Betterment: A Smart Investment Choice For Your Money?

Betterment is a robo-advisor that offers a wide range of investment options, including stocks, bonds, and cryptocurrencies. It provides automated portfolio management and access to human advisors for a fee. With its goal-oriented tools and tax strategies, Betterment appeals to investors of all types. The platform is user-friendly and offers a well-designed journey, making it easy for users to set goals and track their progress. Betterment has reasonable fees, a low minimum investment requirement, and a low portfolio management fee. It also offers fractional shares, allowing all cash in portfolios to be invested. However, Betterment does not offer direct indexing, and the flat fee on smaller balances can be high compared to other platforms. Overall, Betterment is a popular and user-friendly robo-advisor that provides a convenient and personalized investment management experience.

Should I use Betterment for long-term investing?

Betterment is a robo-advisor that offers a wide range of features and is a good choice for long-term investing. It provides multiple portfolio options, including customisation, and a low portfolio management fee. It also offers fractional shares, which allow all cash in portfolios to be invested, and has a range of goal-based financial planning tools.

Betterment's digital offering provides automated portfolio management for a low fee, depending on your account balance. The annual fee is 0.25% for balances over $20,000 or if you set up recurring monthly deposits of $250 or more. Otherwise, the fee is $4 per month. There is no minimum account balance, but there is a minimum of $10 to start investing.

Betterment Premium is Betterment's upper-tier service, which provides unlimited phone access to a team of certified financial planners for a minimum balance of $100,000 and an annual fee of 0.65%.

Betterment is a good choice for long-term investing because it offers a range of investment options, a low fee structure, and the ability to customise your portfolio. It also provides access to financial advisors, either through the Premium service or by purchasing individual financial planning packages. The platform is easy to use and offers a range of tools to help you track your progress and plan for the future.

However, there are a few drawbacks to consider. Betterment does not offer direct indexing, which is a more advanced tax optimisation strategy. It also charges a flat fee on smaller balances, which can be high as a percentage of assets under management. Additionally, the recommended portfolio for emergency funds may be too risky for some investors as it includes a significant allocation to stocks.

Is Betterment good for beginners?

Betterment is a robo-advisor that offers a wide range of features and is suitable for beginners. It has no minimum account balance requirement, but there is a minimum deposit of $10 to start investing. It provides a user-friendly platform that makes it easy to set goals and track progress. It also offers tax-loss harvesting and a variety of portfolio options, including three socially responsible investing portfolios. The fees are transparent and reasonable, with a basic account costing $4 per month or 0.25% annually for accounts with at least $20,000. Betterment also provides access to human advisors for an additional fee. Its security protocols and insurance coverage help protect your identity and data. Overall, Betterment is a good choice for beginners looking for a user-friendly and feature-rich robo-advisor platform.

How much does Betterment cost?

Betterment offers two service tiers: Betterment and Betterment Premium. The Betterment service tier is available for all customers, regardless of their account balances, while Betterment Premium is for customers with a balance of more than $100,000.

The Betterment service tier has a base price of $4 per month. However, if you have a balance of at least $20,000 across all your Betterment accounts or set up recurring monthly deposits of $250 or more, you will be charged an annual fee of 0.25% of your investing account balance.

The Betterment Premium service tier provides unlimited access to a team of financial advisors. This service tier requires a minimum investing balance of $100,000 and charges an annual fee of 0.65%.

In addition to these fees, there are also expense ratios charged by the ETFs that comprise your investment portfolios. These expense ratios generally range from 0.07% to 0.17%, but may be higher for certain portfolios.

Betterment also offers cryptocurrency portfolios for a 1% management fee, as well as trading expenses that can run up to an additional 0.15%.

What are the pros and cons of Betterment?

