Not many people would keep adding money to a brand-new investment that has lost 9% in its first four months. But a robot will.
That’s what has been happening at Wealthfront Inc., the automated online investment manager, or robo-adviser, that manages about $10.5 billion. In January, the firm launched Wealthfront Risk Parity, a mutual fund that invests across stocks, bonds and commodities around the world. For many clients with at least $100,000 invested at Wealthfront, the firm has been automatically moving as much as 20% of their assets into the fund — unless they stipulated that they don’t want it to.
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This article was originally published on The Wall Street Journal.
Further reading
Jason Zweig, Your Money and Your Brain
Jason Zweig, The Devil’s Financial Dictionary
Benjamin Graham, The Intelligent Investor
Jason Zweig, The Little Book of Safe Money
Wes Gray, “Risk Parity for Dummies“
Enterprising Investor blog, “Risk Parity Made Easy“
Bridgewater Associates, “The All Weather Strategy“
AQR Capital Management, “Understanding Risk Parity“
Further reading
Jason Zweig, How Dangerous Is a Stock Market of Mindless Robots?
Jason Zweig, It’s Not Creepy, It’s the Future
Jason Zweig, The Rise of Ultracheap Financial Advisers