Wealthfront, a leading consumer fintech and pioneer of the robo-advisor industry, has officially launched a first-of-its-kind Automated Bond Ladder, which comes bearing an ability to transform the way investors use US Treasuries to maximize interest on their extra cash. Before we dig any further into this development, we must talk a little about automated bond ladder. Basically, as US Treasuries are exempt from state and local income tax, investors can keep up to 13.3% more of their earned interest from the Automated Bond Ladder, as compared to a high-yield savings account or CD (depending on state of residence and tax bracket). Now, when you put that sort of tax efficiency alongside the product’s focus on preserving principal, it makes the Automated Bond Ladder an ideal way to balance out higher risk investments, protect and grow a windfall, or save for large expenses without risking loss of funds. Having referred to its upside, though, we must also get into how investing in a ladder requires specialized strategies, if someone is to churn a meaningful gain from it. Turning things even more complicated here would be the fact that accessing these strategies in the past has required prospective investors to go through considerable manual work, and at the same time, bear high minimums, or expensive fees.
Fortunately enough, Wealhfront’s latest brainchild addresses that problem big time by enabling investors to open an Automated Bond Ladder with just $500. Once the given bond ladder is duly opened, Wealhfront’s software can jump into action and instantly compare rates across hundreds of state income-tax exempt US Treasury bills and notes to build a ladder that, in turn, helps investors reduce interest rate risk and lock in rates for six months to six years. In essence, the Automated Bond Ladder conveniently takes care of everything, right from researching and managing multiple maturity dates and adding more funds in increments as low as $100 to automatically reinvesting proceeds from interest and maturing bonds to consistently grow investor’s money.
“Bonds are begging for modernization with the help of software. Today’s launch of the Automated Bond Ladder continues to redefine what is possible when it comes to saving and growing your money by bringing the same automated, set-it-and-forget-it approach to US Treasuries that we brought to ETFs when we pioneered the robo-advisor industry,” said Dave Myszewski, Vice President of Product at Wealthfront. “We’re proud to add another innovative way for investors to make the most of fixed income, and we will continue expanding our product suite to help our clients build long-term wealth.”
The development in question also delivers a rather interesting follow-up to a recent trend, where interest in US Treasuries has shot up to an all-time high. You see, in 2023 alone, Treasury Bill purchases totaled an estimated $175 billion, making it the highest year on record. Hold on, there is more, as this pattern has also seeped into 2024, with purchases totaling $47 billion in Q1 alone. Complimenting the same would be how, if we talk about Wealhfront’s own clientele, more than 50 percent of its customers’ external Treasury holdings are held as part of a ladder.
“Faced with the spectre of falling interest rates, I wanted to use a bond ladder to grow my emergency fund, but I was immediately overwhelmed by how much work and research it would take to build and manage one myself. Wealthfront made the process so accessible with their bond ladder, and it was perfect timing for me to start taking advantage of US Treasuries to earn a higher after-tax yield,” said Geoff Cleary, a Wealthfront client who beta-tested the Automated Bond Ladder.
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