Editor's note: Author of this article Blake Ross, Firefox designer, former Facebook product director.
In some parts of the Bay Area, a developer came to the brink of madness.
In the past 60 hours, he has been constantly performing A/B tests between "acquisition," "buy," and "install." In turmoil he started the A/B testing reality - but if he can realize that the ultimate "American dream" is impossible to achieve, it will be worth it or it will be worth it: persuade you to spend a dollar and one-time snuggle for the rest of your life. "Install" on your iPhone.
The so-called A/B test is the turn test of two product versions: A version is the original version, and B version is a version that you think may be better than version A. Decision-making applications such as robot search are generally expressed as:
(1) Irreversible decision-making: The influence of some decisions is very significant, and these decisions are irreversible or nearly irreversible. Such decisions are similar to one-way channels and cannot be changed after making decisions. So you must make such decisions in a very structured, cautious, and well-coordinated manner. Once you make a decision, if you find that the result is not what you want, you can't go back and make a decision again.
(2) Variable decision-making: Most decisions are variable and reversible decisions, such decisions are similar to two-way channels. After making such a decision, if you find that the result is not optimal, you can reopen the door to the decision and return to the decision. Variable decisions can and should be made quickly by individuals or groups with good judgment.
When applying A/B tests to "variable decision making", if the A version is found to be better than the B version through A/B testing, then simply shut down the B version and return to the A version. The A/B test method can even help you realize when you need to apply the "irreversible decision-making" process.
So, for example, Wealthfront’s smart investor can beat the odds? He will take away your 70 cents and drop another app on the phone. This app will not only charge him daily for the next day, but will also increase the cost of more than one US dollar each month.
what is the problem?
The real cost of WealthfrontAs promised by the Wealthfront homepage, an account is traded for 100,000 U.S. dollars and management fees are less than 20 U.S. dollars per month.
Wealthfront likes to portray itself as an organization against Wall Street, but it uses the same fatal weaknesses as its Manhattan cousin: Many people do not have an intuitive understanding of the magic of compounding, so they must not understand the behind these compound charges. brutal.
Well, let’s look at the truth: Suppose a 30-year-old invests 100,000 dollars in the Wealthfront that cost “less than one night's movie money†for the required expenses. Then the truth is that this person is The 75th birthday will be paid to the company for more than 100,000 US dollars.
If he chooses to set aside extra money from his salary during the investment period – for example $15,000 a year – then the cost may reach $500,000 or even more. "Much less than one night's movie money," that means making this movie.
This is a great deal for Wealthfront. If the company catches enough young professionals in the early stages and then helps them to invest in the rest of their lives, they will get higher and higher compound charges from the total transaction.
However, for the user, this is not a good deal. There are many ways in the world that will allow you to choose to achieve retirement goals in the early years. This fact was overwhelmed by self-righteous words. As for Wall Street companies, such remarks are also circulating and have plagued real estate investment advisers for decades.
Dirty little secretNow: If you open a retirement account, then invest some of your salary every month in the Vanguard Pioneer Fund, and then leave it... until you retire.
You don’t need to do anything during this period, even if CNBC reports that the sky is falling; even if the Fed is printing money again, it is time to liquidate; even if the parrot is cursing you do not buy gold; even if it is really seen from the Internet, Shiny gold prices crashed again...
No, these are not in charge, because you are planning to roll it for decades...
Then if you hire a guy from Edward Jones, or even a deputy general manager from Goldman Sachs, you might make more money; or if you outsource investment deals to Jewish scholars Rabbi, you can earn more. Money. You can make money at Wealthfront.
But the financial industry has spent decades and billions trying to convince people to go in the opposite direction - investing is difficult, it requires complex certifications and products, and you better not go it alone because it takes a lot of time. This is all fake.
Warren Buffett said: "Don't believe me."
Buffett recommends Vanguard because once you ignore the rhetoric, an incontrovertible fact is: As a non-profit organization that belongs to you and other shareholders, Vanguard is the fund industry's Wal-Mart, the only company in the financial industry that does not want to You squeeze a huge profit company. Vanguard, the low-cost pioneer in the investment community, set a new record for the entire industry in 2012. According to Strategic Insight data, as of November 2012, Vanguard's mutual funds and ETFs absorbed a total of US$130.4 billion in investment this year, exceeding the record of US$129.6 billion that JPMorgan Chase established in 2008 mainly relying on money market funds. . And this is not over yet. This is an asymmetrical war, because Vanguard only needs to be responsible for its fund holders, and their savings will be given to fund holders, not shareholders or partners. This makes BlackRock, Charles Schwab, Fidelity, and State Street difficult to match.
