One of my New Year’s resolutions was to start investing. I had already opened a traditional IRA with my bank and contributed the max amount for that time period. This was a nice first step, but I was only earning 2.67% interest on my money. After a bit of research, I learned stocks will give you about a 7% return.
Now, in general, I don’t enjoy risk. I’ve never been one to ride the rollercoasters at the amusement park or to throw $100 on red at the casino. For that reason, I’ve been hesitant to get into stocks, especially given the current state of the market. This resolution was important for me. I’m young and it’s important to take these risks early while I can afford to do so and hopefully one day reap the rewards.
I don’t work on Wall Street and I quite honestly, I don’t want to spend the time researching the market and handling my portfolio all on my own. I decided to go with a robo advisor, which is an automated, algorithm-based “financial advisor.” They’re much cheaper than a traditional advisor and can manage your investments just as effectively.
My brother, James, an outspoken Dartmouth grad with many Wall Street friends, suggested to me that I try a service called Wealthfront. Here’s a little overview:
- “Wealthfront offers the kind of holistic financial advice and automated investment management that appeals to new and experienced investors alike: helpful planning tools, diversified — and hands-off — portfolios and advanced tax optimization strategies.” – Nerd Wallet, 2019
- Management fee: 0.25%; several services are free.
- Account minimum: $500.
- Referred customers get $5,000 managed for free.
- No account fees.
- Daily tax-loss harvesting on all taxable accounts.
Upon joining, it took me through a little questionnaire to assess my risk tolerance. To my surprise, my risk score was a 7 out of 10. They used that number to decide where they are going to put my money. I loaded it with $600 and have set it to put another $100 on every 1st of the month. It’s been 23 days and I have made $25 to date, a 4.3% return.
They diversified my portfolio for me to put a little in US stocks, foreign stocks, emerging markets, and municipal bonds. I don’t even check what stocks I own and try to just trust the service, which so far has been very easy.
My favorite part of the app is it tells you what age you’ll be able to retire if you keep up with your investment strategy. At the moment, I’m set to retire at 49, which gets me super motivated! Definitely give this a try if you’re a new investor.