarding their personal circumstances and any outcomes/consequences that may result from any investment strategy.

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. Learn more about Wealthfront’s PassivePlus investment features.

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.

PassivePlus® is a registered trademark and property of CSSC Investment Advisory Services, Inc. (“CSSC”) and is used under license. CSSC and Wealthfront are not affiliated companies.