Hi Michael, thanks for your questions :)
Well, there are some potential bad scenarios with Vanguard that JL Collins addressed here. The company has prepared for those.
I think the major risk with investing in index funds is your own psychology. Which means whether or not you’ll hang in there when the market dips and your net worth goes down 50%.
In fact, one financial advisor criticized one of my letters using this very argument:
“If you try to match or beat the SP 500 you have to accept that you will live through a 2008 but to beat the market you have to stay invested through that drawdown so you don’t miss the upswing. Any idea that most investors without a financial advisor will do so bears no connection to reality.”
Here’s right there. The worst enemy you’ll face when investing in index funds is yourself (the simple solution to this is HANG IN THERE).
Another issue would be a Black Swan or something really big and really bad we can’t predict. I’ll address this in a later letter.
As for Wealthfront, I like them :) I also like Betterment. These robo-advisors are doing a terrific job. In fact, Burton Malkiel got on the Wealthfront board (ignore the article’s silly title).
However, these guys will still charge fees (although minimal).
So, I think they’re great if you don’t want to learn or worry about investing. Let Wealthfront handle it for you.
But personally I don’t feel I need them. And after reading my series, I don’t think most people would.
Still, I’d rank the answer to the “how should I invest?” question like this:
Yourself > Wealthfront > Investment Advisors
I hope this long reply helps :)