Betterment Review – Insider Investing Scoop

In a world where low interest is commonplace, most people know that simply leaving money in the bank may not be the best idea. However, many people choose this as an easy option because they believe that investing in the stock market is too complex for them. As

Sendhil Mullainathan wrote for the New York Times;

“A relaxing retirement is supposed to be the reward for a lifetime of work, and yet it seems we must pass an entrance exam to reach it.”

The feeling of facing an exam happens because there has always been a need to have at least a basic amount of knowledge in order to invest wisely and take part in asset allocation. Most people don’t have this knowledge and have been wary of seeking help from investment professionals due to the high levels of cost involved.

This is where robo advisors have come into their own. They create personalized advice for investors, using a series of algorithms and help them to create an investment strategy and build an investment portfolio. They can remove a lot of the stress of investing, no matter whether an individual is college planning, marriage planning or looking to create tax efficient retirement savings.

Betterment is at the forefront in the world of Robo advisors. Investors can use the platform to get advice on many different investment opportunities including mutual funds, bond funds, exchange traded funds (including portfolio rebalancing) and sec investment. Far from being simply a bunch of algorithms, Betterment has developed a good reputation when compared with competitors such as Wealthfront. It has an excellent customer service record and users can get access to advice from a certified financial planner (cfp). Unlimited access to this type of advice can be acquired when a premium plan is used, as can a personalized financial advice package.

Betterment in a Nutshell

Betterment remains the most well-known robo-advisor in the market, with more than a quarter-million clients and $10 Billion in assets managed. We think Betterment is pretty much perfect for new investors who don’t want to spend many hours learning about investment. It’s also a great place for more experienced investors to park their money and watch it grow, with some tax advantages added for good measure.

Now is a good time to sign up with Betterment for the first time, because you could get up to 12 months free (no management fees!). Click here to see promotion details.

New Betterment enrollees currently enjoy double payouts for accounts with $100,000 and more. Customers with taxable accounts of $100,000 also receive a free Canary home security device.

Betterment enrolls new investors in an automated portfolio of stocks and bonds. Betterment charges a flat 0.25% annual balance fee for their service (and .40% for advanced advice and portfolio tailoring). Betterment’s intuitive website shows you how much you need to contribute for retirement, and you can see how your account will grow over the years in all kinds of market environments. With automated deposits, you won’t have to manage a thing.

Betterment’s tax-loss harvesting, automated diversification, Tax-Coordinated Portfolio, and reinvestment of dividends will make your money grow and save you money on taxes. Currently, Betterment is offering new users 6 months commission-free! It’s affordable. It’s simple, effective investing for the Internet generation. Our enthusiasm about Betterment is real. Read on to learn why.

The Betterment Story

Betterment was founded in 2008 by Jon Stein, who still serves as CEO. The company launched in 2010 after a big debut at TechCrunch Disrupt NYC. Betterment quickly scored $3 million in funding and has enjoyed steady growth ever since. Today, Betterment has more than 150,000 users, and manages more than $4 Billion. The press has been kind to Betterment, and you’ve likely seen glowing reviews in the Wall Street Journal, Forbes, and CNN. Betterment’s portfolio results have proved that this is more than hype. Almost a decade from its inception, Betterment is here to stay, and they’re a major player that’s bringing a new generation into intelligent stock market investment.

Betterment’s Methods

When using Betterment the first thing that investors are asked about is their goal. This could be building a retirement fund or creating an emergency fund, for example. Betterment reviews these goals and looks at aspects such as what holdings there should be and what the risk level is.  It provides dedicated advice based on the goals of the investor.  Let’s take a closer look at Betterment’s methods.

Better Investment Performance: Independent investment managers usually charge more than 1% annually, and often fail to beat average (unmanaged) market returns. Betterment has “beaten the market” 88% of the time since its inception, using a portfolio of US and international stocks compiled by their panel of experts. Betterment’s portfolio grew a massive 101.3% between 2009 and 2014. In 2013 the platform boasted 11% growth, with a 70% stock allocation.

New User Promotions: Betterment’s new user promo waives the service free for up to 12 months for new accounts. There are extra perks for those who refer other users as well.

Seamless Platform Performance: Betterment platform performance couldn’t be better. Whether you’re using the platform on your desktop, your cell phone/smartphone, mobile device, or any other piece of tech you can fathom, Betterment runs like butter. It’s a 21st century platform and it just works.

Better Investment Philosophy: Betterment uses every possible method to save their users money and add value to the platform. These methods include free (!) standard offerings like Tax-Loss Harvesting, Smart Deposit Automation, and a Tax-Coordinated portfolio built on low-cost, high-performance ETFs.

