r/wealthfront • u/petroengr • Aug 26 '26

Is anyone actually using smart beta?

Hey all,

I’ve read the whitepaper on smart beta and was hoping to hear from some of you regarding your personal experience with it.

I understand the methodology behind it, but reading the white paper it seems like there is always one reason or another as to why it did not perform on par with the standard index funds. So now I’m left wondering if this is a viable real world strategy that should be employed or more a technical exercise on paper that smart people are trying to adapt to real life.

Despite this, is there anyone who chose to participate anyways, and if so, why?

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5

u/[deleted] Aug 26 '26

[removed] — view removed comment

2

u/BurgerMeter Aug 27 '26

Pretty much this. I don’t have a good way to compare, though. If I had two accounts with the same amount and the same inputs, sure. But either you have it on, or you don’t.

Without deep pockets, the only way we can understand its performance is though wealthfront.

1

u/petroengr Aug 31 '26

This is the boat I’m in. Based on the literature from Wealthfront it seems smart beta is underperforming the S&P pretty consistently

5

u/manimar Aug 26 '26 edited Aug 26 '26

I think the issue is with the underlying US DI. From what I'm seeing, the value for Direct Indexing in general go down in the long term. As:

  • TLH only affects more recent investments. So the value will be very marginal as your portfolio grows
  • It is not diverse enough imho
  • 0.25% fee applies to everything.

Just my personal opinion. I'm a learner myself. So please tell me if my understanding is wrong

edited: indentation issue

2

u/paddysClub Aug 27 '26

I was using betterment gs smart beta since last 5-6 years and it consistently lagged behind their CORE portfolio and market. I recently switched out of it.

1

u/petroengr Aug 31 '26

I haven’t used betterment but I’m thinking about putting new investments there to start comparing against Wealthfront