My Return for 2014 for Wealthfront is less than 2%

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naveen
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My Return for 2014 for Wealthfront is less than 2%

Postby naveen » Sat Jan 03, 2015 1:20 am

I have aggressive profile on wealthfront (9.3 out of 10).

My return for 2014 is paltry 1.3% compared to S&P.

Wondering if I should ditch them or stay with them.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby Alex Frakt » Sat Jan 03, 2015 2:04 am

We can better answer your question if let us know why you decided to invest with them in the first place.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby clast » Sat Jan 03, 2015 2:12 am

naveen wrote:My return for 2014 is paltry 1.3% compared to S&P.


Are you saying your returns are 1.3% more than the S&P? Or your returns are just 1.3% total?

Edit: Also, did you invest in wealthfront mid-year 2014? (please post exact date if you know)

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby walletless » Sat Jan 03, 2015 3:11 am

Please post when you started investing with them and your portfolio allocation. 2% seems to little unless they had put too much into international..

charles_shaw
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby charles_shaw » Sat Jan 03, 2015 3:35 am

Wealthfront's allocations are very heavy on the international/emerging market side. For example, here is what an 8.0 allocation looks like. A 9.3 would be even heavier on intl/em. International, Emerging Markets, and Natural Resources -- over 50% of your portfolio -- did not have a good year in 2014.

Image

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celia
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby celia » Sat Jan 03, 2015 3:35 am

We also need to know if new money was added or withdrawn during the year. What percent were the fees/commissions? What was the account invested in?
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby lack_ey » Sat Jan 03, 2015 3:42 am

charles_shaw wrote:Wealthfront's allocations are very heavy on the international/emerging market side. For example, here is what an 8.0 allocation looks like. A 9.3 would be even heavier on intl/em. International, Emerging Markets, and Natural Resources -- over 50% of your portfolio -- did not have a good year in 2014.


That explains a lot, doesn't it?

Then I don't see any reason for the OP to switch on account of the performance for the year. One year's returns in primarily equities is mostly randomness, nothing else.

Now, if for whatever reason so-called tracking error is a huge concern or the fee charged is now deemed too high (but why wouldn't it have been before), those are different matters but I'd still be skeptical of switching on those accounts too.

edit: Okay, I took their 9.5/10 risk allocation and checked the returns for each of the assets this year. The weighted average should be just a hair above 3% for the portfolio, slightly higher than that again if using a slightly lower risk number. I guess if under 2% was seen, the gain reported includes performance from money added in the middle of the year (dragging down the average)? Or it could be because of however they do rebalancing. Or both.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby naveen » Sat Jan 03, 2015 2:53 pm

Alex Frakt wrote:We can better answer your question if let us know why you decided to invest with them in the first place.

What was interesting to me was their Tax loss harvesting.

The total portfolio is about $150K and I gradually added money into the portfolio. About $20 in each of the last 4-5 months.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby naveen » Sat Jan 03, 2015 2:56 pm

Wondering if I should just stick with the 3-funds portfolio. I was looking to move all the funds to Wealthfront, but now getting second thoughts.

Especially, after reading this article - http://pragcap.com/2014-portfolio-revie ... didnt-work

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby livesoft » Sat Jan 03, 2015 3:06 pm

So did tax-loss harvesting work to get you a 2% additional gain? And how about rebalancing with no taxes? That is, US large-caps should have been sold to buy some of those depressed asset classes.

I'm buying up the domain names PovertyFront.com and WealthBehind.com just in case they change their business model.
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby walletless » Sat Jan 03, 2015 3:10 pm

Naveen,

Can you post your profile in the recommended forum format (read sticky)? We can only advice what is best for you based on that info.

Either way, 1 year does not make a trend. Whichever route you take, you'll need to learn to be patient, stick with your plan, and reap the benefits in the long term.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby naveen » Sat Jan 03, 2015 3:11 pm

How can I upload and embedded an image here?

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby livesoft » Sat Jan 03, 2015 3:24 pm

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby naveen » Sat Jan 03, 2015 3:32 pm

Image

Image

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby sunnywindy » Sat Jan 03, 2015 3:40 pm

I may completely misunderstand Tax Loss Harvesting, but don't you have to wait & do your taxes and then apply the losses before you know your 2014 total portfolio return?
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby naveen » Sat Jan 03, 2015 3:44 pm

The total tax loss harvested for 2014 is about 3K range and I will be able to use all of it against other gains.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby livesoft » Sat Jan 03, 2015 3:55 pm

From May to October, your investments went up and then back down to the May levels. Then from mid-October, you know what happened with oil prices. Only US large-cap stocks ended the year higher than their mid-October levels. Everything else went down.

