Betterment Review – Insider Investing Scoop

In a nutshell: Betterment is an industry leader as a simple, low-cost, easy-to-use robo-advisor.

With just 0.25% in management fees and automated tax-loss harvesting, Betterment makes it easy to put your portfolio on autopilot.

Fees

$0

Account Minimum

$0

Pros:

  • Low Management Fees

  • Tax-Coordinated Portfolio

  • Automatic Investing

Cons:

  • Limited Portfolio Customization

  • Limited Compatibility with External Accounts

  • No Real Estate Investing

In a nutshell: Betterment is an industry leader as a simple, low-cost, easy-to-use robo-advisor.

With just 0.25% in management fees and automated tax-loss harvesting, Betterment makes it easy to put your portfolio on autopilot.

Pros:

  • Low Management Fees

  • Tax-Coordinated Portfolio

  • Automatic Investing

Cons:

  • Limited Portfolio Customization

  • Limited Compatibility with External Accounts

  • No Real Estate Investing

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.

Why? 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.”

We feel we must pass an entrance exam because we think we must have a certain level of knowledge to invest.

Most people don’t have this knowledge. Plus, they have been wary of seeking help from investment professionals due to the high levels of cost involved.

Click for Betterment Pricing and Details.

This is where robo advisors have come into their own. They create personalized advice for investors using a series of algorithms. This helps 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)

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).

Betterment offers unlimited access to this kind of advice through its Premium plan.

What is Betterment?

Betterment remains the most well-known robo-advisor in the market with more than a quarter-million clients and $10 Billion in assets managed. Betterment is perfect for new investors who don’t want to spend many hours learning about investing.

It’s also a great place for more experienced investors to park their money and watch it grow. That’s because it has tax advantages as well.

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.

Betterment dashboard

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. It 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. You can also 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 up to 12 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.

How Does Betterment Stack Up?

Monthly Fees

$0

Minimum Investment

$0

Promo
Tax-Loss Harvesting

No

Dynamic Rebalancing

Yes

Monthly Fees

$0

Minimum Investment

$0

Promo
Tax-Loss Harvesting

Yes

Dynamic Rebalancing

Yes

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. 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. They’re now 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. Nonetheless, they 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 Performance

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.

Betterment Mobile App

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 Process

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.

Betterment Pricing

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%).

Plan Name

Min. Balance

Management Fees

Digital

$0

0.25%

Premium

$100,000

0.40%

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.

Betterment Vs. Vanguard

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, tax-coordinated portfolio service, re-allocation, re-investment, etc.

These perks more than cover the cost of your Betterment fees.

Can I Trust Betterment?

Betterment is not a bank, so it’s not FDIC insured. That said, 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

Vanguard U.S. Total Stock Market ETF (VTI)

iShares Short-Term Treasury Bond Index ETF (SHV)

Vanguard US Large-Cap Value Index ETF (VTV)

iShares Core U.S. Aggregate Bond ETF
(AGG)

Vanguard US Mid-Cap Value Index ETF (VOE)

Vanguard Short-Term Inflation-Protected Securities ETF (VTIP)

Vanguard US Small-Cap Value Index ETF (VBR)

Vanguard US Total Bond Market Index ETF (BNDX)

Vanguard FTSE Developed Market Index ETF (VEA)

iShares National AMT-Free Muni Bond Index ETF (MUB)

Vanguard FTSE Emerging Index ETF (VWO)

iShares Corporate Bond Index ETF (LQD)

iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB)

*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 Features

Betterment has a number of unique features that set it apart from the competition. All of these features help ensure your portfolio will be safe, secure, and properly managed.

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

The socially responsible investing feature at Betterment supports ETFs that have a positive rather than a negative effect on the world.

It does all that while being fully diversified and low-cost. Specifically, it replaces the following asset classes with SRI alternatives:

  • U.S. stocks – large cap
  • Emerging market stocks
  • Developed market stocks

Betterment has offered socially-responsbile investing since 2017 but it in 2020 expanded its socially-responsible products. The original portfolio, mentioned above, became known as the Broad Impact portfolio.

It then added two new socially-responsible portfolios: Social Impact and Climate Impact. In doing so, it allows investors to hone in on the issues they value most.

Climate Impact Portfolio

The Climate Impact portfolio focuses on mitigating climate change. In particular, it invests in three areas:

  • The companies with the lowest carbon footprints in each sector
  • Funds that actively exclude companies with fossil fuel reserves
  • “Green bonds” which invest in alternative energy, pollution control, and climate adaptation

Social Impact Portfolio

The Social Impact portfolio invests in US companies that value diversity. This includes funds such as the NACP ETF and the SHE ETF.

These two funds give exposure to organizations that value ethnic and racial diversity and gender diversity, respectively.

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. This helps improve 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 Cash Reserve and Checking

This new provision from Betterment has replaced the previous Smart Saver option. It’s a cash reserve account that provides the benefit of an APY of up to 0.40%. 

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

5/5

Tax-Coordinated Portfolio

5/5

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.

Customer Service

5/5

Customer Service

5/5

Betterment is responsive and detailed in its emails. 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 Promotions

5/5

Betterment Promotions

5/5

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.

Tax-Loss Harvesting & Rebalancing

5/5

Tax-Loss Harvesting & Rebalancing

5/5

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.

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.

Betterment Pros & Cons

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.

Click for Betterment Pricing and Details.

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