Week 3 Betterment v Wealthfront Results

This week in stocks had the worst week since February. The major averages declined more than 1 percent, the worst since Feb. 5, for S&P 500 and Nasdaq composite and the worst since Feb. 12 for Dow Jones Industrial average.

Looking at Betterment and Wealthfront, their decline wasn’t as big of a loss as the major averages.

Here are the numbers:

Dow Jones: -1.25%

S&P: -1.23%

NASDAQ: -1.23%

Betterment: -0.79%

Wealthfront: -0.45%

Here you’ll see that Wealthfront’s portfolio is slightly better than Betterment. Here are some screenshots of what each of these robo-advisory platforms invested in:

Betterment

Betterment allocation

Wealthfront

Wealthfront allocation

You can see that these two platforms invests completely different from each other. This is one of the reasons why I’m testing out to see which platform performs better in the long run.

Betterment’s website explains why they chose their ETFs:

Betterment exclusively uses open-ended index tracking ETFs rather than mutual or closed-end funds due to their low manager risk, low embedded costs and natural tax efficiencies. These structural advantages along with the maturation and growth of the global ETF market over the last two decades has led to liquid investments covering different asset classes, markets, styles, and geographies. As a result, we can source investment vehicles from a market of portfolio components which are versatile, extremely liquid, and easily substitutable. However, not all ETFs are exactly alike and the difference between an optimal and a suboptimal selection can have non-trivial effects on long-term performance of a portfolio.

You can find more information here: Why did you pick these ETFs?

I’ll explain further about the different ETFs in a blog post at a later date.

Week 1: Wealthfront Initial Investment Takes a Week

Wealthfront initial investment takes about a week from opening an account and getting vested. I thought I was able to open an account on Sunday and have my money deposited on Monday to start tracking my progress, but instead, I had to wait through a various of verification steps. After verifying, Wealthfront takes a few days to actually take money from the bank and invests it depending on your risk level. I wish it was instant.

If you’re thinking of getting into Wealthfront, anticipate about a week of opening an account to initial investment.  The screenshot below shows the on boarding process. I wasn’t able to take a screenshot of every step, but you can pretty much see the gist of what to expect.Week 1 Wealthfront process

Week 2: Betterment’s Dividend and a Monthly Deposit

Week 2 came in a little bit better than week 1, but still below my initial deposit of $1,000. I did initially go into the market at a bad time where the overall market was down -0.42% (DOW) causing my overall portfolio to go down -1.44%.

In the beginning of Week 2, Betterment’s portfolio was $ 985.61 and ended with $ 998.90. However, already, in week 2, I was given a dividend of $ 1.05, which was nice. This brought the portfolio up 1.35% for week 2, where the DOW was up 1.60% (S&P = 1.71%, NASDAQ = 2.70%).

At the end of week 2, Betterment initiated my monthly deposit of $250, however, the $250 was not yet vested.

Week 2 Betterment v Wealthfront Results

We’re finally vested in Wealthfront! It felt like it was a longer process but we were able to get something going at the beginning of this week to see a good comparison!

Here are the numbers:

Dow Jones: 1.60% 

S&P: 1.71%

NASDAQ: 2.70%

Betterment: 1.35%

Wealthfront: 1.30%

Looking at this at first glance, you can see that Betterment performed better than Wealthfront, however, something happened in this week. Already, in week 2, I received a dividend of $1.05, which gave an extra boost of 0.11%. If I never received this dividend, Betterment would only have 1.24% for the week.

Last week, Betterment ended with $985.61, and Wealthfront with $1,000.00 (it took awhile for Wealthfront to process deposits). Even though Betterment ended in the negative last week, we’re not going to be comparing the results by numbers, instead, we’re going to be comparing it by percentages. The reason is because Betterment was vested a week earlier during very bad times. It was just fortunate that Wealthfront finally vested when the market was in the positives.

Week 2 Betterment Result: $ 1,248.90 ($250 vested, but not really) technically, $ 998.90.

Week 2 Betterment Depositing $250

Week 2 Wealthfront Result: $ 1,013.31

Week 2 Wealthfront Dashboard

 

 

The Betterment Direct Deposit Feature Is a Trickster

Any investment service providers will allow you the ability to set automatic deposits from your bank, but the way Betterment does it caught my attention, and it’s quite unique from what I’ve seen before. On April 1st, the Betterment direct deposit said it deposited $250 into my investment account. They even sent a friendly reminder email the day before letting me know that they’re going to deposit the money.

Week 2 Betterment email reminder

I’ve set my investments on automatic, to deposit $250/month. My account now shows $1,248.90 at the end of week 2.

Week 2 Betterment Depositing $250

At first glance I thought they started investing into stocks instantly without taking any money out of my bank. However, when I dug around and looked at my portfolio, the $250 was not yet vested.

Week 2 Betterment Portfolio Stocks Invested

Under the Total Balance, it’s still $998.90.

I’ve set Wealthfront on automatic too, but on their system, it doesn’t show any deposited amount.

Week 2 Wealthfront Dashboard

I’m not totally sure why Betterment does it this way, but for someone who doesn’t know what they’re doing, this can be very misleading.