Get out of Betterment / WealthFront
Tell me if this sounds familiar: You graduated at the top of your class, got a cool job at a tech start up and started making some significant money. You tried to spend it all on alcohol, but when you couldn’t you figured you should probably do something with it. So you asked a friend who immediately pointed you in the direction of Betterment and WealthFront. (Vanguard is too old school) And why not? It’s easy to sign up, the website design is beautiful, and you get to decide the risk you’re willing to take with your money. You think about it once, forget about it, and let the gains begin.
Now for the last 8 years, this has been a great move. From the lows in 2010 the S&P is up more than 250%! But like birds, planes, and Vince Carter, what goes up, must come down.
We live in world full of cycles. There are cycles in the weather, in the tides, in mathematics, and pretty much everything else around us. The cycle in play here is the short term debt cycle. For more information on debt cycles, I highly recommend Ray Dalio’s video: Economic Machine.
A debt cycle happens when someone goes into debt. An increase in consumption builds debt. In order to eventually pay off the debt you have to consume less, which creates a cycle if repeated. Notice that chart below which maps out the short term debt cycle over the last 20 years in relation to the Dow Jones.
In 2000, we hit a peak which is now known as the .com bubble. Eight years later in 2008 we hit a peak known as the housing bubble. And now, another either years later, we are at another peak. We just don’t know which bubble is about to pop.
Let’s get back to WealthFront / Betterment. These investment vehicles primarily follow the direction of the overall stock market. As can be seen in the above chart of the Dow Jones, we appear to be at a top. And as the old adage says, Buy Low, Sell High! Let me repeat, Sell High!
In coming posts we will get into additional details to explain the fundamentals that go into this technical analysis of the chart of the DOW. But until then, take your wins and get out of WealthFront / Betterment, and the stock market in general!