Better Investment Options: It’s easy to create custom allocations and personalized investment goals. Users can also create a variety of account types, including taxable and non-taxable accounts. We have found every element of the Betterment system to be strong, an investment model that offers the best results to the most people.

betterment investing returns

FAQ and TL/DR

It’s time to take a look at what Betterment has to offer in more detail. If you’re too busy to read the full review below, here are some answers to your deepest burning questions about Betterment.

  • How Much Does Betterment Cost?

Betterment recently changed their pricing policy. All users now pay 0.25%, regardless of account balance for standard digital services. This is a discount for low-net worth users (who used to pay 0.35%), and a price increase for high-net worth users (who used to pay 0.15%). There is no account minimum required for the standard offering. Betterment has also introduced a Premium plan for 0.40% which includes personalized asset advice and management. Investors can get unlimited access to investment advisors  by phone and email with this service. It’s worth noting that users of the premium service are required to have an account balance of $100,000. There is an impressive range of low fees all round for all Betterment services.

Vanguard can sell you the same portfolio as Betterment, for a little less money in annual fees. But only if you are willing to do a lot more work on your own. In most cases, the cost difference is very slight. At Vanguard, You’ll also have to perform all your own tax-loss harvesting (a Betterment perk and savings opportunity that can more than cover the cost of your Betterment fees), tax-coordinated portfolio service, re-allocation, re-investment, etc.

Betterment is not a bank, so it’s not FDIC insured but it is regulated and its users are insured by the SIPC. It also has awesome scam/fraud protection and encryption. See their BBB rating here.

  • Can I Use Betterment in Canada? Can I Use Betterment in Australia?

Sorry No, and Nope. They’re working on making it available, so hang in there. It’s one of those developments that you may just see happen in the coming months and years.

What Does the Betterment Portfolio Look Like?

Betterment works to give the user a strong selection of individual stocks and bonds, chosen for great historical performance and affordability in an investment account. The user selects their own stock/bond allocation. Bonds generally offer slow growth, reliable dividends, and low risk of value loss. Stocks are more volatile but can experience higher growth. Betterment’s current portfolio offerings are as follows:

Stocks Bonds
US Total Stock Market
Vanguard U.S. Total Stock Market Index ETF (VTI)
Short-Term Treasuries
iShares Short-Term Treasury Bond Index ETF (SHV)
US Large-Cap Value Stocks
Vanguard US Large-Cap Value Index ETF (VTV)
Inflation Protected Bonds
Vanguard Short-term Inflation-Protected Treasury Bond Index ETF (VTIP)
US Mid-Cap Value Stocks
Vanguard US Mid-Cap Value Index ETF (VOE)
US High Quality Bonds (IRA and 401(k) accounts)
Vanguard US Total Bond Market Index ETF (BND)
US Small-Cap Value Stocks
Vanguard US Small-Cap Value Index ETF (VBR)
National Municipal Bonds (Taxable accounts)
iShares National AMT-Free Muni Bond Index ETF (MUB)
International Developed Stocks
Vanguard FTSE Developed Market Index ETF (VEA)
US Corporate Bonds
iShares Corporate Bond Index ETF (LQ)
Emerging Market Stocks
Vanguard FTSE Emerging Index ETF (VWO)
International Developed Bonds
Vanguard Total International Bond Index ETF (BNDX)
Emerging Market Bonds
Vanguard Emerging Markets Government Bond Index ETF (VWOB)

*Note: Betterment stocks slightly favor value and small-cap stocks, which historically outperform the broad market. You wanted a detailed Betterment review. We tried to leave no stone unturned.

Betterment investing dashboard

What are the features of Betterment?

  • Custom Asset Allocation — This customization is based on the account type an investor has and what their risk levels look like.
  • SmartDeposit — This feature is especially useful for investors with irregular income as they can choose for an investment to be triggered when their bank account balance goes over a specified amount. They can also limit the amount of the investment. One of the best things about SmartDeposit is that it’s really easy to set up.
  • Tax-Coordinated Portfolio — This feature enables the allocation of assets based on the tax efficiency of tax deferred and taxable accounts.
  • Passwords to control security — Investors can allow services such as Personal Capital and Mint to see a read only version of their information without compromising the security of their account.
  • Socially Responsible Investing — Any investors who choose to invest their money, can also make a difference to the world. The socially responsible investing feature at Betterment supports ETFs that have a positive rather than a negative effect on the world.
  • BlackRock Target Income Portfolio— This is a relatively new addition to the offering at Betterment. It’s an ideal solution for anyone who is looking for low risk investments as the entire portfolio is centred on bonds that provide a low level of risk.
  • Goldman Sachs Smart Beta Portfolio — This is another portfolio that is a recent addition to Betterment. In order to compete with the likes of Schwab, investors who use Betterment can benefit from the implementation of Smart Beta which can help with the improvement of returns.
  • Mobile app access to a financial expert – Anyone who signs up for a Betterment account can send a message to a financial expert using the Betterment app. It’s an excellent way of getting an answer to any pertinent questions.
  • Giving to charity — Customers of Betterment can donate an amount of shares of their choosing to certain charities. This obviously benefits the charities as well as helping investors to avoid capital gains tax on the shares which they donate.
  • Flexible Portfolios— Anyone who has $100,000 or more in investable assets in their Betterment account can take advantage of the opportunity to adjust the asset class weights within their portfolio.
  • Financial Advice Packages — One of the most recent offerings from Betterment provides investors with the opportunity to get help from a financial advisor by taking advantage of individual advice packages. They can get advice from a licensed financial expert or certified financial planner to suit specific situations.
  • Betterment Everyday —  This new provision from Betterment has replaced the previous Smart Saver option. It’s a savings account that provides the benefit of an APY of up to 2.44%. This is one of the highest that you will see. Anyone who chooses to use this facility gets access to checking accounts, savings accounts and Visa debit cards.

