Table of Contents
Introduction
For the new investors, there are so many options available when it comes to investing that they may get a bit confused. Two of the most common for beginners are Ally Invest and Wealthfront. All of these platforms have their own advantages and disadvantages which are suitable for different purposes and levels of risk. In this comprehensive comparison, we’ll compare Ally Invest vs Wealthfront to see the differences between the two.
Ally Invest: An Overview and Key Features
Ally Invest is a well-known online brokerage platform that provides a wide range of investment products. This means that novice traders can trade in stocks, bonds, mutual funds, options, and many more. The biggest advantage is that it has low trading costs which is good for those who want to keep the costs down as much as possible.
Furthermore, Ally Invest has a very simple and easy to use interface that is ideal for new traders. The platform also has a number of educational materials including articles, videos, and webinars to help new traders navigate the market and learn about investment strategies.
Wealthfront: An Overview of the Product and Its Features
On the other hand, Wealthfront is a robo-advisor that uses mathematical models to make investment recommendations. This is especially useful for traders who do not have the time or the interest to monitor the market and make decisions. Wealthfront is mostly targeted at passive investing and retirement planning for wealth building.
One of the key features is the tax loss harvesting strategy which is aimed at reducing the amount of taxes that a client has to pay by selling losing positions to offset gains. Wealthfront also offers a professionally managed portfolio of low-cost ETFs based on the risk profile of the investor and his or her financial goals.
Comparison: Fees and Account Minimums
When comparing fees and minimum deposit requirements, it is important to consider Ally Invest and Wealthfront. Ally Invest has $0 commission on trades of stocks, ETFs and options, but the mutual fund trades will set you back $9.95. On the other hand, Wealthfront charges an annual advisory fee of 0.25% of the account balance with no other trading costs.
In terms of account minimums, Ally Invest has no minimum balance requirement to open a account, which is useful for new traders who may not have a large amount of capital to invest. Wealthfront has a minimum investment of $500.
Investment Products and Management of the Portfolio
Ally Invest offers a vast number of investment products including stocks, bonds, mutual funds, and options. This diversity enables the novice traders to learn and implement different strategies and create their own portfolios. It also provides a self-directed trading platform, which enables investors to make their own trading decisions and rules.
Wealthfront has a more autonomous approach to managing investments. It designs and manages portfolios of low-cost ETFs with the help of algorithms. This strategy is based on the Modern Portfolio Theory (MPT) which aims to achieve higher returns with lower risk through diversification.
Customer Support and Education
When it comes to customer support, Ally Invest has phone and email support during market hours. Moreover, it has a knowledgebase and educational resources to help new traders learn effectively. Some of the resources that they offer are articles, videos, webinars and a forum where users can engage with other traders.
On the other hand, Wealthfront has limited customer support. It mainly works on auto-responses and the company’s website and other online resources to help the users. Although it has educational content on its site, it may not be as detailed as that of Ally Invest.
Security and Account Protection
First of all, let’s talk about security when choosing a trading platform. Both Ally Invest and Wealthfront take security seriously and have put in place measures that are generally used by other companies in the industry to protect users’ accounts and their personal information.
Ally Invest provides account protection via the SIPC which provides protection of up to $500,000 in securities and cash. It also has an alternative insurance coverage of up to $37.5 million per account.
Wealthfront, similarly, offers account protection via FINRA and SIPC, up to $500,000 in securities and cash.
Conclusion
Novice traders are likely to feel confused about how to choose the right investment platform. Each of the platforms, Ally Invest and Wealthfront, come with their own benefits and drawbacks to meet the needs of different investors for different purposes.
Ally Invest is a leading online brokerage with many investment products and educational resources, therefore it is suitable for those who want to be in charge of the decision-making process and pay less for it.
On the other hand, Wealthfront is a robo-advisor that makes the decisions for you, which is ideal for those who don’t want to worry about the details and can take advantage of tax loss harvesting and diversified portfolios.
In the end, it is up to the client to decide between Ally Invest and Wealthfront depending on his or her preferences and investment goals. It is important for the novice traders to assess their risk appetite, the degree of their involvement, and the future plans before making the decision.
It does not matter which platform you use, it is important that you keep on learning about investing and that you update your investment portfolio to reflect your financial goals.
