IskraIndex vs. Betterment & Wealthfront - A Comparison of Core Portfolio Quality

Betterment and Wealthfront are American companies that pioneered automated index investing based on portfolio optimization using index ETFs. Since launching operations in 2008, they have grown to serve over 1.2 million clients, with combined assets under management (AUM) reaching $98 billion. The cost of their robo-advisory services, which include access to human advisors, is approximately 0.25% to 0.50% per year. But what do clients actually receive in return for even these nominal fees?

Finding the historical performance sections for the core portfolios of both companies is no easy task: the data is hidden deep within second-level menus on Betterment's website and tucked away in the footer on Wealthfront's. Betterment provides a fairly detailed performance graph for its core portfolio, which is updated weekly based on the selected risk level. Wealthfront, on the other hand, publishes a performance graph completely lacking scales for both returns and time; it displays only the initial and final values, alongside some period-averaged returns for various risk profiles. To evaluate its performance and maximum drawdown, we will attempt to superimpose scale grids onto the performance graph of Wealthfront's medium-risk portfolio (Risk Score: 5), allowing us to compare both companies' portfolios against the balanced Deposit+ portfolio from IskraIndex.

However, before presenting these empirical results, it is essential to clarify the fundamental differences in investment approach between Betterment/Wealthfront and IskraIndex.

1. Operational Model

Betterment and Wealthfront are traditional investment advisors operating under a brokerage license. Their automated index investing systems run entirely on the corporate side, meaning clients must effectively transfer custody of their capital to external services.
Conversely, IskraIndex does not act as an investment advisor. Instead, the company manages its own model portfolios, publishes their performance, and provides access to them through a dedicated subscription. Although IskraIndex portfolios are generated by a quantitative algorithm, they undergo strict manual verification by the company's financial specialists.
Consequently, working with IskraIndex ensures that clients never transfer their funds to third parties or external managers. Instead, they retain absolute control, independently constructing their portfolios using IskraIndex models as a direct blueprint.

2. Asset Classes

While both Betterment and Wealthfront utilize U.S. and global equity and bond markets, they largely overlook sectors such as commodities and cryptocurrency - with real estate being the sole exception for Wealthfront. In contrast, IskraIndex actively incorporates all available ETFs within each respective asset class. Given the substantial daily trading volumes of the specific ETFs utilized by IskraIndex, the total capacity of the Deposit+ portfolios is highly scalable. Specifically, from the standpoint of executing a full portfolio rebalancing within a single trading day, its capacity could comfortably reach up to $300 million.

3. Rebalancing

Due to their massive volume of assets under management, neither Betterment nor Wealthfront can execute frequent or large-scale strategic rebalancing. Instead, they adhere to a fixed allocation framework within each defined risk profile—Betterment offers 11 distinct risk levels, while Wealthfront provides 19. These strategic allocations change only when their core optimization methodologies are updated, which occurs very rarely.

For Betterment and Wealthfront, daily rebalancing is primarily transactional. It is triggered only when individual ETF weights drift too far from their targets, when implementing tax-loss harvesting via alternative ETFs, or when reinvesting interest coupons, dividends, and bond redemptions.

In contrast, IskraIndex features just two portfolios within its Deposit+ lineup - conservative and balanced - and recalculates their optimal mathematical structure every single month. This dynamic rebalancing can reset up to 100% of the portfolio's total allocation. While this tactical approach significantly increases portfolio turnover, it ensures that the service's performance and quality remain precisely aligned with the most current optimal market structure.

4. Tax Effect

Both Betterment and Wealthfront emphasize that they prioritize tax optimization when constructing portfolios for their U.S. clients. They employ two primary strategies to achieve this: incorporating municipal bonds - the interest from which is exempt from federal income tax for U.S. taxpayers - and utilizing automated tax-loss harvesting. The latter strategy offsets capital gains by selling depreciated assets while simultaneously purchasing highly correlated alternative ETFs to avoid triggering the IRS wash-sale rule.

In contrast, IskraIndex does not factor tax implications into its portfolio optimization framework, nor does it utilize municipal bonds. This is because the service targets a broad, global investor base that typically does not benefit from the specific tax advantages of U.S. municipal debt. However, IskraIndex inherently employs alternative techniques that generate loss-harvesting effects. First, during regular monthly rebalancing to transition into a new optimal structure, underperforming ETFs may be liquidated, thereby reducing realized capital gains liabilities. Second, when internal risk management protocols trigger a shift to a defensive asset allocation, the strategy either curtails the portfolio's overall taxable profit for the period or realizes a capital loss, which can subsequently be used to offset prior tax liabilities.

For this comparative analysis, we specifically selected Betterment and Wealthfront portfolios designed for taxable accounts - the exact environment where these platforms claim their tax-minimization techniques deliver the greatest enhanced returns.

Now, let's compare the quality of these portfolios over the six-year and four-month period ending November 28, 2025 (taxable accounts; returns before taxes and fees).

The Betterment portfolio grew by 53%, which was only marginally better than the combined global stock and bond benchmark in a 50/50 ratio (URTH/BNDW), which grew by 50%. At the same time, the maximum drawdown of the Betterment portfolio was 22.2%—worse than the 18.4% drawdown of the 50/50 URTH/BNDW benchmark. Thus, the quality of Betterment's portfolio performance is effectively on par with a passive, medium-risk global portfolio.

The situation for Wealthfront was somewhat better, with its baseline medium-risk portfolio achieving an estimated growth of 73%*. However, this was accompanied by a maximum drawdown of 29% in 2020 (a surprisingly high figure for a medium-risk portfolio) and 18% in 2022. This suggests a potentially much more aggressive asset allocation than what is consistent with its stated "5 out of 10" risk score.

In contrast, the balanced Deposit+ portfolio from IskraIndex grew by 150% over the same period, while containing its maximum drawdown to just 9.7%. This return represents an annualized premium of 6.5 percentage points over the higher‑performing Wealthfront portfolio (15.6% CAGR vs. 9.1%).

The subscription cost for IskraIndex is comparable to the fees charged by Betterment and Wealthfront for a $4.8 million portfolio, and becomes even more cost-effective for larger accounts. For smaller portfolios, the relative fee percentage is higher; nevertheless, the investor still benefits from significantly lower risk and superior net performance. For instance, a client with a $1 million portfolio would pay an effective annual fee of 2.4% to IskraIndex, yet they would still outearn Wealthfront by 4.3 percentage points per year.

Ultimately, IskraIndex offers portfolios that significantly outperform those of Betterment and Wealthfront in terms of both average annual return and capital protection. Given its highly competitive subscription pricing and the fact that investors retain absolute custody of their funds without transferring them to external advisors, brokers, or managers, this approach establishes a new standard of quality in the wealth management market.

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* The estimate is approximate, as it was obtained based on graphical information.