More profitable than non-profit?
Wealthfront has a minimum threshold of only US$500. No annual fee is charged for accounts of US$10,000 and below. For accounts over 10,000 U.S. dollars, only 0.25% of the platform fee is charged for more than US$10,000 per year, and users do not need to pay for transactions. commission. According to Wealthfront's statistics, the average ETF investment cost for Wealthfront users is only 0.12%.
Seriously, which Wealthfront man dared to seriously prove this account?
"Gain 0.25% of the platform fee every year" - they are definitely charged a management fee for your entire positive index balance. Here, Wealthfront seems to prefer to call it a "consulting fee," even if the official page is euphemistically called "management fees." To be honest, I would rather call it "safety ride". But no matter what it says, if you want to own the entire US public market, Wealthfront only needs to charge $2,500 in the positive index of millions of dollars, while Vanguard Fund charges $500 in the first year. Sixty years later, this "evolution of the next index investment" will eventually be much more expensive than the previous one.
Not only that:
By allowing Wealthfront investors to hold personal securities, the direct distribution method can effectively eliminate the management costs of any index fund or ETF (transactional open-ended index fund), thereby reducing the overall portfolio cost.
and also:
Having an index fund or ETF comes with costs. Although costs may be low, it is an obstacle to fully replicating the performance of passive index investments.
And the worst is:
We believe that our direct distribution services can effectively use modern index investment to deal with these two shortcomings - the cost of managing the costs of index funds and ETF funds, and tax losses. For this reason, the direct distribution method is the next step in index investment.
There is no difference between the so-called “index fund fee†you paid to the Pioneer Fund and the Wealthyfront fee. The two are essentially the same. This is Wall Street's oldest trick - their wealth adviser will also tell customers that they are free. And often just "a big surprise in a gift box."
Bottom line: When it comes to recognizing the annual cost of the US stock market, existing index funds will beat Wealthfront.
"We don't need commission!"
For Schwab, for example, it has a "Schwab One Account" for international investors, and its commitment to provide more comprehensive services. For example, telephone consultation, you can call to talk with your agent and listen to a variety of guidance and advice. However, it charges a higher fee. The minimum charge for a transaction is $29, which is usually charged as a percentage. Moreover, the company also provides that the minimum amount must be more than 10,000 US dollars.
This is also true of Wealthfront. Wealthfront's trading game is like the consequences of excessive advertising in Silicon Valley.
According to the current SEC regulations, Wealthfront believes that the benefits of its automated tax-cutting services exceed its costs. In short, they think that there is free money on the table.
This statement often appears in the investment world. Let's take a look at a chart:
Speaking of this, I want to make it clear: I strongly agree that tax losses can increase post-tax income. But like many Wall Street companies' hypocrisy marketing, Wealthfront has exaggerated the benefits. Today, once we talk about Wealthfront's expenses, there is no evidence, and there is no theoretical basis to prove that the use of Wealthfront for portfolio management will be better than the simple transactions that Pioneer Fund buys and holds for retirement investments.
The key to breaking Wealthfront’s marketing paper is this: It counts every potential taxable loss of revenue as if it were all the money in your pocket.
Wealthfront claims that he "could (may) be able to generate "an annual post-tax return of 2.46% under the S & P index". This is an amazing number. If software can reliably generate a 2.5% investment alpha benefit at one-tenth cost, I'll throw the money into Wealthfront tomorrow.
Why is Wealthfront so expensive?As long as investors are willing to pay, Wealthfront should definitely charge as much as possible. In fact, I hope they can convince some people to pay a million dollars a year, so that the more people get. This is Wall Street's trick - capital flows. Why does your neighbor contribute 12% when your credit card reflows 2% of your cash? Of course, this is also why your investment advisor has a luxury boat and you do not.
Wealthfront also enjoys the privileges that its technology companies do not have: all operations are automated.
Via medium