So you did not get any of the gains from Jan-May, but got all of the losses from May to Dec. Worse yet, you did not get to rebalance in that account in early February at the market lows for the year.

Question: Did Wealthfront rebalance during the October lows and the December lows? There was a 10% rally from mid-October in a few things.
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby charles_shaw » Sat Jan 03, 2015 4:00 pm

Another thing to keep in mind when looking at Wealthfront returns on their dashboard is that they use Time Weighted Return (TWR) when many other performance metrics are calculated using Internal Rate of Return (IRR/XIRR). This can make it difficult to compare apples to apples -- for example my Wealthfront account shows a TWR of 14% but if you do an XIRR calculation on the transactions, it's really only about 5.5% return for 2014.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby galeno » Sat Jan 03, 2015 4:09 pm

Our 2014 CAGR = 1.70%. Being in short duration FI (40%) and non-USA equities (35%) were the causes.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 2.8%. TER = 0.5%. Port Yield = 2.0%. Term = 35 yr. FI Duration = 6.2 yr. Portfolio survival probability = 100%.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby naveen » Sat Jan 03, 2015 5:13 pm

With all this background, which is the option I should go with.

1. Stick with Wealthfront but do not move funds from 3 - fund portfolio. Give Wealthfront some more time.
2. Move funds from 3-fund portfolio to Wealthfront. Take advantage of Tax Loss Harvesting and Automated investment at 25 basis points.
3. Close down Wealthfront and stick to 3-fund portfolio. BogleHead 3 Fund portfolio is the best. Manual Tax Loss Harvesting and investment.

Thoughts?

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby charles_shaw » Sat Jan 03, 2015 5:24 pm

Your performance is primarily due to the time you got into themarket. And one year's performance is not enough to prove Wealthfront's strategy doesn't work. The target portfolios they use are well diversified and low cost.

My suggestion would be to make sure the proposed 9.3 asset allocation matches your risk tolerance, especially with regard to international exposure. Perhaps turn it down a little if it seems over exposed.

9.3 is just an arbitrary number made up from the answers to a few behavioral questions. Don't put too much weight in it, but do understand the underlying asset allocation.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby z3r0c00l » Sat Jan 03, 2015 5:30 pm

Most here will suggest the optimal choice, a simple 3 fund (or less) portfolio with the cheapest vendor, Vanguard.

However I don't think your portfolio with Wealthfront is so bad, just somewhat less than optimal. Your returns this year are similar (a bit worse) than mine because I also go market cap international. I do not overweight natural resources or energy stocks, and that took a chunk out this year. Underperforming American stocks is not a bad thing, it just shows your diversification goals re. international are working.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby walletless » Sat Jan 03, 2015 5:33 pm

naveen wrote:With all this background, which is the option I should go with.

1. Stick with Wealthfront but do not move funds from 3 - fund portfolio. Give Wealthfront some more time.
2. Move funds from 3-fund portfolio to Wealthfront. Take advantage of Tax Loss Harvesting and Automated investment at 25 basis points.
3. Close down Wealthfront and stick to 3-fund portfolio. BogleHead 3 Fund portfolio is the best. Manual Tax Loss Harvesting and investment.

Thoughts?

If you're comfortable with the 0.25% fee, I'd say stick with wf. Automatic rebalance, automatic tlh, and sticking to the plan is enforced in wf for the novice, hands off investor. The wf portfolio is market-cap weighted on international; which a lot of bogleheads do as well.

If you're comfortable doing all this yourself, then going with a 3 fund (or any other AA you come up with) will lower your cost to the fund fee.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby baw703916 » Sat Jan 03, 2015 5:51 pm

There's nothing wrong with the portfolio you have. The commodities and dividend stocks don't thrill me, but they aren't much of the portfolio.

Anyway, a three fund portfolio in taxable would include municipal bonds, U.S. stocks, and international stocks, which make up the vast majority of the portfolio.

