Betterment: A Guide To Investing With Betterment

Investing with Betterment is a safe and easy way to build wealth. It is a robo-advisor that offers automated portfolio management and unlimited access to certified financial planners for a low fee. The process is simple: tell Betterment about your financial goals, and they will provide recommendations and set up your ideal account. You can start with one product and easily add more later. Betterment's technology optimises every dollar you spend, save, and invest with them, helping you earn more. As your money grows and your priorities change, Betterment evolves with ongoing advice and updates to help you stay on track.

Setting up your investments

• Tell Betterment about yourself and your financial goals: Share information about your financial situation, such as your income, savings, and investment objectives. This helps Betterment understand your needs and make personalized recommendations.
• Choose your investment strategy: Decide how you want to invest your money. Betterment offers a range of diversified portfolios built by experts, including options for different risk tolerances and goals, such as retirement planning or building wealth. You can also choose from various portfolio strategies, such as stock and bond portfolios, sustainable and socially responsible investing, or even cryptocurrency portfolios.
• Open an account: Based on the information you provide, Betterment will help you open an account that aligns with your goals. You can choose to start with one product or go all-in with multiple products. Betterment offers various account types, including taxable brokerage accounts, Roth IRAs, traditional IRAs, and more.
• Fund your account and let Betterment get to work: Once your account is set up, you can fund it with the amount you wish to invest. Betterment's technology will then optimize your investments by managing your money and providing ongoing advice to help you earn more. They also offer automated trading, dividend reinvestment, and portfolio rebalancing.
• Monitor and adjust as needed: Betterment provides tools to help you monitor your investments and track your progress towards your financial goals. You can also make adjustments to your portfolio or investment strategy over time as your goals and circumstances change.

Remember, investing carries risks, and past performance does not guarantee future results. Before investing, carefully consider your investment objectives and take the time to research and understand the risks involved.

Choosing a portfolio strategy

Betterment offers a range of portfolio options to choose from, including expert-built, curated portfolios designed to help you build wealth over the long term. These portfolios are well-diversified, low-cost, and built for long-term investing. They feature a broad collection of exchange-traded funds (ETFs) made up of thousands of stocks and bonds from around the world.

You can also choose from a variety of specific portfolios, such as:

• Goldman Sachs Tax-Smart Bonds: A personalized bond portfolio for higher-income individuals to generate additional after-tax yield.
• BlackRock Target Income: A 100% bond portfolio with different income yields to protect against stock market volatility.
• Socially Responsible Portfolios: These portfolios invest in companies with strong environmental, social, and corporate governance (ESG) practices, as well as those focused on minority empowerment and gender diversity.
• Goldman Sachs Smart Beta: A diverse portfolio targeting companies with the potential to outperform the broader market over the long term, but with higher exposure to risk.
• Innovative Technology: A well-diversified portfolio focused on high-growth potential companies in areas like clean energy, robotics, virtual reality, and blockchain.
• Crypto ETF Portfolio: A fully automated ETF portfolio that taps into the two largest and widely traded cryptocurrencies, Bitcoin and Ethereum.

If you're a more experienced investor, you can also customize your portfolio with a Flexible portfolio, which allows you to adjust individual asset class weights based on your preferences.

Remember, you can have multiple portfolio strategies within your Betterment account, as you can set a different portfolio strategy and allocation for each of your financial goals.

Tax-efficient investing

Betterment offers a range of tax-efficient investment strategies to help minimise your taxes and maximise your returns. Here are some of the ways Betterment can help you invest in a tax-efficient manner:

Tax Loss Harvesting+

Betterment's Tax Loss Harvesting+ feature allows you to offset losses when the market drops. When you turn on this feature, it will automatically help you identify opportunities to sell investments that have lost value, enabling you to offset the taxes that come with income and capital gains. By considering your gains and losses across all your investments, you can reduce your tax bill and potentially eliminate your capital gains bill entirely.

Asset Location

Asset location is a strategy employed by Betterment to optimise your portfolio's tax efficiency. This involves placing your most tax-inefficient investments, typically bonds, into a tax-efficient account such as an IRA or 401(k), while maintaining your desired overall portfolio mix. By doing so, you can shield the interest income from bonds from taxes in the IRA, while qualified dividends from stocks in the taxable account are taxed at a lower rate.

