Vanguard is a mutual company; they exist for the benefit of their users. Hard to compete against that.
Disclaimer: moved from Betterment to Vanguard
For example I am a cautious investor right now. At Betterment this means I have to lean more towards their Bonds option, which yielded a very low return over the past year. At Vanguard, I can invest in the Income fund which is a mix of high dividend paying stocks and bonds. Still cautious but much better returns.
I actually use Vanguard target date for my tax-advantaged accounts, but I use Wealthfront for taxable account.
Hold only one index fund, hold it long-term and the problem vanishes: all the gains are not taxed until you sell the fund and they are always net of losses.
Not to mention the massive benefit of deferring taxes in a compounding context.
It worked pretty well for me in 2016. I was up ~11% total and about to deduct about 6% in losses.
By having a separately managed account of ETFs or stocks, you can sell and exchange similar stocks when they lose value and harvest the tax losses to use at a later date.
IE: IRAs and Roth accounts instantly don't give a care, because they're not taxed. Soooo, no benefit to tax-loss harvesting.
IE#2: Any security that actually makes money will be unable to be tax loss harvested. (You need a LOSS to benefit from the tax loophole)
only if you're maxing out your tax advantaged accounts, and still have additional funds to invest is TLH even relevant.
https://www.hedgeable.com/blog/2015/09/how-to-protect-your-p...
Those fees were on top of the ETF fees for the funds they assembled your portfolio with.
However, all of the things Betterment does for you now would be your responsibility, including asset selection, rebalancing, thinking about how to manage taxes, etc.
The bottom line is that you can do this yourself for less money, but you have to do it all yourself. Betterment offers more convenience for a higher fee.
I disagree with some of the Boglehead stuff, but the wiki is a good resource.
You don't need to do any trial and error. You just need to pick some funds and hold onto them for a long time. The funds Betterment has already picked for you are probably pretty good.
(In fairness, they do some other stuff which is more value-added like TLH, which is more work to do yourself, but again, it's hard to justify the 0.25%.)
"If You Can" by William Berstein is a good, short ebook on this subject.
I got the Wealthfront pitch when I started with my employer, but I feel much better with my current arrangement. Your comment "I have very little choice but to stay put" is never nice to hear in any context, so I hope you can move along from that place.
http://www.cnbc.com/2015/06/16/is-your-advisor-a-fiduciary-c...
Vanguard Target Date funds rebalance automatically.
> including asset selection
Vanguard's asset selection is "literally buy everything on the market". Its a dumb strategy, but it seems to work. In particular, Vanguard's total market index will perform by definition the average (minus Vanguard's very low fees).
> how to manage taxes
Its no harder than Betterment. You get a 1099-DIV next year, and then fill out your taxes. Since Vanguard Target Date funds automatically rebalance and everything, its unlikely that you get any benefits from Betterment.
So if you have $50,000 in capital gains and $53,000 in capital losses, your gains are "free". And you can deduct the extra $3k from ordinary income.
You can also carry capital losses forward each year.
You still aren't getting around the fact that you made a crappy investment somewhere to generate that loss.
If you have a diversified portfolio that is all gains, I think you're probably not actually diversified.
Diversified, but generally speaking it gains every year.
And no. Your portfolio is not as diverse as the entire market. Period.
Anyway, we are talking past each other.
Just felt like pointing out that you'd have to rebalance the same way Betterment does, which isn't the way I believe normal people do it. Betterment uses portfolio optimization techniques that can be hard to implement yourself: https://www.betterment.com/resources/investment-strategy/por...
If you don't want to even rebalance, then go buy one of the target date funds from the likes of Vanguard.
TLH is extremely oversold. I don't need to repeat what is easily found in a google search though.
Edit: looked it up, the 2050 is 0.16%, not bad. I usually see much higher fees on those target date funds.
as a general note, anyone interested in this should take a look at the bogleheads site, starting with their wiki: https://www.bogleheads.org/wiki/Main_Page
yes, definitely go straight to vanguard for any of their products! i should've said as much, thanks for doing so.
they're so easy to deal with there's hardly any point in purchasing any of their products elsewhere.
> and getting Admiral Shares of the corresponding mutual fund, which have much lower fees than the ETFs.
once you've saved up enough to buy into the admiral shares, that's certainly the easiest thing to do. but their ETFs are just shares of the admiral-level funds. so their expense ratios are identical.
https://personal.vanguard.com/us/funds/snapshot?FundIntExt=I... https://personal.vanguard.com/us/funds/snapshot?FundId=0928&...
https://personal.vanguard.com/us/funds/snapshot?FundIntExt=I... https://personal.vanguard.com/us/funds/snapshot?FundId=0970&...
that's apparently some sort of magic that vanguard has patented.