Betterment is an investing website that tackles the perceived complexity of investing head on. I hear it time and time again from the readers of Money Q&A and even my own family members that they simply are scared to invest because they think that it is too complicated.
Betterment works to break down that notion and makes investing a simple process that is goal oriented. While Betterment is essentially a stock brokerage firm, it takes the title to a new level targeting the segment of potential investors that have been sorely lacking representation, the new or novice investor.
While even experienced investors can receive a lot of value from the company’s approach, the company’s niche is the new investor who may be taking that first step into investing.
Betterment Review – An Easy Way To Start Investing
Betterment is a website to help you start investing whether you are a veteran or a novice investor. Novice investors will receive the most bang for their buck. Even if you think that you do not have enough money to invest, Betterment has an answer to help you. You can invest as little as $25 per month to start, and their automatic deposits make investing a snap.
Betterment.com will even give you $25 for just trying out their service too! If you do not know where to start or which mutual funds to invest in, Betterment helps you get started with their pre-built mutual fund portfolio. You simply choose the allocation between stock and bonds that you want to invest in.
Your Investment Choices With Betterment
Betterment’s managers have chosen six electronically traded funds (ETFs) that mirror both the Dow Industrial Average, S&P 500 index, and the broader stock market. And, they have also chosen two bond ETFs that invest in inflation protected bonds as well as short term bonds.
Here is a list of the stock and bond index funds Betterment invests in for their customers:
- 10% SPDR Dow Jones Industrial Average ETF (DIA)
- 20% iShares S&P 500 Value Index ETF (IVE)
- 20% iShares S&P 1000 Value Index ETF (IWD)
- 15% iShares Russell 2000 Value Index ETF (IWN)
- 15% iShares Russell Midcap Value Index ETF (IWS)
- 20% Vanguard Total Stock Market ETF (VTI)
When you are invested in stocks, the stock section of your Betterment portfolio is invested in the ETFs listed above in the percentages listed as well. When you invest in bonds through Betterment, you are investing in the following two bond funds equally split down the middle.
Fees Associated With Betterment
When you invest with Betterment, the service charges you a low annual management fee to invest your money instead of a commission like you would receive from a typical brokerage firm. Betterment charges 0.3% to 0.9% of your average account balance each year. The percentage fluctuates depending on how much money you invest and have in your account.
If you have $1,000 investing with Betterment, you will pay $9 in fees for the year to use their service. This is an incredible discount when it could cost you that much for a single trade at some discount brokerage firms. There are no minimum balances that you have to keep. There are no transaction fees and no hidden costs. Betterment was built to make investing transparent, and that is apparent in their fee structure.
Here is a more detailed breakdown of the percentage of fees that you will pay based on your account balance.
- $0-$25,000 account balance has an annual fee of 0.9%,
- $25,000-$100,000 has a fee of 0.7%,
- $100,000-$500,000 has a fee of 0.5%, and
- $500,000+ has a fee of just 0.3%.
Betterment Is A Goal Oriented Investing Service
Betterment is a goal oriented investing company. It is not for day traders, and you will find its website further away from that purpose than anything. As soon as you sign up for an account, you are asked about your investing goals. And, from that time forward, Betterment focuses your attention and investing to obtain those financial goals.
While you can have multiple investing goals, Betterment has you also focus on one primary goal and list a date that you want to accomplish it. No matter if you want to build a fully funded emergency fund, send your kids to college, or add to your retirement nest egg, Betterment will continue to help you focus on your goals and continue to chip away at them with sensible investing in order to achieve the goal.
Incredible Visual Tools With Betterment
One of the best features of Betterment is their graphics and tools that help you visualize exactly how your investments can possibly help you accomplish your goals if you stick to a certain investing game plan. Their tools and sliding bars help give you a great visual of how changes will affect your investments over the long-term.
How To Start Investing With Betterment
It is very simple to open an account with Betterment. It took me less than ten minutes if that long. After signing up for an account, you connect a bank account to your Betterment investing account. You can choose the goal that you are investing for and then you pick a time when you want to accomplish that goal.
You also set your asset allocation between stock and bonds. You can see the screenshot below that I have 100% of my account investing in stocks (I have bond mutual funds with another brokerage firm).