Exchange-Traded Funds (ETFs)

Betterment uses ETFs in its all-ETF portfolio due to their tax efficiency and lower costs compared to mutual funds. ETFs are generally more tax-efficient because they are less likely to incur capital gain taxes, even if the overall fund value decreases. Additionally, ETFs provide the benefit of reduced taxes on qualified dividends and municipal bond income.

Tax Coordination

Betterment's tax coordination feature helps you understand the potential tax implications before making a transaction. They work to minimise transaction taxes by selling your assets in a specific order, starting with those that have the lowest tax burden.

Charitable Giving

Betterment enables you to maximise the benefits of charitable giving. You can donate your most appreciated shares directly through their platform, reducing your portfolio's tax liability.

Tax-Advantaged Accounts

Betterment can help you choose the right tax-advantaged accounts for your retirement planning, such as your 401(k) plan, an IRA, or a Roth IRA. These accounts offer tax benefits, such as tax-deductible contributions or tax-free withdrawals, depending on your specific situation and goals.

Automated investing

Investing with Betterment is designed to be easy and stress-free. The platform offers automated investing, allowing you to build wealth with a diversified, expert-built portfolio curated to help you invest like a pro.

Here's how it works:

Step 1: Tell Betterment About Yourself and Your Goals

Share information about your financial situation and what you want to accomplish. This could be saving for retirement, building wealth, or any other financial goal you may have.

Step 2: Choose Your Investment Portfolio

Betterment will recommend a diversified portfolio based on your goals. These portfolios are built by experts using low-cost exchange-traded funds (ETFs) and are designed for long-term investing. You can also choose from a variety of portfolio options, including sustainability, tech, crypto, and more.

Step 3: Betterment Puts Your Money to Work

Once you've set up your account and chosen your investment portfolio, Betterment's technology and automated investing features take over. They offer automated trading, rebalancing, and dividend reinvestment. Their fractional shares feature ensures that every dollar you invest is put to work.

Step 4: Save, Withdraw, Spend

Betterment's technology optimizes every dollar you spend, save, and invest with them. As your money grows and your priorities change, they provide ongoing advice and updates to help you stay on track and achieve your financial goals.

Benefits of Automated Investing with Betterment:

• Tax-efficiency: Betterment utilizes strategies like Tax Loss Harvesting+ and asset location to minimize your taxes and maximize your returns.
• Ongoing optimization: They continuously monitor your investments, rebalance your portfolio, and reinvest your dividends.
• Low fees: For just $4 a month or 0.25% annually, you get access to automated investing, expert-built portfolios, ongoing guidance, and tax-efficient strategies.
• Customizable: You can choose from a variety of portfolio options or customize your own if you're an experienced investor.
• Goal-based: Betterment helps you set financial goals and provides investment portfolios tailored to each goal, whether it's retirement, saving for a dream vacation, or anything else.
• Socially responsible investing: You can invest in companies that meet specific environmental, social, and governance (ESG) criteria or focus on areas like climate impact and minority empowerment.

Customising your portfolio

Betterment offers a variety of portfolio options, including the ability to customise your own.

Firstly, you can choose from a selection of curated portfolios, which are designed to help you build wealth over the long term. These include portfolios focused on stocks and bonds, cash, crypto, and socially responsible investments.

If you're an experienced investor looking for more control, you can customise your portfolio with a Flexible Portfolio. This option lets you adjust individual asset class weights based on your preferences. You can also choose exposure to non-market correlated assets like real estate investment trusts (REITs) and commodities.

Betterment also offers multiple portfolio strategies within your account. This means you can set a different portfolio strategy and allocation for each of your goals. For example, your retirement goal can use the Betterment Core Portfolio, while your safety net goal could invest with a socially responsible investing strategy.

When setting up your goals, Betterment will recommend the best portfolio for you. If you're a more hands-on investor, you can choose from multiple portfolio options, including factor-based portfolios and bond-only portfolios.

You can also use Betterment's technology to optimise your investments. Their platform manages your money and helps you earn more by providing ongoing advice and updates to help you stay on track.

Frequently asked questions