{"id":12202,"date":"2019-12-09T14:05:37","date_gmt":"2019-12-09T22:05:37","guid":{"rendered":"https:\/\/canary.kcprod.info/blog\/?p=12202"},"modified":"2022-01-11T17:12:20","modified_gmt":"2022-01-12T01:12:20","slug":"wealthfronts-portfolio-rebalancing-just-got-even-better","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/","title":{"rendered":"Wealthfront\u2019s Portfolio Rebalancing Just Got Even Better"},"content":{"rendered":"\n

Wealthfront is committed to helping you do more with your money, and we\u2019re always working to make our existing products even better. That\u2019s why we\u2019re so excited to announce that our portfolio rebalancing is now more sensitive to both short- and long-term capital gains taxes to further minimize your tax bill. You don\u2019t have to do anything at all to take advantage of this upgrade \u2014 our software is now better at minimizing capital gains taxes, leaving more money in your pocket.<\/p>\n\n\n\n

What is rebalancing, anyway?<\/strong><\/h2>\n\n\n\n

Rebalancing is the process of buying and selling investments in your portfolio to bring it into closer alignment with your target allocation. Wealthfront periodically compares all investment accounts to their target allocations to make sure clients\u2019 portfolios reflect their tolerance for risk. When you first set up your investment account, you may remember answering questions designed to assess your tolerance for risk, which we express as a risk score. Your risk score determines your target allocation<\/a>, which is the ideal mix of different asset classes for your preferences given that some asset classes are riskier than others.<\/p>\n\n\n\n

Once we\u2019ve determined your target allocation, we start putting your money to work. But over time, your portfolio will naturally change as some investments outperform others. If any asset class drifts too far from your target allocation, that\u2019s when we evaluate rebalancing your portfolio. We also do this when you change your risk score.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

As you can see from the graph above, this simple sample portfolio of stocks and bonds strays a lot<\/em> from its target allocation of 60% stocks and 40% bonds when it isn\u2019t rebalanced. Over the decade pictured here, the portfolio drifts as far as 42% stocks all the way to 73% stocks. That\u2019s a big deviation from the target allocation and means this portfolio wouldn\u2019t do a good job reflecting this investor\u2019s risk tolerance. That\u2019s exactly why rebalancing is so important. <\/p>\n\n\n\n

When we rebalance your portfolio, we sell investments from one or more asset classes (typically those that have been performing well and now make up too much of your portfolio) and buy investments from others to move your portfolio back to its target. Of course, if we sell something from your portfolio at a gain, you\u2019ll end up owing taxes. In general, that\u2019s fine \u2014 capital gains taxes mean you\u2019re making money. And the taxes associated with rebalancing are part of getting back to a target allocation that makes sense for your risk score. <\/p>\n\n\n\n

What\u2019s changed?<\/strong><\/h2>\n\n\n\n

Our software has gotten even smarter. Our new rebalancing methodology is finely tuned to consider the tradeoff between moving your portfolio all the way back to your target allocation and the taxes you\u2019ll incur along the way.<\/p>\n\n\n\n

Our software can now recognize when the likely tax cost to bring you back to your target is too high relative to the benefit of having a more optimal risk profile. In those cases, we stop short of your target to keep your tax bill lower. Over time, other events can help naturally rebalance your portfolio including deposits, dividends, and tax-loss harvesting. <\/p>\n\n\n\n

What does this mean for you?<\/strong><\/h2>\n\n\n\n

It\u2019s all good news, and you don\u2019t have to do a thing. Our software is now better at minimizing your long- and short-term capital gains taxes. If you keep a close eye on your portfolio, you might notice you\u2019re not right at your target allocation.<\/p>\n\n\n\n

For example, let\u2019s look at a sample investment account with a balance of just over $32,000 where the client has just changed their risk score from 3.5 to 4.5 (by the way, we do not recommend changing risk scores due to market conditions!). Because of portfolio drift and the change in risk score, the account deviates from its target allocation by 7% in one asset class, nearly 6% in another, and several percentage points in most others, for a total deviation of over 25%. In this particular scenario, our optimized rebalancing would buy and sell investments to get the account nearer to its target allocation while remaining sensitive to the taxes the client would incur. The client would realize $4.03 of losses and not incur any taxes as as result of the rebalancing. The portfolio would still have a total deviation of 21% from its target allocation, but we believe it\u2019s worth it to keep more money in the client\u2019s pocket. A complete rebalance would bring this portfolio all the way to its target and the client would incur $184.50 in tax cost along the way.<\/p>\n\n\n\n

