> Yeah. Reducing expenses is the goal.
I feel like you may have overlooked some of the nuances in my answer, because I've already specifically pointed out how the robo advisors can be cheaper than buying the indexes directly for a lot of people.
> can be cheaper than buying the indexes directly for a lot of people.
If that's what you think, you've missed some of my post :-). Specifically, I said:
> you can buy the same Vanguard ETFs with no minimum.
As an individual you can get 0.05% VTI directly from Vanguard. No $3k minimum (minimums are a mutual fund thing).
Well, they charge additional fees. They have to make that up somewhere or it's the same (but at higher cost) as buying the indices directly.
> very frequent automatic rebalancing
This actually costs money and doesn't improve outcomes. Scroll to "study for the NYTimes on rebalancing" on http://johncbogle.com/wordpress/category/ask-jack/ . Or http://www.morningstar.com/cover/videocenter.aspx?id=615379 .
> automated (aggressive) tax-loss harvesting
Tax-loss harvesting has very limited benefit. Mostly you can offset income. But it's only $3k/year. You can harvest enough losses by hand to easily take the $3,000 deduction too.
> Third, the ability to diversify any amount of money. You can put $1k into Wealthfront and diversify across five Vanguard index funds. But directly on Vanguard, this is impossible because the minimum investment in most Vanguard funds is $3k.
No... you can buy the same Vanguard ETFs with no minimum.
> With that, take their Total Stock Market Index Fund as an example. If you can only invest $3k in it, your expense ratio is 0.16% [1]. If you can invest $10k in it, your expense ratio is 0.05% [2]. Through Wealthfront, I can hold the VTI ETF at 0.05% expense ratio
You can just buy VTI as an individual. You still get the 0.05% rate.
> The best possible claim I can imagine then is that for very large accounts, excluding tax-loss harvesting benefits and any benefits of rebalancing, it is cheaper to index invest — for example, if you have a $100k account and can spend less than $225 worth of your time [4] in the entire year keeping up on it, rebalancing if you wish, etc., then in some cases you could beat the robos.
Yeah. Reducing expenses is the goal.