Is Wealthfront Scam?
Product Name: Wealthfront
Price: $500 minimum balance with % fee, depending on the balance
Rating: 7.8 out of 10
Verdict: Now, I am not saying that growing your money from this program is 100% guaranteed. There are still some risks depending on the way the economy is moving. But from a purely numerical standpoint, Wealthfront will do a remarkable job of investing money on your stead.
They say that the key to financial freedom is good investing and patience. If you managed to save up and grow your investment, you can retire at a young age and enjoy the next half of your life not worrying about money at all. I won’t argue against this logic at all.
Currently, there’s been a push towards robo-advisors. These are automated investment management systems that would basically manage your investments on an automated level. They would invest your money by using a guideline set by their algorithm, ultimately allowing you to grow your money safely and almost risk-free.
Now, the most common question that arises to this setup is about its legitimacy. Is it all real? Can you really grow your money at a steady rate from using these so-called robo-finance advisers? This review will look into that.
At the core of this review, we are going to take a look at this emerging robo-finance industry to see if it’s worth investing your life’s work on it. All the while, we’re also going to review one of the most popular proponents of this idea – Wealthfront. Shall we begin?
What Is Wealthfront?
Wealthfront is an investment company that was founded in 2011. It’s one of the largest robo-advisors out there with over $12 billion in valuation.
This company offers automated investment services that are designed to make it accessible for people all over the country. They want to make investing simple and easy by automating most of everything they do.
You can look at it the same way you look at your bank – you save your money up there and expect a little interest over time. The only difference here is Wealthfront do not offer interest but promises to grow your money above the inflation rate, which is way more than any bank can offer.
Is Wealthfront Legit?
Right out of the gate, I will answer this question with a resounding yes. Normally, I answer this question near the end of my article but there’s no point in holding it in since this company is obviously legitimate. It’s only been in operation in 8 years but has already amassed the trust of many people.
The fact that it’s one of the giants of the industry means that it’s doing something right. People look for stability when it comes to investing their money. After all, they want to make good returns for their investment and from all the sources I’ve gathered, Wealthfront seems to be doing fine on that regard.
How Does Wealthfront Manage Your Investment?
They have AIs that look into the market and make projections based on empirical data. They then categorize the risk for each investment levels. This make it so that their users can select which investment options to make based on their preference.
If investors want to take on a much riskier investment style, they have the option to do so. If they want to have a more balanced portfolio, that could be arranged, too. It totally depends on the needs and preference of the users.
One major complaint about this system is there seem to be very little human touch behind these investments. In a financial environment, people would be more at ease if there’s some level of socializing. That isn’t the case here. They’re robo-advisers after all.
Who Can Use Wealthfront?
This program is basically for everyone. If you have the money and want to invest, then Wealthfront might just be the perfect option for you.
Of course, there are other alternatives out there. You won’t run out of financial advisers on the market if you search for one. But that requires a bit more effort on your part, which can sometimes be a hassle.
Wealthfront understands this issue which is why it made its investing so much simpler and easier. I don’t want to say ‘lazy’ but yes, it can be said that this kind of program caters more to people that don’t want be hands on with their investment. It’s more of a hands off approach – you save money and it grows, that’s basically all there is to it.
How Does Wealthfront Really Work?
Wealthfront is one of the largest automated finance advisors on the market with around $12 billion in assets. That’s a huge amount of money.
But if we get right down to it, any specific information about how they do their investments is hidden from public view. I assume this is due to them wanting to keep their strategies secret from their competitors and the public. They have released plenty of information about their behind the scenes but nothing too specific.
What we know is they use MPT or Modern Portfolio Theory that looks at a market purely on a number perspective. These are algorithms that don’t put much stock on the value of stories or any noise. They work using numbers.
How To Become A Member?
You can easily register on their website to become a member. You fill out your profile just like any other membership website on the internet. Once you become a member, you need to answer a few more things to see what kind of investment portfolio would work best for you.
They have a minimum of $500 before you can use the program. You also need to have a US-based contact number which means that it is only available to US residents. Apart from this, you will also be asked for your Social Security number, citizenship or residency status, and employment details.
Once you’re done with all their verification process, you will be asked to deposit money on your account. The company will do the rest of the investment which is dependent on your preference.
Of course, this service does not come free. You will need to pay them like membership fees which is 0.25% annually for all your portfolios. If your portfolio is under $100,000, you will also pay an additional 0.07% to 0.16%, depending on the sum of your account.
Apart from all of that, you will have traditional Roth, SEP IRAs, rollover, and other fees that you might not even heard of.
If you want to lessen your fees, you can participate in their referral program. If you successfully refer another person into their program, you will have your fees waived for investments of up to $5,000 or higher. This is a neat little trick to save you up some money.
The Verdict – Is Wealthfront A Scam?
As far as I’m concerned, Wealthfront is a legit company. It’s a reputable company that does exactly what it sets out to do.
It’s a robo-advising firm which means that all of your investments are the hands of an algorithm designed to identify the markets that would grow your money the most, depending on your preference, of course. Now, if you are not comfortable with that idea, there are plenty more alternatives out there.
But if you’re purely a numbers guy and want to just grow your money with as little effort as possible, then doing it this way is probably one of the easiest ways to invest your money.
Now, I am not saying that growing your money from this program is 100% guaranteed. There are still some risks depending on the way the economy is moving. But from a purely numerical standpoint, Wealthfront will do a remarkable job of investing money on your stead.
Alternative To Automated Investing
Investing your money is definitely one of the wisest decisions you can make with your money. It has the potential to turn into a passive income which is generally our goal for retirement. This method is not 100% guaranteed though. There are still some risks involved but generally speaking, you’re pretty safe.
Now, if you aren’t confident with automated investments, you can always invest on your own. You have to do your own research though.
If you are curious about other forms of online money-making, perhaps you would want to learn how I make my money online. It’s a very simple read which introduces an alternative option for making money online.