After you set up your account and your asset allocation, Betterment handles the rest by investing you in their portfolio mix of exchange traded funds (listed above). You can even set up automatic investments that transfer certain amounts from your linked bank account into your Betterment account to continue your investing towards your goal.
You can see a graph showing you your progress and where you are projected to be based on historic market returns. This is a great way to invest in the stock market using dollar cost averaging.
Betterment’s Low Fees
Betterment has really tried to set the bar with its new pricing structure and admits that it is trying to be the best value in investing. There are three main tiers:
Builder – No minimum required, but it does require a $100 monthly deposit, and fees are 0.35% (If you can’t afford to deposit the $100 month minimum, you will be charged a $3 per month fee, in lieu of an annual fee)
Better – $10,000 minimum deposit, fees are 0.25%
Best – $100,000 minimum deposit, fees are 0.15%
Also, if you are considering joining Betterment, you can get a 30-day free trial to see what it is all about and whether its investment approach is right for you and your needs. Betterment: Free Sign up + $25 Bonus! Start now!
Betterment is very different from a standard brokerage. It is designed to be simpler, easier to use, and more aligned with your individual goals. If you have checked it out yet, consider using the free trial to give it a shot.
Betterment Offers IRA Accounts to Customers
Many individuals who are saving for the future prefer to do so in an individual retirement account (IRA) because of the tax savings involved. And now, Betterment is offering its customers to do the same thing and allowing them to invest in IRAs. Betterment offers IRA to its customers now.
If you haven’t heard of Betterment or of a Betterment IRA, it is an online brokerage that is trying to simplify the way investing is done by automating the process and making it easy to invest in a diversified portfolio.
If you are considering saving for the long term, you should take advantage of an individual retirement account. Betterment offers both traditional and Roth IRAs and offers all of the same perks as a normal Betterment account.
If you want to get a tax break now and don’t mind paying taxes when you retire, you should consider going with a traditional IRA. If you want to have tax free withdrawals in retirement and want to use the after-tax money now, then go to a Roth IRA.
Betterment even offers 401k rollovers into a rollover IRA. So, you can move that 401k retirement plan from your old employer over without any hassles. It is a great option for moving your money especially if you have changed jobs recently.
You may want to consider a partial rollover if you are still with your current employer. Check with your human resources department to see if your plan allows it. Get a $25 Account Bonus when you sign up for Betterment.
Betterment is trying to do things differently by automating the process, keeping your portfolio diversified automatically, and keeping things simple. Betterment also offers automatic deposits, which makes saving for retirement easier than ever.
For example, the current deposit rules for IRAs are that if you are under 50, the maximum deposit is $5,000 per year. If you are over 50, it jumps to $6,000 with a catch-up contribution.
So, if you wanted to take advantage of Betterment’s automatic investing, you could invest $416 per month if you’re under 50, and Betterment will handle the rest. Once the money was deposited, Betterment would automatically invest it, make sure that your portfolio was diversified, and rebalance as needed.
Quick, simple, and easy…that is what Betterment is trying to do by offering you individual retirement accounts. Get a $25 Account Bonus when you sign up for Betterment.
Betterment is a brokerage that is trying to make investing simple, easy, and automated by asking you a bunch of questions to get to know your goals and risk tolerances, and then creating an automatic portfolio to match your needs. Get a $25 Account Bonus when you sign up for Betterment.
Betterment is like a mutual fund custom tailored to your needs, except that it is a fully diversified portfolio at a brokerage. The system is designed to meet your needs and investment amounts. You can invest nothing up front, as long as you’re making monthly deposits, or you can start with a $10,000 investment.
The great thing about Betterment is that you can always withdraw your money at any time, and at no cost. Betterment offers a low fee structure as well, especially compared to other financial services firms.
Betterment allows anyone to start investing with only a little bit of time, disposable income, time to monitor the stock markets, and expertise. You do not have to be a financial aficionado to invest with Betterment. In fact, Betterment is designed for those whose financial knowledge may not be as high as it should be.
Betterment is a resource to educate investors to reach their financial goals. If you are an experienced investor, you may still benefit from Betterment’s service as well. Betterment’s website offers an excellent visual and tracking component to your investments to help keep you on track. I love that this service allows me to put both long and short term cash investments to use.