Should You Put Your Last Remaining Money Into Betterment?


A new concept in online investing may give investors a new way to grow wealth. Employing software, rather than human brokers, the online service Betterment provides clients with most of the advantages that a human broker offers, without the high fees. Betterment is also able to manage a variety of accounts, from IRAs and trust to the more traditional taxable accounts.

Customers can also choose to focus on multiple investment goals. If buying a home, or sending the kids to college is in the future, Betterment allow the user to simultaneously target each goal. If retirement is a priority, Betterment’s ability to manage funds being put away for the golden years makes it an ideal investment tool for those wanting to stash away an ample nest egg for those late years.

This is how Betterment works.

The client’s portfolio is managed by software. When establishing an account, a customer informs the program about a number of different factors, such as age and the time to retirement. Betterment takes these factors into account while helping the customer set up the initial portfolio. Then the computer takes over managing the portfolio.

One of the most important services offered by Betterment is portfolio rebalancing. Periodically, the program will check to make sure that the current account balance is in tune with the goals the user desired when setting up the account. If the distribution has become skewed, for instance if small cap funds have outpace the rest of the portfolio, Betterment will step in, selling the necessary portion of small cap funds needed to bring the account back into balance. Of course the client is free to rebalance the account manually at any time and many investors find it preferable to take an invest and forget approach, letting Betterment handle the details.

Another money saving feature is Beterment’s Tax Loss Harvesting ability, which potentially saves customer money by using investment loses to diminish taxable income.

In addition to Betterment’s ability to automatically rebalance a client portfolio and harvest tax losses, the software can also help customize a portfolio, considering such concerns as risk tolerance and future and current goals.

Betterment also works to keep all of the investors money on the field. It is able to purchase ETF shares in small fractions, making sure that all of the clients money always remains at work.

The automatic deposit features rounds out the list of impressive services. A secure link between the clients bank account and Betterment means that the client will always be able to access money on demand.

The most attractive feature of the service is its cost.

There is a multi-layered fee structure. Depending on how much is initially invested, the price for using Betterment ranges from .35% annually for those who want to begin by direct depositing $100 a month into their accounts, to just .15% annually for those whose first investment exceeds $100,000. The low fee translate into a sizable profit for users when compared to the fees charged by a human broker offering identical services.

An emphasis on buying and selling Exchange Trade Funds is another hallmark which saves investors money, boosting clients earning potential. These low fee index funds, diversified just like mutual funds, provide both low cost and safety to any portfolio.

Is Betterment for you?

If you are an experienced investor, one who likes to stash money into the market and not have to worry about its constant fluctuations, Betterment may be an ideal way to manage your funds. Most investment professionals recommend this approach. It prevents the client from getting caught up in the emotional roller coaster the market can bring to traders who constantly fret about their money. All you have to do is put Betterment in charge of your funds and let it handle the details.

Another group that might benefit from using betterment are those investors who are approaching the markets for the first time. With its ability to gauge risk tolerance, consider goals, and periodically rebalance a portfolio, Betterment provides a full service investment tool for novices who know little about investment strategies and have little knowledge about how the stock market operates. The low cost of an initial investment will also appeal to beginners. All that is required is that clients set up a direct deposit from their bank account of $100 a month, and then let Betterment handle the rest.

Of course, as with any service, there are always some people who make unsuitable customers. One group is comprised of those who are ambivalent about their risk tolerance. Although Betterment presents each client with a risk tolerance questionnaire when setting up an account, this may be a poor indicator of tolerance for those who bend when put under stress. The invest and forget strategy works best for those who don’t always worry about their money, even during turbulent times. Nervous investors might do best being pared with a human broker.

So, should you invest your last dollar with Betterment?  This service provides an impressive array of features for both novice and experienced investors. Over the course of several years, the low cost fee structure alone will potentially save clients thousands of dollars. The automatic rebalancing feature keeps clients investment constantly in line with their goals. Even though Betterment allows investors to step in at any point and take control of their money, the software provides a dependable way to keep an investors portfolio balanced, and in sync with future goals.

The Tax Loss Harvesting feature is also a money saver, keeping funds in clients money and out of the hands of the taxman. For those who are able to put their money to work, not worrying about the fluctuations of the market, Betterment appears to be an ideal tool. On the other hand, for those who constantly fret over the ups and downs of the stock market, or for those who need the constant assurances s of a human voice, perhaps a traditional brokerage would be best for them.


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