Betterment is slightly different than the other stock trading sites because it is actually an online financial advisor. The company uses software tools to automate tasks that other sites and brokers will charge fees for. Their services are entirely online, however, so if you are uncomfortable with sharing your personal financial information and goals with an online entity, you may want to consider a living financial advisor instead.
Betterment is dedicated to long-term wealth management and retirement planning, and they have mastered these objectives with dramatically lower costs and superb execution. They offer a number of tools regarding financial planning, retirement, IRAs, trusts, and more.
Betterment Platform & Tools
It's easy to open your online account at Betterment and set it up according to your retirement goals and needs. You start your investment plan by entering your age, whether or not you're retired, and your annual income. From there, Betterment recommends three goals: Safety Net, Retirement, and General Investing.
Based on the information you supply, Betterment will suggest how many stocks and bonds you should have in your portfolio determined by your goal. You can always go back and change your goal later. From there, you'll be walked through how to make an account, sync your banking information, and you'll be ready to start investing!
Deposits can be transferred from existing bank accounts. Betterment walks you through a process to determine how much to invest in stock ETFs (exchange traded funds) and how much in bond ETFs for your portfolio. They keep fees low by investing in ETFs that are diversified like mutual funds, but trade as shares like stocks. ETFs tend to have low expense ratios.
After you set your allocation of stocks vs. bonds, Betterment places your money in a variety of Vanguard and other ETFs. They automatically rebalance your selection of investments and reinvest your dividends. You are provided with charts tracking your portfolio performance.
There is no minimum deposit required to open your Betterment account. Fees are charged as a percentage of your account balance from 0.15% to 0.35%, with rates depending on the amount of the balance. For accounts with less than $10,000, the fee is .35% of the average balance and requires a $100 per month automatic deposit.
If you don't do the auto deposit, you incur an additional fee of $3.00 per month. A fee of 0.25% of the average balance is charged for accounts with a minimum $10,000 balance. The fee is 0.15% of the average balance for accounts with a minimum of $100,000. If you have more than one Betterment account, the balances are combined to determine your fee percentage.
The in-house proprietary re-balancing program works to maintain your personal mix of stocks, bonds, and securities in the optimum strategic proportion. If part of the mix gains value while another part loses value, the software adjusts the mix, selling off a bit of the winner and buying some discounted assets. The idea is to buy low, sell high, and improve returns gradually over a period of years.
Over time, with rebalancing, Betterment will sell some of your index fund shares at a profit, triggering capital gains taxes. This is countered by selling other shares at a loss in the same calendar year and using the money to pick up shares of other funds that own the same companies, a process known as loss harvesting.
Betterment Portfolio Management
As you receive dividends, Betterment distributes them to fit your portfolio allocation. For example, you receive a dividend from a stock fund. Instead of reinvesting it in the same fund, Betterment invests the money in an area of your portfolio that needs to be built up, such as bonds.
Another cool feature is Betterment's ability to invest every penny in your portfolio, as they are able to invest in fractions of shares. This keeps your money active at all times. This smart reinvestment feature is the hallmark of Betterment's ability to smartly invest all of your money in a constantly changing mix that maximizes your potential to stay on the beam towards your retirement goals.
Betterment Prices & Fees
The philosophy behind Betterment's percentage fee structure is to keep overall client costs low, with the goal of encouraging long-term growth for its clients. The proprietary software custom designs a low-cost, diversified plan for each client, and constantly adjusts the account.
The Betterment software automates two key areas that help you to earn more and hang onto more money, automatic portfolio rebalancing and tax loss harvesting. Their fee for the service is as low as $150 per $100,000 invested. While risk is always present in investing, you can likely expect gains that far outstrip the fee.
Betterment Retirement Guide
One of Betterment's signature services is their Retire Guide. The guide makes a big picture analysis of your income sources, retirement expenses, cost of living, and savings rate. All these factors are considered along with your savings and other assets to paint the complete picture of your financial situation in order to give you top quality retirement advice.
Betterment delivers a detailed scenario of your present financial position and crafts personalized recommendations on steps to take towards your retirement goals. The advice includes planning retirement withdrawal amounts that are sustainable for the long term.
Betterment Customer Support
Betterment offers excellent customer service. They're determined to help subscribers educate themselves on how to properly invest and manage their personal finances. Under the website's Research tab you'll find articles instructing you about the ins-and-outs of the investment world. You can also find additional tools and calculators can help determine important investment decisions. The Support Center at the site takes care of the most common inquiries with the FAQ menu.
If you have an issue or need advice that can't be handled by Betterment's written resources, you can reach them handily via phone, email, or live chat. If you want to call, be aware that they have varying hours on weekends and weekdays. You can reach them at (888) 428-9482.
Those who are uncomfortable with an automated investment system may want to consider using a traditional walking, talking financial advisor. It costs more but may be worth it for some, simply in terms of peace of mind.
Betterment is a great service for anyone who wants to get started in the stock trading market and is interested in doubling down on managing their personal finances.
Financial novices can save time and get a lot of expertise and service for the low fee. Those who understand the value of long-term program investing will also appreciate Betterment. They are happy to patiently invest their money and grow it over time and know that a diversified portfolio tends to be a safe, profitable long-term bet.