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Comment by pmiller2 | Hacker News Reader

The article mentions Wealthfront and Betterment as alternatives to traditional advisors and their heavy fees. But, honestly, the vast majority people don't even need to pay the 0.25% they charge. Just get yourself a Vanguard account and follow the advice here: https://www.reddit.com/r/personalfinance/wiki/investing

The advice there, and in the rest of that wiki, will serve you very well, at least until you have many millions of dollars.

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Worth mentioning that Charles Schwab also has some etfs with extremely low expense ratios.

As does Fidelity, but at the end of the day, neither is structured in a way that ensures that continues. Vanguard is mutually owned.

Why use the ETFs? You're paying spread and front-runners, and have to deal with cumbersome atomic shares. Use the very excellent underlying mutual funds that are free to trade on Schwab's platform.

Wealthfront and Betterment fit the population of people that honestly don't even want to read that wiki and just want someone else to deal with it. That population is a lot larger than you think- I don't have the statistics handy, but a very large % of people just have their 401k funds sitting in cash. And even for slightly more knowledgeable people, they are happy to have a middle ground of a company that at least does an annual checkup to make sure their portfolio makes sense while avoiding a sleazy broker type.

You are right that you can just read that wiki, but a lot of people just aren't want to and are willing to pay a fee to avoid it.

I wonder how much of the 0.25% is recouped by wealthfront's tax loss harvesting.

The problem with TLH as justification is that with assets with a positive EV (and because of inflation), after 5-10 years, you probably won't have many losses to harvest, but you'll still be paying that fee.

The main problem is that TLH tops out at $3,000/yr in losses. After that the benefit doesn't scale with the fee.

The main problem is that TLH is irrelevant in tax-free/deferred retirement funds, which is where you should be sticking your savings if you haven't maxed them out, which is the situation of most people who use these robo services.

Yet another problem of TLH is that you must have all your investments with Betterment to ensure you don't trigger the "wash sale" rule. (Alternatively, you can handle it yourself manually, but that negates most of the benefit of having Betterment from a TLH perspective.)

That's more or less true only if you are retired & not re-investing dividends (not regularly purchasing new, high-basis lots).

The key problem is the one that loeg mentioned: on a $500k+ account you will likely be paying >$1k in fees for a ~$1k/yr tax savings. To make matters worse, the tax savings does not increase with inflation, but the fees do.

Right, over time new purchases generally become less and less significant relative to the asset value of your account. But yeah, the reinvestment and new investments can still be TLH'd.

The benefit is mostly limited to the $3,000 tax deduction, so as that approaches 0% of your growing savings, the fee isn't recouped by TLH.

Not really, there is a net gain for deferring taxes on gains beyond $3K. But irrelevant for tax-advantaged retirement funds.

That benefit isn't nearly as significant as the $3k deduction and isn't worth 0.25%/year.

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