The time is right to explore automated investing options. If you have used a financial adviser, you may have been advised against automated investing for obvious reasons. However, do not let that adviser be your only point of advice, since automated investing can save you significantly on adviser fees and trading fees. It can also help you get better results with less effort and less stress. Some of the best investment sites now offer automated investing as an option. Even if you have been going the DIY route, you may not have considered automated investing with a platform like TradeKing Advisors or Wealthfront.
Many investors are initially reluctant to leave their nest eggs in the hands of bots. However, bots currently handle up to 80 percent of the daily volume in trading on stock markets, and they buy and sell stocks almost instantly. Financial companies and brokerages use computers to assist with trading, so obviously they trust the platforms to perform consistently and efficiently.
What’s more, today’s “Robo-advisor” programs from the best investment companies use computer algorithms to automate the allocation of your assets to those which will return the greatest amount on your investment. It is a good alternative to scouring through financial records for potential investments, or depending on Uncle Wally to give you a hot stock tip. The program does the hard work of analyzing stocks and performance returns for you, and it makes purchases that make sound financial sense, based on your investment profile.
Let’s take a look at a pair of the automated investment platforms taking the financial world by storm, and see if one is right for you:
TradeKing Advisors vs Wealthfront
TradeKing Advisors and Wealthfront are similar online platforms for automatic investing. Both have relatively low fees, ask you a series of questions about your investment goals and gauge your risk tolerance based on your answers. Your responses provide them with a good starting point for advising you on how to invest with them.
These platforms are both good alternatives for beginning investors who don’t want to spend the time learning all the intricate details of investing, or for those who want to manage their money well, but passively. Keep reading for more details about each one.
TradeKing Advisors Review
TradeKing Advisors, which is now Ally Invest, invests in low-cost exchange-traded funds (ETF) and exchange-traded notes (ETN) to keep costs low for investors. The platform allows multiple accounts to be managed at any time, including IRA accounts, a Coverdell education account, trusts and custodial accounts. This platform is easy for beginning investors to use, and a new account can be opened with just $500; management fees are also quite low. Full integration with existing and new TradeKing online brokerage accounts is available, and business accounts are allowed.
TradeKing Advisors (TKA) uses automatic rebalancing of accounts, but it does lack a few items that other automated investment companies offer. TradeKing Advisors does not invest in fractional shares, which means that at times your TKA account will have uninvested cash that is not earning funds. Also, TKA does not offer tax-loss harvesting, which is a standard feature for many other Robo-advisor companies. Of course, this is not an issue for non-taxable accounts.
Some good features of TKA are the single dashboard to review all of your accounts and the aforementioned ability to open a business account, which is not available with most Robo-advisors at this point.
Here are some reviews for alternatives to TradeKing:
What Is TradeKing Advisors?
TKA is the automated investment platform of TradeKing, now Ally Invest, an online brokerage that has been around since December 2005. The company launched with the goal to provide great customer service and allow investors to network with one another and place trades easily. Here is a full review of Ally Invest.
After TradeKing merged with Zecco in 2012 and acquired MB Trading three years later, it decided a focus change was in order. Now, overall client experience is the focus; with the combination of assets, TradeKing is on a mission to be the ultimate value broker, hence the launch of TradeKing Advisors toward that goal and making trading easier for the average investor.
How Is TradeKing Advisors’ Performance?
TradeKing Advisors is just about two years old, but it is partnered with Ibbotson Associates, who is the registered investment advisor for Morningstar. Ibbotson has over $105 billion dollars in assets under management (AUM) and a good performance record. Here is the track record for the period from January 2011 through Q1 2016, based on different investment models and a $100,000 investment:
- Conservative: $117,221
- Moderate: $124,582
- Moderate Growth: $131,461
- Growth: $136,882
- Aggressive Growth: $141,431
What Are TradeKing Advisors’ Fees?
TradeKing Advisor’s overall account management fee is $1 per month for balances below $5,000 and a flat 0.25 percent for balances above $5,000. Investment expense ratios average 0.17 percent. Here’s a better breakdown of all the costs and fees of TradeKing Advisor.
Wealthfront Review
Wealthfront was established in 2008, and since then it has built a large clientele; it currently has over $3.5 billion in assets under management. Wealthfront’s draw is its extremely low costs for asset management. In fact, the platform manages a client’s first $10,000 completely free, by taking humans completely out of the mix and replacing them with computer algorithm to manage and trade accounts. Like nearly all Robo-advisors, it uses a set of online questions to assess risk tolerance and investment goals before advising on a plan to meet those goals.
Wealthfront offers traditional accounts as well as IRAs, trust accounts, educational savings accounts and 401(K) plans. Wealthfront requires a minimum deposit of $500 to open an account, and all of the accounts are managed online.
Due to the low cost, Wealthfront limits its investments to ETFs; there is no ability to purchase a particular mutual fund or a stock you think is getting ready to take off. However, the investment expense ratios here are just 0.12 percent on average. Here is a better breakdown of Wealthfront’s services compared to another automated investing service, Betterment.
What Is Wealthfront?
Wealthfront is one of the largest automated investing platforms online today, combining modern technology and investment research to provide well-diversified, tax-efficient portfolios for clients. With more than $3.5 billion AUM, Wealthfront appeals to a large number of investors.
Wealthfront prides itself on the way its automated investment platform was developed from the ground up to appeal to a new generation of investors, by creating something new and better.
How Is Wealthfront’s Performance?
Although Wealthfront has one of the largest AUM balances of all the Robo-advisors in existence today, its historical performance seems to be a closely guarded secret. Available charts viewable without a Wealthfront account appear to show hypothetical possibilities of how a certain recommendation would have performed in the past. This is known in the industry as a backtest, and it does not indicate true performance.
What Are Wealthfront’s Fees?
Low fees are one of Wealthfront’s biggest draws; small and beginning investors can manage up to $10,000 on the platform at no cost at all. Even better, if you refer friends to the platform, you will increase the amount you can freely manage (by $5,000 for each individual who opens an account), up to a limit of 25 people. Above your freely managed balance, Wealthfront charges a flat 0.25 percent.
Like most things, there is not a one-size-fits-all approach to investment advice. By comparing these two platforms, we can see that either would be good bets for those who’d like to set up an account and forget it, secure in the knowledge that it is being well handled by Robo-advisors. Low fees are a feature of both platforms. Our only concern about being able to draw a solid conclusion is the fact that Wealthfront performance history is not available readily. At this juncture, our recommendation would be TradeKing Advisors.