Betterment Review – Insider Investing Scoop

Betterment Review – Insider Investing Scoop

Betterment in a Nutshell

Betterment is the most well-known robo-advisor in the market, and there’s a lot of discussion among investors about what value they offer. While controversial and not ideal for every investor, we think Betterment is pretty much perfect for new investors who don’t want to spend all their time learning about investing. 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.

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. More on that later.

Betterment enrolls new investors in an automated portfolio of stocks and bonds. Betterment charges a flat 0.25% annual balance fee for their service. 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. Betterment is here to stay, and they’re a major player that’s bringing a new generation into intelligent stock market investment.

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. 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

  • 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.
  • Betterment’s new user promo waives the service free for a few months make the minimum deposit. There are extra perks for those who refer other users.
  • 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 investing returns

  • 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: 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.

FAQ and TL/DR

If you’re too busy to read the full review below, here are 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. 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%). Betterment has also introduced Plus and Premium services for 0.40% and 0.50% each. More on those later.
  • 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 (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.
  • Can I Trust Betterment?
    Betterment is regulated and its users insured by the SIPC. It also has awesome scam/fraud protection and encryptionSee 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.

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 free payouts of up to $500 for new users who sign up with an initial deposit of up to $500,000. These payouts are currently doubled. Betterment also offers a free Canary security device to all users with $100,000 in taxable accounts. Canary home security systems record movement in HD, monitor all kinds of household activity, and makes reports directly to your phone.
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

Digging Deeper into Betterment

If you’re still reading, you want to understand the nuts and bolts of Betterment’s online platform. We’ve taken a lot of time compiling every bit of information we can find about Betterment, and have even used the service ourselves. We believe that Betterment will provide an excellent investment strategy for a lot of our readers. Below, we’ll explain our reasons why.

How Much Does Betterment Cost?

Betterment has recently simplified its pricing. All users now pay a flat annual fee of 0.25% of account balance. Plus and Premium customers get phone calls and personalized account monitoring (in slightly different distributions) at 0.40% and 0.50%.

Betterment eliminated the transaction fees common to older investment platforms. The only other fees you’ll pay are for ETFs ownership, which are well less than one tenth of one per cent (.06% for Vanguard Total Stock Market Index ETC (VTI), for instance). ETFs are usually cheaper to trade own than equivalent mutual funds.

What Does the Betterment Portfolio Look Like

Betterment gives the user a strong selection of stocks and bonds, chosen for great historical performance and affordability. 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 (LQD)
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

How Do I Sign Up For Betterment?

If you’ve read this far, 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 Betterment will give you 6 months free if you put in $50,000 right away. There are smaller free periods for smaller initial deposits. 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. Users can choose between a Traditional IRA, a Roth IRA, and a SEP IRA, depending on tax deference preferences. 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. It’s so easy to use, and so effective at growing wealth, that new investors are signing up by the thousands. 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

Rating: 5 / 5
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Read our Betterment Review to learn more about the platform.
Betterment Review
Written by: Andrew Black
Date Published: 03/16/2017
5 / 5 stars