Incurring taxes is part of investing, and it means you\u2019re making money! We\u2019re here to help minimize what you owe. We already do this with our unparalleled suite of tax-minimization features including Tax-Loss Harvesting<\/a>, Stock-level Tax-Loss Harvesting<\/a>, minimizing your taxes while transferring between brokerage accounts<\/a>, and minimizing your taxes when you make withdrawals<\/a>. We\u2019re thrilled to be able to rebalance clients\u2019 portfolios in an even more intelligent and tax-sensitive way.<\/p>\n\n\n\n

Wealthfront is committed to clients\u2019 financial wellbeing and we\u2019re constantly innovating to find more ways to help you have a more secure and rewarding future. Our optimized rebalancing is just one of the many ways we do that. This feature, like Wealthfront\u2019s Tax-Loss Harvesting, would be virtually impossible for an individual investor to perform on her own \u2014 another case where software truly is better than people<\/a>.
<\/p>\n","protected":false},"excerpt":{"rendered":"

Wealthfront is committed to helping you do more with your money, and we\u2019re always working to make our existing products even better. That\u2019s why we\u2019re so excited to announce that our portfolio rebalancing is now more sensitive to both short- and long-term capital gains taxes to further minimize your tax bill. You don\u2019t have to […]<\/p>\n","protected":false},"author":129,"featured_media":12206,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1360],"tags":[1295],"coauthors":[82],"class_list":["post-12202","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-product-news","tag-rebalancing"],"acf":[],"yoast_head":"\nOur Portfolio Rebalancing Just Got Even Better | Wealthfront<\/title>\n<meta name=\"description\" content=\"We're excited to announce that our portfolio rebalancing is now more sensitive to both short- and long-term capital gains taxes to further minimize your tax bill.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Our Portfolio Rebalancing Just Got Even Better | Wealthfront\" \/>\n<meta property=\"og:description\" content=\"We're excited to announce that our portfolio rebalancing is now more sensitive to both short- and long-term capital gains taxes to further minimize your tax bill.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/\" \/>\n<meta property=\"og:site_name\" content=\"Wealthfront Blog\" \/>\n<meta property=\"article:published_time\" content=\"2019-12-09T22:05:37+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-01-12T01:12:20+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/12\/christophe-hautier-902vnYeoWS4-unsplash-scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2560\" \/>\n\t<meta property=\"og:image:height\" content=\"1707\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"The Wealthfront Team\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@Wealthfront\" \/>\n<meta name=\"twitter:site\" content=\"@Wealthfront\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"The Wealthfront Team\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/\",\"url\":\"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/\",\"name\":\"Our Portfolio Rebalancing Just Got Even Better | Wealthfront\",\"isPartOf\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/12\/christophe-hautier-902vnYeoWS4-unsplash-scaled.jpg\",\"datePublished\":\"2019-12-09T22:05:37+00:00\",\"dateModified\":\"2022-01-12T01:12:20+00:00\",\"author\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/3eca21c0f00c276ebcaa3d634995cb77\"},\"description\":\"We're excited to announce that our portfolio rebalancing is now more sensitive to both short- and long-term capital gains taxes to further minimize your tax bill.\",\"breadcrumb\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/#primaryimage\",\"url\":\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/12\/christophe-hautier-902vnYeoWS4-unsplash-scaled.jpg\",\"contentUrl\":\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/12\/christophe-hautier-902vnYeoWS4-unsplash-scaled.jpg\",\"width\":2560,\"height\":1707,\"caption\":\"Credit: Christophe Hautier\/Unsplash\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/canary.kcprod.info/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Wealthfront\u2019s Portfolio Rebalancing Just Got Even Better\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/#website\",\"url\":\"https:\/\/canary.kcprod.info/blog\/\",\"name\":\"Wealthfront Blog\",\"description\":\"Personal Finance & Investing Insights\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/canary.kcprod.info/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/3eca21c0f00c276ebcaa3d634995cb77\",\"name\":\"The Wealthfront Team\",\"description\":\"The Wealthfront Team believes everyone deserves access to sophisticated financial advice. The team includes Certified Financial Planners (CFPs), Chartered Financial Analysts (CFAs), a Certified Public Accountant (CPA), and individuals with Series 7 and Series 66 registrations from FINRA. Collectively, the Wealthfront Team has decades of experience helping people build secure and rewarding financial lives.