Betterment Review

The following is a sponsored review. The opinions presented below are what I truly believe in.

Have you ever heard of Betterment? Betterment is an online investment account that easily enables you to diversify your portfolio in the right, profitable way. Right now, they’re offering a $25 bonus for any initial deposit of $250 or more. You can apply for an account at Betterment.com.

But don’t sign up just yet. Listen to what I have to say about Betterment.

First off, here’s how it works.

Deposits that you make are diversified into two investment baskets. You have complete control in how much exposure you want to the two baskets. You can easily change your allocation between these two baskets, and all transactions are free. Betterment offers extremely competitive fees, ranging from 0.3% – 0.9% depending on your Betterment account size.

So you may ask, what are the two investment baskets? The two are Stock Market ETFs and Treasury Bond ETFs.

The highly professional team at Betterment has chosen the following components for the Stock Market ETFs basket. The components they’ve chosen reflect well the overall global financial market, especially the American markets.

Vanguard Total Stock Market, iShares S&P 500 Value Index, iShares S&P 1000 Value Index, iShares Russell 2000 Value Index, iShares Russell Midcap Value Index, DIAMONDS Trust Series 1

The Treasury Bond ETF basket consists of the following.

iShares Barclays TIPS Bond Fund, iShares Barclays 1-3 Year Treasury Bond Fund

Betterment gives you total control over the how much exposure you want to the two investment baskets. For example, if you believe that stocks are headed for a big increase, you can adjust your Betterment account to reflect your prediction of the stock market. If you believe that stocks are headed for a fall, you can adjust your Betterment account so that you have more exposure to the Treasury Bond ETF basket than the Stocks basket.

Don’t care to read on? Convinced that Betterment is the way to go for your investments? Sign up now, or read on!

What I like about Betterment.

I have long told readers in this blog that investors should invest in the overall market instead of individual stocks. Here’s what I wrote in a previous post.

Unless you have crazy connections with executives at public companies, you shouldn’t invest in individual stocks. When investing in individual companies, you need to get really up close to observe the company. Just by reading the company’s financial statement and paying attention to press releases won’t do you any good. That’s common knowledge, and has already been discounted by the markets. You need to understand the company’s competitiveness, ability to increase revenue, where it plans on expanding, etc. Only management knows this sort of stuff (or at least knows the truth about this stuff), hence you shouldn’t invest in individual stocks unless you have big connections with management.

Investing in individual stocks is too dangerous for the average investor, since he or she doesn’t have big connections with corporate management. That is why I’ve always advised my readers to invest in the overall market, such as S&P ETFs. Investing in the overall market is much easier, simply because it’s easier to predict where the overall economy and markets are going than individual companies. This leads to my point on one of the main advantages of using Betterment.

The Betterment Stock Market basket is great for those who aren’t professional investors, because instead of dealing with all the nitty gritty details of individual stocks, one only has to worry about the overall stock market. The Betterment Stock Market portfolio traces perfectly the movements of the overall market. So if you believe that general market and economic conditions are getting worse, simply allocate more of your Betterment account towards Treasury Bonds ETFs (which are deemed highly safe).

Also, Betterment’s fee is highly competitive. Due to such a low management fee (0.3% – 0.9% depending on your account size), you’ll be paying pretty much nothing for such a great online investment.

Another great thing about Betterment is that there is that unlike many other online investment accounts, there’s no minimum balance or minimum deposit.

Most of all, why do I like Betterment? Because it’s so simple to use.

So if you’re ready, please feel free to sign up at Betterment. Sign up today, and get a free $25 if you deposit $250 or more! And remember, there’s no minimum deposit amount!

A few FAQs that you should be aware of before signing up.

Here is the link to the Betterment FAQs page. However, I’ve highlighted below a few of the FAQs that stand out to me.

How is a Betterment account different than a traditional online brokerage account?

Betterment offers unique features, including:

  • A straightforward pricing model without transaction charges or hidden fees
  • No minimum balance
  • Focus on the only two investments that matter to 99% of investors – a great stock basket and a conservative bond portfolio.
  • An incredibly easy user experience that makes it easy to understand your money and control your exposure to risk
  • Automatic, seamless diversification (which means higher returns with lower risk)
  • The ability to see how others like you invest
  • We rebalance your account automatically
  • We reinvest your dividends automatically
  • You can transact in exact dollar amounts (not whole shares)

What are Betterment’s fees and when are they charged?

Betterment’s fee is 0.3% to 0.9%, depending your balance, and is prorated across the entire year and is charged at the end of each calendar quarter (every 3 months) — i.e. every 3 months Betterment charges 0.075% to 0.225% based on your average balance for the period. If you withdraw all your money before the end of the quarter you are charged a prorated fee for only the days your money was managed by Betterment.

Why wouldn’t I just buy Betterment’s recommended ETFs directly?

While you could buy the same ETFs from a traditional broker or fund company, you couldn’t get them all from any one place for free, so you’d be paying transaction fees to buy, sell, or trade them.

Even after you purchased those securities, you’d have to rebalance regularly—which few people do because of the work and scheduling and transaction fees involved—to get the risk-reducing and returns-enhancing benefits of rebalancing (which Betterment handles for you, automatically).

Remember that Betterment seamlessly invests every penny according to your allocation; this means you’re always diversified as you should be, without the chance for timing/allocation mistakes or leaving money sitting idle while waiting to purchase shares.

Betterment gives you advice about how to allocate your funds, and so takes the guesswork out of asset allocation. We also show you what your peers are doing, so you can make decisions with reference to the actions of other people like you.

And Betterment’s investment committee regularly scours the market, looking for more cost-efficient index ETFs to give you the same broad-market exposure.

These benefits mean there’s a lot of real value Betterment provides that you just can’t get buying ETFs on your own. We’re providing a way for you to simply make a smart investment that you can set and forget, so you can spend more time doing whatever it is you like to do more than managing your money.

Is Betterment available outside of the United States?

Betterment currently only operates in the United States, and for regulatory reasons cannot accept customers residing outside the country. A customer must have a permanent U.S. address, a U.S. Social Security Number, and a checking account from a U.S. bank.

7 Responses to “Betterment Review”

  1. steve March 9, 2012 at 4:31 am #

    Easy, yes…too easy! I just see no advantage here when you can go to Vanguard or another discount fund and get exactly the same thing for less. No transaction fees for their mutual funds, and a much bigger selection. I guess it is offering a useful service for those who really, really, really don’t want to learn anything or put any effort into investing.

  2. LaTisha August 30, 2011 at 2:40 pm #

    Great write up! I opened a Betterment account and I really like it so far. The only thing I wish they had was an IRA option.

    • Tony Chou August 30, 2011 at 3:41 pm #

      Thanks! I see that you wrote a review for Betterment too! Yours was far better than mine!

      • LaTisha August 31, 2011 at 9:53 am #

        I’m sure you will have some more good reviews to come, especially if you open an account.

        • Tony Chou August 31, 2011 at 10:14 am #

          Thanks!

  3. Khaleef @ KNS Financial August 17, 2011 at 6:09 pm #

    It seems like Betterment makes it easy for the “average person” to manage their portfolio. That can be good and bad – depending on how little that person knows.

    • Tony Chou August 17, 2011 at 6:23 pm #

      Thanks for the comment! Most online investment sites are for the average person. Full time professional investors stick to their own devices.