Any portfolio you choose is going to lag some other portfolio you could have chosen (but didn't) at some point in time. A three fund portfolio might lag this one in 2015 (or 2016, or sometime). If that happens, would you consider jumping back (if you change to a 3 fund now)?
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby rakaye47 » Sat Jan 03, 2015 7:10 pm

Why continue paying Wealthfront if their asset allocation strategy is just to set it and forget it? You already know what their formula is and what ETFs they use, so just transfer all your stocks in-kind to somewhere else and dont pay them advisory fee.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby livesoft » Sat Jan 03, 2015 7:23 pm

You should stay with Wealthfront for quite a while longer. The forum needs someone who uses them and who is also willing to report on performance and such. You have to stay with Wealthfront in order to do that.

You can split your portfolio between Wealthfront and any other strategies that you think might be suited for you, too. There is no reason to put all your eggs in the Wealthfront basket.
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby MossySF » Sat Jan 03, 2015 7:38 pm

naveen wrote:Image


These returns don't look like 2014 annual returns. They appear to be as of when you started with Wealthfront until now.

If you're using that as your timeframe, then the answer is simple -- your returns don't match the S&P500 because you hold more than just the S&P500. Sometimes the S&P500 is the top returning asset class, sometimes it's other stuff. Your portfolio here is designed to cover all bases, be average all years -- it will never be a top performer.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby celia » Sun Jan 04, 2015 6:20 pm

sunnywindy wrote:I may completely misunderstand Tax Loss Harvesting, but don't you have to wait & do your taxes and then apply the losses before you know your 2014 total portfolio return?


naveen and sunnywindy, When someone calculates their returns for a year, they need to look at how much they had invested on the first day of that reporting period (Jan. 1) compared to the last day (Dec. 31) and also take into account if they added or withdrew money from the account during the reporting period. It is easy to compare your portfolio to some benchmark if you didn't add or withdraw money during the year, but this usually isn't the case for those who are investing new money each year.

Say several people had Roth accounts with $10K in them on January 1. They were all invested in the same fund. One person adds $5,500 to the account on Feb 1, another on May 1, another on Sept 1, another on Dec 31, and another evenly spaced through the year based on paycheck dates. They will each have a different amount in the account at the end of the year. Would you say the person who ended up with the lowest amount had a bad investment, pick the wrong fund or custodian, or shouldn't have put the money into a Roth, but a taxable account instead? NO, none of these are the right answer. It is just luck that they added their new contributions when the market was going up or down. If they each repeat this for many years, it will just be luck on who has the most or the least at the end of each year, but they will roughly end up with the same amount in the long term (say 30 years).

Another example is if your account grew a lot and you withdrew some money so that the ending balance was the same as at the beginning. What would your return be for the account for the year? Would you say you got a return of 0 for the year? (I wouldn't.)

In fact, it often is not easy to calculate your returns for a year. Many on this forum don't even attempt to calculate it. I believe the calculation that Vanguard makes considers a withdrawal of money from Vanguard as an investment now worth 0. They have no idea if you are investing that money elsewhere, converting it to another asset, such as a car or property, or spending it on a vacation or dental work. All they know is that the value of the account dropped.
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby tj » Thu Mar 05, 2015 1:41 am

naveen wrote:Wondering if I should just stick with the 3-funds portfolio. I was looking to move all the funds to Wealthfront, but now getting second thoughts.

Especially, after reading this article - http://pragcap.com/2014-portfolio-revie ... didnt-work


That article seems to be suggesting a mix of 18% VTi, 25% VXUS, 24% BND, 33% BNDX. Certainly an odd mix. Why would you have 1/3 of the your assets in USD hedged international bonds?

http://www.pragcap.com/a-simple-four-fu ... -portfolio

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby House Blend » Thu Mar 05, 2015 11:00 am

I missed your thread the first time around, but this post caught my eye:
naveen wrote:With all this background, which is the option I should go with.

1. Stick with Wealthfront but do not move funds from 3 - fund portfolio. Give Wealthfront some more time.
2. Move funds from 3-fund portfolio to Wealthfront. Take advantage of Tax Loss Harvesting and Automated investment at 25 basis points.
3. Close down Wealthfront and stick to 3-fund portfolio. BogleHead 3 Fund portfolio is the best. Manual Tax Loss Harvesting and investment.


Reading between the lines, I take it that you have two brokerage accounts, one at Wealthfront, and one somewhere else, and the Elsewhere account is invested in a 3-fund portfolio.