Betterment is a robo-advisor that offers a wide range of features and is considered one of the best in the market. Here are some pros and cons of using Betterment:

Pros:

• No minimum account balance is required to open an account, but there is a $10 minimum to start investing.
• Offers a wide selection of asset classes (13 in all) across stocks and bonds for its core portfolio.
• Provides access to human advisors for larger portfolios.
• Offers a cash management account with a competitive interest rate.
• Offers tax-loss harvesting and tax-coordinated portfolio features to minimize taxes.
• Provides a user-friendly platform and mobile app that make it easy to set goals and track progress.
• Offers fractional shares, allowing you to purchase investments by the dollar amount rather than a full share.
• Offers a 1% match on IRA contributions, a perk that was previously only available through employer-sponsored retirement accounts.

Cons:

• Does not offer direct indexing, an advanced tax optimization strategy that can be beneficial for taxable accounts.
• Charges a flat fee on accounts below $20,000 or those without recurring investments of at least $250, which can be high compared to other robo-advisors.
• Does not offer individual stocks or other investments for trading.
• Premium plan with human advisors requires a $100,000 minimum balance.
• Confusing setup process, with no clear checklist of steps to follow.
• Lacks direct REIT exposure in robo-advisor portfolios.
• Does not offer weekend phone customer service.

How does Betterment compare to other robo-advisors?

Betterment is a top robo-advisor with a range of features, including cryptocurrency investing, that make it a great choice for investors. Its sophisticated and highly functional investing platform has earned it recognition as the best robo-advisor by Forbes Advisor.

Betterment offers two service options: Betterment Digital, which provides automated portfolio management for a low fee, and Betterment Premium, which provides unlimited access to certified financial planners for a $100,000 account minimum.

Here's how Betterment compares to other robo-advisors:

Fees

Betterment's fees are transparent and reasonable for a robo-advisor. The basic Betterment Digital plan charges a monthly fee of $4 or an annual management fee of 0.25% for accounts with at least $20,000 or recurring monthly deposits of $250. The Betterment Premium plan, which includes access to financial advisors, has an annual fee of 0.65% for accounts with a minimum of $100,000.

Wealthfront, another leading robo-advisor, charges a similar fee of 0.25% for its basic service, while its premium service, which includes access to financial advisors, costs 0.40%.

Investment Options

Betterment offers a wide range of investment options, including a default Core Portfolio made up of ETFs from about a dozen asset classes. It also provides several custom portfolio options, such as Broad Impact (an overall SRI investment option), Climate Impact (focusing on companies with lower carbon emissions), and Social Impact (supporting minority empowerment and gender diversity).

Wealthfront also offers a diverse range of investment options, including stocks, bonds, and alternative investments like real estate and natural resources. Its investment strategy is based on modern portfolio theory, aiming to maximize returns while minimizing risk.

Account Minimums

Betterment has no minimum account balance requirement, but there is a $10 minimum deposit to start investing. This makes it accessible to investors who are just starting out.

Wealthfront, on the other hand, has a $500 minimum initial deposit requirement, which may be a higher barrier for entry for new investors.

Tax-Loss Harvesting

Betterment offers automatic tax-loss harvesting as a standard feature, which can help reduce your tax burden by selling securities that have lost value and replacing them with similar investments.

Wealthfront also offers tax-loss harvesting, but only for taxable accounts with balances of $100,000 or more.

User Experience

Betterment's platform is user-friendly and well-designed, making it easy to set goals and track progress. Its mobile app is available for both iOS and Android and offers a similar experience to the desktop version, allowing you to manage your investments on the go.

Wealthfront also has a user-friendly platform and a mobile app, making it convenient for users to access their investments anytime, anywhere.

Customer Service

Betterment provides phone and email customer support from Monday to Friday, 9 am to 6 pm ET. It also offers a virtual chatbot that is available 24/7 to answer questions.

Wealthfront provides customer support through email and live chat, but it is not clear what their specific hours are.

Overall, Betterment compares favourably to other robo-advisors like Wealthfront, offering a wide range of investment options, reasonable fees, and a user-friendly platform. Its premium service, which provides access to financial advisors, is also competitively priced, making it a top choice for investors seeking guidance.

Frequently asked questions