Wealthfront has been a leader in the robo advising industry since it's inception in 2008. The company primarily uses software and technology to lower the cost of investing and make it more accessible for the everyday investor.

When you first sign up for Wealthfront, you will be asked about your general investing goals and be required to enter some personal information. From there, Wealthfront will put you through a questionnaire that is used to gauge your risk tolerance.

Wealthfront wants to figure out how much risk you are comfortable with before they recommend what you should invest in. Wealthfront uses a sliding scale that ranges from 0.5 to 10 to gauge risk. If you are lower on the scale, Wealthfront will recommend a more conservative portfolio.

For example, let's say that you had a risk tolerance score of 5. Wealthfront might recommend a portfolio that allocates 60% towards stocks and 40% towards bonds. If you got a higher risk tolerance score, Wealthfront might recommend a portfolio with 80% stocks and 20% bonds.

Once a portfolio is recommended for you, you can simply complete the sign-up process and make the initial $500 deposit that Wealthfront requires. Beyond their automated investing service, Wealthfront does a couple of other things well which we will look at below.

Wealthfront currently offers five account types. These accounts simply hold the investment portfolio that Wealthfront recommends for you and are not investments themselves.

Individual or joint brokerage account - A brokerage account simply allows you to deposit funds and start investing. This account does not have any special tax features, but anyone can open one. You can own this account as an individual or jointly with another person.

Traditional IRA - A Traditional IRA allows you to contribute dollars to save for your retirement. The contributions you make to a Traditional IRA may be tax deductible depending if you or your spouse contribute to a 401k and what your income is.

A Traditional IRA is a tax deferred account. This means that all the money you earn from the investments in the account is not subject to taxes in retirement. Once you are 59 and a half years old you can start to withdraw from the account at which point you will owe taxes.

Roth IRA -  A Roth IRA is just the opposite of a Traditional IRA. The contributions that you make to a Roth IRA are The contributions that you make to a Roth IRA are not tax deductible. Instead, you contribute to the account with dollars that you have already paid tax on. However, a Roth IRA is a tax-free investing account.

This means that you will not owe taxes as the account grows, and you will not owe taxes when you pull the money out in retirement. In general, the account must be at least 5 years old and you must be at least 59 and a half years old before you can pull money out of the account.

SEP IRA - Simplified employee pension (SEP) IRAs are retirement accounts for business owners in which the contributions are tax deductible. Investments grow tax deferred and are taxed as income upon withdrawal in retirement.

College 529 plan - A 529 plan is an account specifically designed to help save money for college. Contributions towards these accounts grow tax free and withdrawals are also tax free when used for educational expenses.

Wealthfront's investment management team is led by Dr. Burton Malkiel who is an economist and author of A Random Walk Down Wall Street. Dr. Malkiel and the rest of Wealthfront's investment management team use Modern Portfolio Theory to invest your money. This allows Wealthfront to "identify the portfolio that has the maximum expected return for your chosen level of expected risk."

Modern Portfolio Theory (MPT) is a strategy that focuses on minimizing market risk while maximizing market return. The way the theory does this is by recommending an investment portfolio that is diversified across different asset classes and investments. The idea is to hold investments that are not positively correlated to create a more well-balanced portfolio.

This is exactly what Wealthfront does to invest your money. Wealthfront is able to invest your money in a range of assets including US stocks, foreign developed stocks, emerging market stocks, dividend growth stocks, US government and corporate bonds, emerging market bonds, municipal bonds, treasury securities, REITs, and commodities.

Wealthfront will look at the risk tolerance score that is right for you based upon your initial questionnaire and choose a mix of the assets listed above that balances risk and reward in accordance with MPT. For example, let's say that you got a risk tolerance score of 8.

Wealthfront might use the following portfolio allocation for that risk score: 45% US stocks, 15% foreign market stocks, 15% emerging market stocks, 9% dividend stocks, and 16% municipal bonds. Wealthfront does not simply buy individual assets within each of these classes.

Instead, Wealthfront buys each of these investment classes through a corresponding low cost ETF. As you invest in your portfolio, Wealthfront also uses what is called portfolio rebalancing. Portfolio rebalancing is the process of returning your investment allocation to the original portfolio created by Wealthfront.

For example, let's say that Wealthfront recommended you have 45% of your portfolio in US stocks. If for whatever reason your portfolio drifted out of this and had 50% US stocks, Wealthfront would automatically rebalance your portfolio back to 45% US stocks.

Wealthfront also allows you to adjust your risk tolerance or asset allocation manually if you choose to do so. For example, let's say that you wanted to adjust your risk from an 8 down to a 7. You can ask Wealthfront to do this and they will adjust your assets accordingly.

You can also manually adjust the weight of each ETF in your portfolio. This is usually not recommended unless you are an experienced investor. The whole point of Wealthfront is to let them choose your investments for you so you can be hands off.  

Although Wealthfront is known for their automated investing feature that builds a portfolio tailored to your risk tolerance, they recently introduced "stock investing" which allows you to buy individual stocks commission free so you can better customize your investing portfolio. Wealthfront created what they call "stock collections" to help you make smarter investing decisions, faster.

