©2014 Wealthfront Inc.
Nothing in this presentation should be construed as a solicitation or
oﬀer, or recommendation, to buy or sell any security. Financial
advisory services are only provided to investors who become
Wealthfront clients pursuant to a written agreement, which investors
are urged to read and carefully consider in determining whether such
agreement is suitable for their individual facts and circumstances.
Past performance is no guarantee of future results, and any
hypothetical returns, expected returns, or probability projections may
not reﬂect actual future performance. Investors should review
Wealthfront’s website for additional information about advisory
ASSET CLASS RETURNS
Wealthfront used the following for its calculations: US Bonds
(Barclays Capital US Aggregate Bond Index), Foreign Stocks (MSCI
EAFE Total Return Index), Emerging Markets (MSCI Emerging
Markets Total Return Index), Real Estate (NAREIT North America
Index), Natural Resources (DJ-UBS Commodity Index Total Return
Index). Wealthfront presents the information going back to 1987,
which is the earliest date that necessary data is available for all six of
the asset classes being used.
The tax-loss harvesting analysis on slide 19 presents hypothetical
results for tax-loss harvesting in a volatile year like 2011. The
example assumes $100,000 investment on January 1st, 2011 and the
opportunity to harvest losses on December 15, 2011. Past
performance is no guarantee of future results, and any hypothetical
returns, expected returns, or probability projections may not reﬂect
actual future performance. Consult your tax advisor to determine
whether tax-loss harvesting is right for you.
The performance checklist on slide 20 compares the estimated time-
weighted returns of a Wealthfront investment with the returns
experienced by an average 20-year US Mutual Fund investor as
described by DALBAR.
The amounts are obtained by adding the projected additional rates of
return from various Wealthfront investment features (as described
here) to the average US Mutual Fund investor return from DALBAR
(3.17%/year) and compounding the result on an annual basis over 20
years. It is intended to highlight the possible diﬀerences in earnings if
you use Wealthfront’s investment approach rather than the approach
applied by the typical US Mutual Fund investor and where your
earnings are reinvested over a 20-year period.
It is not intended to predict portfolio earnings or performance, nor is it
a guarantee of future performance or earnings. Actual investors on
Wealthfront may experience diﬀerent results from the results shown.
The performance checklist does not represent the results of actual
trading using client assets. See Full Disclosure at wealthfront.com.
LOW-COST ETFS VS. MUTUAL FUNDS
Arnott, Robert D., Andrew Berkin, and Jia Ye. 2000. “How Well Have
Taxable Investors Been Served in the 1980s and 1990s?”
OPTIMIZED TAX-AWARE ALLOCATION
Wealthfront performed simulations that measured the diﬀerence in
average annual return attributable to owning a taxable portfolio
consisting of seven asset classes to a portfolio consisting of three
asset classes assuming the same risk tolerance for the two portfolios
for the period 1987-2010.
The three-asset-class portfolio consisted of US Stocks, US Bonds
and International Stocks. Wealthfront’s seven-asset-class portfolio
included US Stocks, Foreign Developed Stocks, Emerging Market
Stocks, Dividend Growth Stocks, Municipal Bonds, TIPS and Natural
Resources. Annual rebalancing was assumed. While the data used for
this comparison and the optimal allocation comparison are from
sources that Wealthfront believes are reliable, these comparisons
represent Wealthfront’s opinion only.
Swensen, David, Unconventional Success, 2005, pp. 195-96.
We simulated the potential after-tax beneﬁt of our tax-loss harvesting
and found that it added an average of at least 1.13% annually, net of
commissions. The results are hypothetical only and should not be
relied upon for predicting future performance. See our tax-loss
harvesting white paper for more details. Wealthfront’s tax-loss
harvesting strategy is available only to portfolios with $100,000 in a