For Automated Investing
Wealthfront is the best automated investing tool. It is easy to use and has low fees.
[But keep in mind that many people are better off skipping the 0.25% Wealthfront fee and investing their extra money directly with Vanguard.
You can get a simple and diversified Vanguard Target Retirement Fund as I explain in my “The Best Way To Invest” post.
However, if you are looking for an automated tool then Wealthfront is a great choice.]
A) One stop shopping: Wealthfront manages all of your investing for you.
B) They choose funds with the lowest fees.
C) They reduce your risk by giving you a well diversified portfolio. The funds that they choose get you invested in hundreds of stocks or bonds. This spreads out your risk and improves performance.
D) They choose tax efficient funds.
E) They automatically re-balance your allocation so you continue to always have the right mix of stocks and bonds..
2) Lowest Fees
Wealthfront manages up to $10,000 for no fee.
If you put in more than $10,000 then you will pay them 0.25% per year. This is pretty low.
[Don’t forget that the ETFs which they buy for you add on another 0.17% or so in expenses.]
It is very important to minimize costs and these fees are about as low as you can find.
3) All The Benefits Of Investing
By investing in stocks and bonds you have the potential for much higher returns than a low interest savings account with a bank.
Compound your gains year after year by leaving your money invested to work for you
1) Sign Up
Go to Wealthfront.com.
2) Decide How Much Money
Invest the amount that you are comfortable putting at risk. Wealthfront manages the first $10,000 for free, but the minimum investment is $5,000.
3) Complete Risk Survey
Decide how much risk (1-10) you are willing to take with the help of filling out their short survey. This will determine how much of your money they put in each fund.
Higher risk means more aggressive, whereas lower risk will give you a more conservative portfolio mix.
The sooner that you might need to take the money out, the lower your risk should be.
Vanguard (Not an automated tool)
If you want to be even simpler and cheaper without using an automated investment tool, then you can buy a diversified Target Retirement Fund directly from Vanguard. I explain how (and why) in my “The Best Way To Invest” post.
Save the 0.25% fee – You’ll end up with a very similar mix of stocks and bonds but you will save Wealthfront’s 0.25% fee on investments over $10,000.
Many people will be better off with these target retirement funds, but if your preference is for a tool like Wealthfront then go for it.