This has the potential to greatly complicate your tax situation, and interfere with Wealthfront's TLH algorithms. These complications may already be in play for your 2014 tax return.

For example, if you buy shares of VTI at Elsewhere Brokerage Services while Wealthfront is selling shares of VTI at a loss, then you have a wash sale. Worse, you have a wash sale that neither brokerage knows about. So your 1099-B's will be incorrect, and you will have to track cost basis yourself, and you will get to learn all of the fun rules regarding altering the holding periods and cost bases of your existing shares, and all of the exception codes that go on Forms 8949.

Seems to me this defeats one of the main purposes of a robo-advisor and creates more trouble than it could possibly be worth.

If you do insist on holding another portfolio elsewhere, I would stop adding new money to it, and not reinvest dividends. Either that, or you need some way of picking a set of funds that Wealthfront will not trade in and out of.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby rkhusky » Thu Mar 05, 2015 12:47 pm

charles_shaw wrote:Wealthfront's allocations are very heavy on the international/emerging market side. For example, here is what an 8.0 allocation looks like. A 9.3 would be even heavier on intl/em. International, Emerging Markets, and Natural Resources -- over 50% of your portfolio -- did not have a good year in 2014.

Image


The US/Int'l split is about the world market cap. However, the int'l portion is heavily tilted towards emerging markets. And the VEA/VWO combo for int'l does not have Canada (3rd largest country in Total Int'l) or small cap int'l.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby rkhusky » Thu Mar 05, 2015 12:57 pm

naveen wrote:I have aggressive profile on wealthfront (9.3 out of 10).

My return for 2014 is paltry 1.3% compared to S&P.

Wondering if I should ditch them or stay with them.


The after-tax 2014 return for Vanguard TR 2040 was 6.6%. Before tax was 7.2%. (Similar to TR 2050)

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby DVMResident » Thu Mar 05, 2015 1:38 pm

Barry Ritholtz just said "Emerging markets are going to make you look stupid before you look smart." (1)

Stay the course.

(1) http://www.ritholtz.com/blog/2015/03/macro-hedge-funds-stinking-up-the-joint/

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby IPer » Thu Mar 05, 2015 1:57 pm

House Blend wrote:I missed your thread the first time around, but this post caught my eye:
naveen wrote:With all this background, which is the option I should go with.

1. Stick with Wealthfront but do not move funds from 3 - fund portfolio. Give Wealthfront some more time.
2. Move funds from 3-fund portfolio to Wealthfront. Take advantage of Tax Loss Harvesting and Automated investment at 25 basis points.
3. Close down Wealthfront and stick to 3-fund portfolio. BogleHead 3 Fund portfolio is the best. Manual Tax Loss Harvesting and investment.


Reading between the lines, I take it that you have two brokerage accounts, one at Wealthfront, and one somewhere else, and the Elsewhere account is invested in a 3-fund portfolio.

This has the potential to greatly complicate your tax situation, and interfere with Wealthfront's TLH algorithms. These complications may already be in play for your 2014 tax return.

For example, if you buy shares of VTI at Elsewhere Brokerage Services while Wealthfront is selling shares of VTI at a loss, then you have a wash sale. Worse, you have a wash sale that neither brokerage knows about. So your 1099-B's will be incorrect, and you will have to track cost basis yourself, and you will get to learn all of the fun rules regarding altering the holding periods and cost bases of your existing shares, and all of the exception codes that go on Forms 8949.

Seems to me this defeats one of the main purposes of a robo-advisor and creates more trouble than it could possibly be worth.

If you do insist on holding another portfolio elsewhere, I would stop adding new money to it, and not reinvest dividends. Either that, or you need some way of picking a set of funds that Wealthfront will not trade in and out of.


I disagree. I have accounts with various brokers including a few robo investors. They all track their own costs and basis. If Betterment or Wealthfront does something Vanguard is unaware of it all gets reported correctly there. If you have VTI at Betterment/Wealthfront and at Vanguard each time you buy/sell receive dividends, etc... it alters the cost basis independently. Each brokerage gets reported separately on my tax return and the IRS has no problem with it, as long as you don't forget to report any of them! ;)
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby IPer » Thu Mar 05, 2015 2:00 pm

naveen wrote:I have aggressive profile on wealthfront (9.3 out of 10).

My return for 2014 is paltry 1.3% compared to S&P.

Wondering if I should ditch them or stay with them.