Reviews of Betterment’s Departments, Products, and Offerings

There are a lot of aspects to Betterment’s service. Here’s what we’ve found after more than a year of use.

Tax-Coordinated Portfolio: Betterment’s TCP adds a lot of value to the already great service. A Betterment-controlled Tax-Coordinated Portfolio is a way to automatically put expensive holdings into tax-protected accounts, and cheap holdings into taxable accounts. Of course, this only works for people who have multiple accounts with Betterment, but as you use the service longer and longer, you’ll likely do just that. Let’s say you have one taxable account, one Roth IRA, and one Traditional IRA. Betterment’s algorithms automatically swap out all the assets contained in these accounts until they are in an orientation that costs you the least amount of money possible. Betterment estimates annual savings of 0.48%, or 15% over 30 years.

Betterment Tax-Coordinated Portfolio Review: 5 Stars

Customer Service: I usually use email to contact Betterment. Betterment is responsive and detailed in their emails. I always receive thorough replies in less than 24 hours. Betterment chat is now available, and representatives are available by phone 7 days a week until mid-late evening EST. There is even a special line for 401(k) customers, Plus, and Premium customers.

Betterment Customer Service Review: 5 Stars

Promotions: Betterment offers up to 12 months of free service for new accounts with $500,000 and above. $10,000 new accounts get 1 month of free service, $25,000-$49,999 2 months, $50,000-$99,999 3 months, $100,000-$249,999 6 months, and $250,000-$499,999 9 months.

Betterment Promo Review: 5 Stars

Tax-Loss Harvesting and Automatic Re-Allocation: Betterment offers free Tax-Loss Harvesting and Re-Allocation/Portfolio Balancing. Both of these could be accomplished by users through traditional platforms, but the time and costs involved would quickly eat up the savings incurred.

Betterment TLH and Portfolio Balancing Review: 5 Stars

How Do I Sign Up For Betterment?

At this point you might be ready to sign up for Betterment. Good news – it’s really easy. New users input all the usual information, then start asking some questions about their investment goals (risk tolerance, time-specific goals, etc.). You’ll be asked to link to your financial institution, which can be completed in minutes. New funds show up in just a couple of days, at which point your account is up and running. Users transferring IRAs and other accounts from other brokers will usually see the accounts appear in 2-3 weeks.

There’s no minimum balance to begin, but make sure to take advantage of free service for the initial deposit amounts specified above. Once your account is humming along, Betterment will send you a series of helpful emails, detailing Betterment features and making sure you’re getting the most out of the service. Betterment understands how to make this helpful, not annoying, a delicate balance Vanguard hasn’t figured out, IMHO.

Click here to Sign Up.

Betterment IRA Review, and Other Account Types

Because so many users start Betterment IRAs, this account type is worth a little extra attention. Betterment users can utilize Retireguide to carry out a comprehensive retirement calculation in order to choose the right retirement account for them. They can choose between several different IRA accounts including a Traditional IRA, a Roth IRA, and a SEP IRA, depending on tax deference preferences and retirement goals. Betterment’s visualization tools make it easy to see the advantages of each tax model. In addition, users can start Taxable Accounts, 401k, Trust Accounts, and 529 Plans.

Conclusion

You’ve just read lots of words about Betterment investing. By now, you know we’re enthusiastic about Betterment, and that we have every reason to be. To sum up, Betterment is affordable and effective for use in financial planning and the creation of investment strategies. It’s so easy to use, and so effective at growing wealth, that new investors are signing up by the thousands, especially as there is no minimum investment We love how responsive Betterment is to user feedback, how quick they respond to our emails, and how many useful features and improvements they’ve added in a short time. We only expect Betterment to get better. Even now, they’re a true leader in the robo-advisor and modern investment landscape.


Betterment Review

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