\",\"url\":\"https:\/\/canary.kcprod.info/blog\/author\/teamwealthfront\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Our Portfolio Rebalancing Just Got Even Better | Wealthfront","description":"We're excited to announce that our portfolio rebalancing is now more sensitive to both short- and long-term capital gains taxes to further minimize your tax bill.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/","og_locale":"en_US","og_type":"article","og_title":"Our Portfolio Rebalancing Just Got Even Better | Wealthfront","og_description":"We're excited to announce that our portfolio rebalancing is now more sensitive to both short- and long-term capital gains taxes to further minimize your tax bill.","og_url":"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/","og_site_name":"Wealthfront Blog","article_published_time":"2019-12-09T22:05:37+00:00","article_modified_time":"2022-01-12T01:12:20+00:00","og_image":[{"width":2560,"height":1707,"url":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/12\/christophe-hautier-902vnYeoWS4-unsplash-scaled.jpg","type":"image\/jpeg"}],"author":"The Wealthfront Team","twitter_card":"summary_large_image","twitter_creator":"@Wealthfront","twitter_site":"@Wealthfront","twitter_misc":{"Written by":"The Wealthfront Team","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/","url":"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/","name":"Our Portfolio Rebalancing Just Got Even Better | Wealthfront","isPartOf":{"@id":"https:\/\/canary.kcprod.info/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/#primaryimage"},"image":{"@id":"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/#primaryimage"},"thumbnailUrl":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/12\/christophe-hautier-902vnYeoWS4-unsplash-scaled.jpg","datePublished":"2019-12-09T22:05:37+00:00","dateModified":"2022-01-12T01:12:20+00:00","author":{"@id":"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/3eca21c0f00c276ebcaa3d634995cb77"},"description":"We're excited to announce that our portfolio rebalancing is now more sensitive to both short- and long-term capital gains taxes to further minimize your tax bill.","breadcrumb":{"@id":"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/#primaryimage","url":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/12\/christophe-hautier-902vnYeoWS4-unsplash-scaled.jpg","contentUrl":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2019\/12\/christophe-hautier-902vnYeoWS4-unsplash-scaled.jpg","width":2560,"height":1707,"caption":"Credit: Christophe Hautier\/Unsplash"},{"@type":"BreadcrumbList","@id":"https:\/\/canary.kcprod.info/blog\/wealthfronts-portfolio-rebalancing-just-got-even-better\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/canary.kcprod.info/blog\/"},{"@type":"ListItem","position":2,"name":"Wealthfront\u2019s Portfolio Rebalancing Just Got Even Better"}]},{"@type":"WebSite","@id":"https:\/\/canary.kcprod.info/blog\/#website","url":"https:\/\/canary.kcprod.info/blog\/","name":"Wealthfront Blog","description":"Personal Finance & Investing Insights","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/canary.kcprod.info/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/3eca21c0f00c276ebcaa3d634995cb77","name":"The Wealthfront Team","description":"The Wealthfront Team believes everyone deserves access to sophisticated financial advice. The team includes Certified Financial Planners (CFPs), Chartered Financial Analysts (CFAs), a Certified Public Accountant (CPA), and individuals with Series 7 and Series 66 registrations from FINRA. Collectively, the Wealthfront Team has decades of experience helping people build secure and rewarding financial lives.","url":"https:\/\/canary.kcprod.info/blog\/author\/teamwealthfront\/"}]}},"_links":{"self":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts\/12202","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/users\/129"}],"replies":[{"embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/comments?post=12202"}],"version-history":[{"count":1,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts\/12202\/revisions"}],"predecessor-version":[{"id":14999,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts\/12202\/revisions\/14999"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/media\/12206"}],"wp:attachment":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/media?parent=12202"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/categories?post=12202"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/tags?post=12202"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/coauthors?post=12202"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}