A stock collection is a group of stocks that contain similar companies, opportunities, and themes to help you sift through all the potential investments you could make. You can choose individual or multiple stocks within a collection, or an entire collection itself. There are currently 1500+ stocks available to choose from with a quick pros and cons of each researched by the experts at Wealthfront.

You only need a single dollar to start investing and fractional shares are offered. This is simply a way of slicing up a stock into smaller pieces. If a stock were $100, you could buy a piece of it for $25. It should be noted that to use this feature, you need to have a cash account with Wealthfront.

Path is another feature that Wealthfront offers that continues their belief of helping individuals invest and manage their money by using software and technology. Path is Wealthfront's attempt to create a "fully mobile financial planning experience."

The idea is to tell Wealthfront about your financial goals. This might include saving for a home, funding your retirement, and saving for large expenses. Wealthfront will look at your accounts you have with them, as well as outside accounts if you connect them, and create personalized advice to help you reach your goals.

It is like having a digital financial advisor in your pocket. Keep in mind that Path is not as robust as a human financial advisor. It simply uses digital algorithms to provide advice in a variety of scenarios. It is an added benefit of Wealthfront, but it is probably best to speak with a human financial advisor for more robust advice.

If you have $25,000 in a taxable automated investing account and have a cash management account with Wealthfront, you can qualify for a portfolio line of credit. Wealthfront currently allows you to borrow against 30% of the value of your portfolio. This means if you had $25,000 in your taxable account, you could borrow $7,500 from Wealthfront.

Rates currently range from 7.65% to 8.90% depending upon the total market value in your taxable account. There is no credit check or application fee when you apply, and automatic approval if you qualify. Finally, Wealthfront does not require set payment schedules. You can repay the loan as you are able to, and the interest is added to your monthly balance as you go until the loan is paid off.

Wealthfront uses a strategy called tax loss harvesting to help minimize the impact of taxes to boost your overall return as you invest. This is a strategy where Wealthfront will intentionally sell investments in a taxable account at a loss. This might sound counterintuitive, but selling investments at a loss can help reduce the amount of taxes you owe from investments that were profitable.

For example, let's say that half of the total value of your investments within your taxable account went up 20%, but the other half of your investments went down by 5%. For sake of example, let's assume that you put $10,000 into this account.

If half of that $10,000 went up 20% it would now be worth $6,000. The other half that went down by 5% would now be worth $4,750. Wealthfront might sell the $4,750 to harvest the 5% loss and replace it with other investments.

If you were to then sell all the investments within the account, you would not owe taxes on the $1,000 that half of your portfolio made. Instead, you would be able to subtract the 5% loss of $250 from your $1,000 profit and only owe taxes on $750. Wealthfront uses this strategy when it is in your best interest to do so.  

Wealthfront does not currently offer access to human advisors as it is primarily focused on using technology to help you invest. The closest thing that Wealthfront offers to human advisors are their product specialists. These product specialists have a range of financial certifications and can assist you via the phone or email.

These product specialists do not give financial advice or recommendations. Instead, they are there to answer your questions and help you use the services that Wealthfront already offers.  

Wealthfront also offers a high yield savings account that is currently earning 5.00% APY. There are no account fees, and a minimum balance is not required to earn the APY. The account is FDIC insured up to $5 million and comes with unlimited fee free transfers.

This account also offers some of the features of a checking account. You can opt for a free debit card to use for daily purchases, use a network of 19,000+ fee free ATMs, access funds early with direct deposit, and more. Wealthfront offers this so that you have a place to store your uninvested cash while still earning a competitive interest rate.

Wealthfront offers two primary channels of customer support. First, you can opt to email their support team and anticipate a response within 1 business day. Second, you can contact their customer support line by calling Monday through Friday 7 am to 5 pm ET if you would rather talk to a person.

Wealthfront does a good job at building simple investing portfolios based upon your risk tolerance by using the Modern Portfolio Theory. As you invest in your portfolio, Wealthfront continues to offer support via their tax loss harvesting and portfolio rebalancing features.

Wealthfront also allows you more flexibility with your investment choices beyond the portfolio they recommend for you with their stock investing program. The rest of the features that Wealthfront offers such as a cash management account and the "Path" feature integrate well with Wealthfront's primary service.

When compared with other robo advisors, there are a few knocks against Wealthfront. First, the $500 that Wealthfront requires to use their automated investing service is quite high. It is cheaper than a traditional financial advisor, but more expensive than other popular robo advisors.

Secondly, Wealthfront does not offer access to human advisors. The entire point of Wealthfront is to use technology to democratize access to investing, but other popular robo advisors such as Betterment and Sofi Automated Investing do offer human advisors in addition to digital advice.

Wealthfront is a good option if you are an inexperienced investor who wants help getting started. Wealthfront provides well rounded investment portfolios based upon your risk tolerance at a low cost. The rest of Wealthfront's digital features integrate with their robo advisor service.

With that being said, Wealthfront is not a full service financial firm. There are other components to a well rounded financial plan such as insurance and estate planning that Wealthfront cannot help you with. The bottom line is that Wealthfront can be a good place to start, but it might be best to move to a full service financial firm as your wealth grows.