There’s a buzz going around within the investment community. Â You are all familiar with the big players in the brokerage community like Options House. There is a new kid on the block. Â This new kid goes by the name of Betterment.com. Â Like other online discount brokerages, Betterment gives you the option of holding ETF’s and bonds in your account.
This might sound like another brokerage, but it’s different. Â Betterment’s goal is to simplify your investment accounts. Â There is a common concensus that investment brokers are complicated and most people get confused when trying to invest. Â Betterment simplifies the process and streamlines it through the use of automation. Â Simply select your funds, put it on autopilot, and you don’t have to look at your funds for years. Â Sounds pretty good doesn’t it? Â Let’s take a closer look…
Investing with Betterment is a simple process. Â First, you need to sign up through their website. Â Once you have a profile setup, you need to connect your checking account and start transferring money to your Betterment account. Â It’s important to point out that there are no fees associated with these transfers. Â Use the slider feature to control your risk tolerance and adjust as necessary. Â Then it’s up to you how often you want to adjust your asset allocation. Â Simply by opening a new account, they will fund your account with a $25 bonus, sweet! Â Here is a great tour of their site, they explain it better than I can
So, you have some money in your account now, what’s next? Well, Betterment has already done the grunt work for you. Â They have picked 6 ETF funds that represent the United States stock market. Â Alongside those six funds, they also have chosen two bonds funds. Â Here are their fund options:
- 20% Vanguard Total Stock Market
- 20% iShares S&P 500 Value Index
- 20% iShares S&P 1000 Value Index
- 15% iShares Russell 2000 Value Index
- 15% iShares Russell Midcap Value Index
- 10% DIAMONDS Trust Series 1
- 50% iShares Barclays TIPS Bond Fund
- 50% iShares Barclays 1-3 Year Treasury Bond Fund
This mix of stocks and bonds is a fantastic asset allocation. Â Coming from someone who is well versed in what funds to invest in, Betterment has done a great job picking these out.
What separates Betterment from the rest?
So, what makes Betterment more effective than other brokers? Â Well, their visualization and automation tools are a couple examples. Â Most people are visual, and Betterment knows this. Â I love their visual tools for forecastingÂ returnsÂ years down the line. Â For example, you can play around with their forecasting tools and see what your account will be worth 40 years down the line and such. Â It’s cool to see how the asset allocations you make today drastically affect returns down the road.
Along similar lines, Betterment has great tools for automation in regards to asset-allocation automation. Â If you set it and forget your savings accounts, you could see your allocation percentages start to swing too heavy to one side. Â Betterment has an automation tool to keep that from happening so you don’t have to worry about it. Â This is a great feature for people on the go.
Sounds good, but what are the fees?
This is where Betterment will scare off some investors. Â If you have account with under $25,000, the fee will be 0.9% on an annual basis. Â I know this was something that scared me off. Â I like to plan my own investments and I know enough to make those decisions. Â However, if you’re too busy to do that, 0.9% fee is not bad for the service you’re getting with Betterment. Â The good news is that the Betterment fees decrease with the more money you invest. Â If you have an account over $25,000 the fee will be 0.7% annually. Â If you have over $100,000, the fee is 0.5%. Â Anything over $500,000 is 0.3%. Â Starting out, the fee is pretty expensive but decreases over time. Â This is something that you will need to decide. Â To some, it just won’t be worth it. Â For people new to investing, this fee is nominal. Â It just depends on your individual experience.
Betterment is setup for people who want flexibility. Â It’s ridiculous how much flexibility you get with Betterment versus other brokers. Â Here is a summary of the flexibility Betterment provides:
-NoÂ minimumÂ initial investment
-Set allocation depending on your savings goals. Â Simple slider makes this very flexible
-Easy to move money between Betterment and your checking account
-Activity tracking feature to track withdrawals and additions
Is my money protected?
Betterment accounts are SIPC protected (up to $500,000 per customer) against losses resulting from fraud or mismanagement. SIPC coverage means that if anything happens to Betterment you will get your securities back promptly. Unlike FDIC insurance for banks, SIPC does not protect against losses due to normal swings in the market.
Betterment is a wonderful way to invest for people on the go. Â I would not recommend Betterment to people who know how to manage their investments due to their high expense fees. Â I do love how their passion is to reach average Americans and help the masses save for their retirement. Â All in all, they run a great brokerage. Â I also like the automatic asset re-allocations. Â This is unheard of in the investment community, such a great tool.
If you are looking for a “set it and forget it” broker for your retirement accounts, Betterment is the way to go. Â Don’t forget to open an account now with the $25 bonus below! Â Betterment could be you new best friend in the wild world we call investing. Start investing today!