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. 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 (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.
- 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.
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 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%). Betterment has also introduced Premium services for 0.40% which include personalized asset advice and management.
- 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 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.
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:
|US Total Stock Market|
Vanguard U.S. Total Stock Market Index ETF (VTI)
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.
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.
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.
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.