The Arbitrageur System

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First thing first @Wealthfront and @Betterment are amazing services at market price. However, @blakeross (Intuit’s @turbotax flat-pricing business module (we are going to use a $25/month subscription for this example) could offer the same amazing services at an outstanding price.

“I’m not asking why Wealthfront helps itself to such margins, which is obvious and perfectly normal, but rather why the market bears it.” — @blakeross

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Second, the unique value position of robot investing services like these is that you pay for convenience — the advantage of having them do everything for you automatically. Assuming it would take you one hour a month to implement this strategy yourself, you would be saving money as long as your hourly wage was higher than $75.27. Well, I know — $7.25 is the federal minimum wage, and we are assuming you have the $100K to invest (according to a 2012 report by @PitneyBowes, the average savings account balance in the United States in 2011 was $5,923) so you can get that direct indexing discount, and have the actual skills of knowing what you are doing.



We should not forget that they also claim they can beat the market by more than a few basis points. This is thanks to the added value of strategies such as tax-loss harvesting, which could make you break even or better by covering the cost of those monthly exponential fees. So they claim. But right now we can only assume we could achieve these results in the long run since they are based on simulations. It is not like they offer a J.P. Morgan Funds — Guide to the Markets with actual history performance.

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@danielcarroll, @jonstein, and @blakeross: let’s take a look at the numbers and some back of the envelope simulations.

Feel free to download all charts and spreadsheets here >>

Investing only $100,000 . . . maxing out your IRA contributions . . . maxing out your 401k contributions; with the condition of paying for all fees out of pocket and discarding the free management of the first $10,000.


Then again, let’s be fair. They do run a for-profit corporation, meaning that after twenty years of world-class service, they take away only 1.56% from your portfolio (of course, they could take less — anywhere from 42% to 63% less). To put this in perspective, think of the following analogy: it is like having a credit card with a 1.56% interest rate.

Imagine that one of these robot traders can corner the Exchange-Traded Fund market from Vanguard ($451 billion in ETF assets under management) at a 0.25% fee. That is only $1,127,500,000.00.

Full Disclosure


I think the argument here should be to know whether these founders are clients of their own services like @Shpigford of Baremetrics.

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“Because no one should talk about investing if they are not willing to show their actual holdings and performance.” — @riveranomics

You can see my own income reports here >>

Call to Action


@blakeross and VCs out there: if you really believe this is a problem the world needs to solve, feel free to invest $2 million for 19% (because we are@PledgeOne together) of the #startup to solve this issue under my leadership.



This article was previously posted on dated: July 17th, 2015.

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November ReportOn July 2015, I closed my open long position on Disney because liquidity concerns.

As you already known I share my results with you mainly for three reasons:

  • The Benefit of Full Disclosure
  • Share the Knowledge
  • Track Performance

 Because “no one should talk about investing if they are not willing to show their actual holdings and performance.”

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Half Year ReportFive and half years ago when I discover the secret of arbitrage, I decided to first apply it to my retirement income portfolio (Roth IRA) but in a unique way because as a student of the markets and industrial engineer myself. I have a particular way of thinking when it comes to income investing. Today, I am going to share my results with you… holdings and performance for my Roth IRA as June 2015.


“Risk comes from not knowing what you’re doing.” – Warren Buffett [Read More…]

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