Don't fidget. Determine what your Asset Allocation should be and reason you have this portfolio and it's allotments and stick to your plan. If you thought
a Wealthfront portfolio is supposed to match or beat the S&P 500 then you are way off and need to research.
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby IPer » Thu Mar 05, 2015 2:03 pm

Also you did not have all the funds in the account for the entire year so how can you expect to compare like that?! I see at least 4 places you must have added additional cash during the year! So each of those is a separate cost and starting point.
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby House Blend » Thu Mar 05, 2015 2:19 pm

IPer wrote:I disagree. I have accounts with various brokers including a few robo investors. They all track their own costs and basis. If Betterment or Wealthfront does something Vanguard is unaware of it all gets reported correctly there. If you have VTI at Betterment/Wealthfront and at Vanguard each time you buy/sell receive dividends, etc... it alters the cost basis independently. Each brokerage gets reported separately on my tax return and the IRS has no problem with it, as long as you don't forget to report any of them! ;)

I'm fairly certain you're wrong about that.

Otherwise, you've found a pretty nice loophole for avoiding wash sales--buy the replacement shares at another brokerage.

Just because you haven't gotten a letter from the IRS about your Schedule D doesn't mean what you've done is correct.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby Dale_G » Thu Mar 05, 2015 3:31 pm

House Blend is correct. The wash sales rules apply to all accounts controlled by you or your spouse. The fact that they are not reported in a particular account, does not relieve you of the obligation to report them.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby IPer » Thu Mar 05, 2015 4:03 pm

House Blend wrote:
IPer wrote:I disagree. I have accounts with various brokers including a few robo investors. They all track their own costs and basis. If Betterment or Wealthfront does something Vanguard is unaware of it all gets reported correctly there. If you have VTI at Betterment/Wealthfront and at Vanguard each time you buy/sell receive dividends, etc... it alters the cost basis independently. Each brokerage gets reported separately on my tax return and the IRS has no problem with it, as long as you don't forget to report any of them! ;)

I'm fairly certain you're wrong about that.

Otherwise, you've found a pretty nice loophole for avoiding wash sales--buy the replacement shares at another brokerage.

Just because you haven't gotten a letter from the IRS about your Schedule D doesn't mean what you've done is correct.


Come to think of it I might have received a letter once. But the amount I had to pay was definitely not worth worrying about what you are describing.
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby itstoomuch » Thu Mar 05, 2015 7:44 pm

As a data point.
Deferred GLIB Variable annuities, 3.5% fees, advisor funds: 2014 yield = 4.5% to 6%. No bonds, Large Cap Growth funds with a tilt towards midcap or small cap. No foreign.
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby Bfwolf » Thu Mar 05, 2015 10:40 pm

IPer wrote:
House Blend wrote:Just because you haven't gotten a letter from the IRS about your Schedule D doesn't mean what you've done is correct.


Come to think of it I might have received a letter once. But the amount I had to pay was definitely not worth worrying about what you are describing.


It could amount to a lot of money. Just because it didn't cost you much the one time the IRS caught you [unintentionally] evading taxes, doesn't mean that will always be the case for others.

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Re: My Return for 2014 for Wealthfront is less than 2%

Postby IPer » Thu Mar 05, 2015 11:33 pm

Bfwolf wrote:
IPer wrote:
House Blend wrote:Just because you haven't gotten a letter from the IRS about your Schedule D doesn't mean what you've done is correct.


Come to think of it I might have received a letter once. But the amount I had to pay was definitely not worth worrying about what you are describing.


It could amount to a lot of money. Just because it didn't cost you much the one time the IRS caught you [unintentionally] evading taxes, doesn't mean that will always be the case for others.


I think if I cannot just use multiple brokers and file what they give me at year end plus whatever I get from individual stocks like MLPs and REITs and so forth
and have it not cost me dearly things are way out of whack! People go to great lengths, in my opinion, to over complicate issues. Please give me an example where
this could have cost a whole lot with reasonable numbers so my paranoia can be satisfied as well.
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby Call_Me_Op » Fri Mar 06, 2015 7:47 am

One year is an inadequate time period to use for judging a portfolio.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Gropes & Ray
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby Gropes & Ray » Fri Mar 06, 2015 10:43 am

I became a Boglehead after I discovered that my "super aggressive" model portfolio in my 401k was underperforming the market by about 19%. Turns out, "super aggressive" means "highly volatile," and the funds may go up or down by a lot. Your strategy is supposed to be to weather the bad years in the hope that there are more good than bad years. I didn't like that plan, and now I am happy to have a three-fund portfolio. I consider my strategy to still be "aggressive" because I am 90% equities, but it's aggressive in my percentage of equities, not aggressive by being under-diversified.

