I think the sub heading makes it clear on author's issue - Weatherfront's real costs. While they write tons of stuff on how they are anti Wall Street and are cheaper options, they actually are misleading people with standalone numbers instead of showing them compounded ones. A trick which is prevalent in Wall Street companies.
> To this point
>> All these cases neglect to mention that you will probably only see the maximal gain if you are maximally messing up already, by needlessly churning your account to generate capital gains. As Vanguard’s founder advises: Don’t just do something; stand there.
It talks about the comparison Wealthfront seems to make. As he says in the earlier para:
> They appear to reach these numbers simply by adding the maximum possible tax alpha to VTI’s return.
A simple backtesting shows wealthfront shows them they would have come out ahead. What it doesn't consider is achieving it in realtime will require a lot of other trades to be done.
Example, a company being removed and new one added to S&P. This will cause a change in weightage and calculation.
In an index fund, as you have bought the component you need not bother with the churn of companies. While in "direct indexing" you will have to actively manage the portfolio and adjust it accordingly. This will cause brokerage and fees applied to your account for the trades.
> To this point
>> All these cases neglect to mention that you will probably only see the maximal gain if you are maximally messing up already, by needlessly churning your account to generate capital gains. As Vanguard’s founder advises: Don’t just do something; stand there.
It talks about the comparison Wealthfront seems to make. As he says in the earlier para:
> They appear to reach these numbers simply by adding the maximum possible tax alpha to VTI’s return.
A simple backtesting shows wealthfront shows them they would have come out ahead. What it doesn't consider is achieving it in realtime will require a lot of other trades to be done.
Example, a company being removed and new one added to S&P. This will cause a change in weightage and calculation.
In an index fund, as you have bought the component you need not bother with the churn of companies. While in "direct indexing" you will have to actively manage the portfolio and adjust it accordingly. This will cause brokerage and fees applied to your account for the trades.