•Estimated Additional Return

This performance checklist and interactive performance graph compares the estimated time-weighted returns of a Wealthfront investment with the returns experienced by an average 20-year U.S. Mutual Fund investor as described by DALBAR.

The graph and amounts are obtained by adding the projected additional rates of return from various Wealthfront investment features (as described here) to the average U.S. Mutual Fund investor return from DALBAR (3.17% /year) and compounding the result on an annual basis over 20 years. This tool, therefore, is intended to highlight the possible differences in earnings if you use Wealthfront’s investment approach rather than the approach applied by the typical U.S. Mutual Fund investor and where your earnings are reinvested over a 20-year period.

This tool is not intended to predict portfolio earnings or performance, nor is it a guarantee of future performance or earnings. Actual investors on Wealthfront may experience different results from the results shown. The performance checklist does not represent the results of actual trading using client assets. Full Disclosure

•Index Funds Over Mutual Funds

Arnott, Robert D., Andrew Berkin, and Jia Ye. 2000. “How Well Have Taxable Investors Been Served in the 1980s and 1990s?”

•Tax-Loss Harvesting

We simulated the potential after-tax benefit of our tax-loss harvesting and found that it added an average of at least 1.35% annually, net of commissions. The results are hypothetical only and should not be relied upon for predicting future performance. See our white paper. Wealthfront’s tax-loss harvesting strategy is available only to portfolios with $100,000 in a taxable account.

•Optimal Allocation

Wealthfront performed simulations that measured the difference in average annual return between a portfolio that used asset allocations recommended by Fidelity’s free online asset allocation tool and an allocation plan constructed using mean variance optimization, for the same risk tolerance, asset classes (U.S. Stocks, U.S. Bonds and International Stocks) and time period (1987-2010). Annual rebalancing was also assumed for both portfolios.

•Automatic Rebalancing

Swensen, David, Unconventional Success, 2005, pp. 195-96.

•Tax Aware Allocation

Wealthfront performed simulations that measured the difference in average annual return attributable to owning a taxable portfolio consisting of seven asset classes to a portfolio consisting of three asset classes assuming the same risk tolerance for the two portfolios for the period 1987-2010.

The three-asset-class portfolio consisted of U.S. Stocks, U.S. Bonds and International Stocks. Wealthfront’s seven-asset-class portfolio included U.S. Stocks, Foreign Developed Stocks, Emerging Market Stocks, Dividend Growth Stocks, Municipal Bonds, TIPS and Natural Resources. Annual rebalancing was assumed. While the data used for this comparison and the optimal allocation comparison are from sources that Wealthfront believes are reliable, these comparisons represent Wealthfront’s opinion only.