Investment Guys - Tell me about sites like Wealthfront and Betterment (1 Viewer)

[Plorfu]

https://www.wealthfront.com/

https://www.betterment.com/

After maxing out the 401K and Roth, I'm looking at doing something else. I have a regular brokerage account, but I was looking at options other than DIY. These sites tout tax harvesting as a major feature, but I honestly couldn't tell you what this means in layman's terms- I'm looking for help with that.

Wealthfront offers no fee at all for the first 10K, so I was looking at them more than Betterment initially. Anyone with experience with these types of services? Can anyone explain what they'll do for me (in simple terms) that I can't do myself?

I know answers may depend on my personal situation, but I was hoping for generalized information as well.

 

[KCitons]

 

[Plorfu]

Monday morning bump

 

[Headbutts]

Tax harvesting... Sell your losers, write off the loss against your taxable income and pay less in taxes. Sorta makes sense... lose money, pay less in taxes.

The key here is to be smart about it. Maybe you've got a loser today but you think the company's a long-term winner. Sell it, wait 30+ days, buy it again and ride the wave. Or you need some cash for something... sell some winners AND some losers. Sell the losers to count against the gains of the winners, pay less in taxes.

Of course if you never sell you never pay the taxes...

 

[Buddy Ball 2K3]

Been using Betterment for a couple years. Its not my major investing tool, but it might be my favorite. I have an automatic deposit of $50 go in every week. I treat it as a set it and forget it account.

 

[Gopher State]

Buy farmland,you can thank me later

 

[Andrew74]

Based on my poking around the sites, they basically set up a target retirement strategy for you. I don't understand why anyone would pay them more $ than you'd pay Vanguard. They claim their better diversification makes up for it. I find that quite ironic since their whole premise is why pay someone for promised outperformance.

 

[johnnycakes]

Never heard of either one. But I looked at the Wealthfront site just now. Frankly, I'm underwhelmed. They throw out a lot of technical jargon without really saying anything. I am most reminded of an old saying from my college days... "If you can't dazzle 'em with brilliance, then baffle 'em with bull####." And I really don't see much brilliance at that site.

 

[Dentist]

Mr. Money Mustache, notorious cheapskate, prefers betterment

http://www.mrmoneymustache.com/2014/11/04/why-i-put-my-last-100000-into-betterment/

 

[Dentist]

The white coat investor also reviewed almost every available roboadvisor

http://whitecoatinvestor.com/what-you-need-to-know-about-roboadvisors/

 

[RUSF18]

sell some winners AND some losers. Sell the losers to count against the gains of the winners, pay less in taxes.

Back in maybe 2010 or 2011, I thought I was being so smart doing this. I had a completely worthless stock post crisis (bond reinsurer) and had a nice gain on another so I figured I'd lock in my gain and use the dog to offset those taxes. I think my initial investment in each was about $5K, so it wasn't big money, but I was thinking more in terms of being able to tell people, "hey I made 30% on a stock AND was wise enough to offset my tax hit! (ignore that massive loss part, please)" even though I was a big big believer in the company long term.

The company I sold was Under Armour which not only split twice since then but is going nowhere but up seemingly. My initial $5K would be about $27K today I believe.

A very good, and very expensive, lesson.

 

[johnnycakes]

sell some winners AND some losers. Sell the losers to count against the gains of the winners, pay less in taxes.

Back in maybe 2010 or 2011, I thought I was being so smart doing this. I had a completely worthless stock post crisis (bond reinsurer) and had a nice gain on another so I figured I'd lock in my gain and use the dog to offset those taxes. I think my initial investment in each was about $5K, so it wasn't big money, but I was thinking more in terms of being able to tell people, "hey I made 30% on a stock AND was wise enough to offset my tax hit! (ignore that massive loss part, please)" even though I was a big big believer in the company long term.

The company I sold was Under Armour which not only split twice since then but is going nowhere but up seemingly. My initial $5K would be about $27K today I believe.

A very good, and very expensive, lesson.

If you thought the underlying investment was good long-term, you should have bought it back after 31 days to avoid the wash-sale loss

 

[RUSF18]

sell some winners AND some losers. Sell the losers to count against the gains of the winners, pay less in taxes.

Back in maybe 2010 or 2011, I thought I was being so smart doing this. I had a completely worthless stock post crisis (bond reinsurer) and had a nice gain on another so I figured I'd lock in my gain and use the dog to offset those taxes. I think my initial investment in each was about $5K, so it wasn't big money, but I was thinking more in terms of being able to tell people, "hey I made 30% on a stock AND was wise enough to offset my tax hit! (ignore that massive loss part, please)" even though I was a big big believer in the company long term.

The company I sold was Under Armour which not only split twice since then but is going nowhere but up seemingly. My initial $5K would be about $27K today I believe.

A very good, and very expensive, lesson.

If you thought the underlying investment was good long-term, you should have bought it back after 31 days to avoid the wash-sale loss

Thanks. Where were you 4.5 years ago?

 

[Ignoramus]

sell some winners AND some losers. Sell the losers to count against the gains of the winners, pay less in taxes.

Back in maybe 2010 or 2011, I thought I was being so smart doing this. I had a completely worthless stock post crisis (bond reinsurer) and had a nice gain on another so I figured I'd lock in my gain and use the dog to offset those taxes. I think my initial investment in each was about $5K, so it wasn't big money, but I was thinking more in terms of being able to tell people, "hey I made 30% on a stock AND was wise enough to offset my tax hit! (ignore that massive loss part, please)" even though I was a big big believer in the company long term.The company I sold was Under Armour which not only split twice since then but is going nowhere but up seemingly. My initial $5K would be about $27K today I believe.

A very good, and very expensive, lesson.

Wait, what was the lesson?

 

[KCitons]

sell some winners AND some losers. Sell the losers to count against the gains of the winners, pay less in taxes.

Back in maybe 2010 or 2011, I thought I was being so smart doing this. I had a completely worthless stock post crisis (bond reinsurer) and had a nice gain on another so I figured I'd lock in my gain and use the dog to offset those taxes. I think my initial investment in each was about $5K, so it wasn't big money, but I was thinking more in terms of being able to tell people, "hey I made 30% on a stock AND was wise enough to offset my tax hit! (ignore that massive loss part, please)" even though I was a big big believer in the company long term.

The company I sold was Under Armour which not only split twice since then but is going nowhere but up seemingly. My initial $5K would be about $27K today I believe.

A very good, and very expensive, lesson.

If you thought the underlying investment was good long-term, you should have bought it back after 31 days to avoid the wash-sale loss

Thanks. Where were you 4.5 years ago?

He was busy buying shares of Under Armour

 

[Ignoramus]

sell some winners AND some losers. Sell the losers to count against the gains of the winners, pay less in taxes.

Back in maybe 2010 or 2011, I thought I was being so smart doing this. I had a completely worthless stock post crisis (bond reinsurer) and had a nice gain on another so I figured I'd lock in my gain and use the dog to offset those taxes. I think my initial investment in each was about $5K, so it wasn't big money, but I was thinking more in terms of being able to tell people, "hey I made 30% on a stock AND was wise enough to offset my tax hit! (ignore that massive loss part, please)" even though I was a big big believer in the company long term.The company I sold was Under Armour which not only split twice since then but is going nowhere but up seemingly. My initial $5K would be about $27K today I believe.

A very good, and very expensive, lesson.

Wait, what was the lesson?

Never mind, I see it.