Our Wealthfront Diversified Portfolio

We started putting money into our Wealthfront account sometime in July 2016. It was initially only a $20,000 deposit. Then we did another $7k the following month. Then another $10k the month after. Over time, we kept putting more and more money in until the account reached the current deposit value of $157k. Thanks to the growth in the market over the last 14 months, that deposit number has ballooned to $181k, a paper "profit" (before taxes) of $24k. That's a money-weighted return of 22.76%.

Our Wealthfront account history over time - the last 14 months have been great for growth! We're seeing a money weighted return (before taxes) of ~23%


Why do we like Wealthfront so much?

You pay 0.25% of your portfolio in fees to Wealthfront every single year (on top of all the fund fees). For us that amounts to ~$35/month or $450/yr. But we think this fee is worth it due to the following reasons:

  • No worry investing, just setup some automatic deposits from your bank account and forget about the rest. Over the super long term (20+ years), you're destined to profit because the stock market has always gone up.
  • Great international + emerging market exposure. Awesome diversification.
  • Ability to tune your risk score every few years without worrying about it. Wealthfront will automatically re-balance your portfolio to match your risk appetite.
  • Automatic re-balancing of your money to match your target allocation percentages. This is done whenever you make a transfer (every 15 days for us), or every time you receive a dividend payout from one of your funds. You don't have to schedule this once or twice a year to do this yourself. Manual balancing isn't all that easy, and if you make a mistake and over-sell accidentally, you owe a bunch of money in taxes.
  • Nice dashboard and graphs to keep you motivated. When it comes to investing, motivation to keep adding money to your account is the biggest bottleneck. The more you can see your progress visually, the more you are likely to keep investing month over month, year over year. Investing is a long game, and you only start to see the massive compounding benefits over the super long run (like 10+ years).
  • Allows you to connect all your other accounts (Vanguard, Chase, Mortgage, etc.) so you get to see a full picture of your net worth.
  • Gives you free access to Wealthfront Path, a great tool that allows you to figure out the best time to retire, and keeps you motivated to follow through with your plan since you can see your progress real-time.
  • Automatic tax-free and direct-index harvesting at no (extra) cost to you. Use these to offset your capital gains. If you don't have any capital gains, you can at least use it to reduce your income by $3,000 a year, saving you ~$1,000 in taxes every year depending on your marginal tax bracket.

Wealthfront Path - a free tool to allow you to predict when you can retire comfortably.

Portfolio Diversification

Speaking of diversification, here's the breakdown of our portfolio, to get a sense of how diversified it is, and what the percentage allocation is for each type of stock (asset risk). The risk score chosen here is 10/10 (the highest Wealthfront currently allows).

Our current Wealthfront diversified portfolio asset allocation (target + actual)

Let's break this down even further to look at which individual index funds make up each asset class in the diversified portfolio.

The following illustration shows how your asset allocation varies as a function of chosen risk level. Reducing your risk level from 10/10 basically reduces the amount of exposure to foreign and emerging market stocks, in exchange for tax-free municipal bonds.

Keep it Super Simple

Investing in a diversified portfolio that grows with the economy in the long run is one of the basic building blocks of any financial independence/early retirement plan. Maximizing your savings rate is step #1, but stashing your savings under your pillow or in a checking account is a losing bet against inflation over the long run. We like Wealthfront because it's ridiculously simple to set up and requires zero maintenance on an ongoing basis. Use our referral link to get $15,000 managed for free (escaping the 0.25% management fee).

If you're not sure what to do with your savings, this is all you need to know for now. Start investing in a diversified, low-cost index fund portfolio and let the power of compounding over 20+ years take care of the rest. 

Mr. Frugal Hacker

San Francisco, CA

Born in India. Grew up in Dubai for 15 years. Studied and lived in Canada for 8 years. Backpacked in Europe for 2 months. Lived in Toronto for 1.5 years. Working in San Francisco for the past 4 years. Runner, cyclist, software engineer.