The Wizard
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby The Wizard » Fri Mar 06, 2015 11:00 am

IPer wrote:
Bfwolf wrote:
IPer wrote:
House Blend wrote:Just because you haven't gotten a letter from the IRS about your Schedule D doesn't mean what you've done is correct.


Come to think of it I might have received a letter once. But the amount I had to pay was definitely not worth worrying about what you are describing.


It could amount to a lot of money. Just because it didn't cost you much the one time the IRS caught you [unintentionally] evading taxes, doesn't mean that will always be the case for others.


I think if I cannot just use multiple brokers and file what they give me at year end plus whatever I get from individual stocks like MLPs and REITs and so forth
and have it not cost me dearly things are way out of whack! People go to great lengths, in my opinion, to over complicate issues. Please give me an example where
this could have cost a whole lot with reasonable numbers so my paranoia can be satisfied as well.

This separate topic would be better discussed in a new thread...
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House Blend
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby House Blend » Fri Mar 06, 2015 11:26 am

IPer wrote:
Bfwolf wrote:
IPer wrote:
House Blend wrote:Just because you haven't gotten a letter from the IRS about your Schedule D doesn't mean what you've done is correct.


Come to think of it I might have received a letter once. But the amount I had to pay was definitely not worth worrying about what you are describing.


It could amount to a lot of money. Just because it didn't cost you much the one time the IRS caught you [unintentionally] evading taxes, doesn't mean that will always be the case for others.


I think if I cannot just use multiple brokers and file what they give me at year end plus whatever I get from individual stocks like MLPs and REITs and so forth
and have it not cost me dearly things are way out of whack! People go to great lengths, in my opinion, to over complicate issues. Please give me an example where
this could have cost a whole lot with reasonable numbers so my paranoia can be satisfied as well.

This has little to do with saving money, it is about conforming to the law. And to a lesser extent, avoiding complications.

If you do have multiple brokerage accounts, one way to stay clear of the issue is to hold different funds at different brokerages, or do all of your tax-loss harvesting manually (i.e., not with a robo-advisor).

Otherwise, if you have (for example) shares of VTI in multiple brokerage accounts, either in your name or your spouse's name, then you cannot rely on your brokerages to correctly identify and make cost adjustments for your wash sales. This remains true even in our brave new world of covered shares. On top of that, you cannot trust your tax software to correctly identify your wash sales. On top of that, the IRS doesn't have easy ways to identify *all* wash sales. The most reliable way would be to conduct an audit.

In the meantime, legality is not the same thing as not getting caught.

Bfwolf
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby Bfwolf » Fri Mar 06, 2015 1:23 pm

IPer wrote:I think if I cannot just use multiple brokers and file what they give me at year end plus whatever I get from individual stocks like MLPs and REITs and so forth
and have it not cost me dearly things are way out of whack! People go to great lengths, in my opinion, to over complicate issues. Please give me an example where
this could have cost a whole lot with reasonable numbers so my paranoia can be satisfied as well.


Let's say the stock market dips 10% in a short period of time, and your Robo adviser sells $20K worth of stock index fund ABC with a $2000 loss and buys replacement stock index DEF. At the same time because of the stock market dip you rebalance your 3 fund portfolio with another broker by selling $20,000 of bond fund GHI and purchasing $20,000 of stock fund ABC. You've just wash saled yourself out of the $2,000 tax deduction.

If you know which securities your robo adviser uses and you can make sure you use securities that aren't substantially identical with your 3 fund portfolio, you should be OK.

Ben Carlson
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Re: My Return for 2014 for Wealthfront is less than 2%

Postby Ben Carlson » Wed Mar 11, 2015 9:15 am

naveen wrote:I have aggressive profile on wealthfront (9.3 out of 10).

My return for 2014 is paltry 1.3% compared to S&P.

Wondering if I should ditch them or stay with them.


Naveen,

It looks like you've already gotten some good advice on this request, but here's my advice on this:

http://awealthofcommonsense.com/advice- ... llocation/


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