BettermentRobo Advisor Reviews

Betterment Review – Should I Sign Up for Betterment?

*Please read affiliate disclosure below.

You may have heard of Betterment. It’s one of the original robo-advisors and still considered one of the most innovative. You’ve probably seen a lot of Betterment reviews, but this one is an in-depth three-part review covering the ins and outs of the Betterment platform. If you’ve wanted to know more about Betterment, then you need to sit down for a few and read through our comprehensive review. You’ll get all of the important details about the Betterment robo-advisor, all on one site. After digging into the nuts and bolts of this low-fee, well-regarded robo-advisor you may be ready to sign up and try it out for your investment strategy!

Should I Sign Up for Betterment?

Betterment bills itself as “investing made better”. They have a simple, well-supported, low cost strategy to invest your money. In these reviews you’ll find the answer to the question, ‘Should I sign up for Betterment?’

This 3 part series lays out all of the information you need to make an educated decision about the Betterment Platform. You’ll learn about how the platform works, the investing performance, how it stacks up against best practices investing research. Finally you’ll get a drill down into the features, ease of use, along with the fee structure. This review is for you if you’re looking for the most comprehensive exploration of the Betterment approach, without actually signing up.

Part 1 is an overview of the Betterment Platform where you’ll find out about the underlying philosophy of this robo-advisor. You’ll view the ‘goals based’ approach with an introduction to the 3 initial goals; Safety Net, Retirement, and Investing. You’ll dig into the Safety Net and uncover the underpinnings for this goal.

You’ll Benefit from Betterment If You’re Looking for:

  • The highest returns for the lowest fees.
  • An investment approach that is supported by “years of research and Nobel Prize-winning Modern Portfolio Theory”.
  • An investment approach that minimizes taxes.
  • A guide that indicates whether you’re on track to meet your financial goals.
  • A platform which chooses funds with the best risk-adjusted returns for the lowest fees.

If you answered yes to at least one item, then Betterment may be for you

What is Betterment?

“An intelligent portfolio designed for optimal performance.”

The Betterment platform strives to maximize your returns at every risk level. The platform provides the cornerstones of smart investing management; diversification, automated rebalancing, tax-loss harvesting and lower fees. They state on their website that;

“Betterment customers can expect 4.30% higher returns than a typical DIY investor.”

If you’re looking for a simple, research based investing platform with rock-bottom fees, then Betterment is a sound choice.

Betterment-Investing Made Better-Should I sign up for Betterment?

Walk Through the Betterment Sign Up Process

As with each robo-advisor, we start in as newbies and attempt to navigate the program. Join us as we dig into the Betterment platform.

Get Started with Sign Up

The Sign Up

Betterment starts out with a simple 3 question start:

  • Age
  • Retired or not
  • Annual income

It doesn’t get any easier than this.

For the Betterment ‘test run’ I created several investor profiles. We’ll start with Jenae, age 45, working, with an annual income of $50,000.

For those that want to delve into the rationale of the Betterment philosophy, each screen gives you an opportunity for more ‘detail’ before proceeding to the next.

Betterment Introduction Screen is easy to access.

After Jenae lists age 45, not retired, and $50,000 annual income, she’s taken to the next screen.

Your Plan-3 Recommended Goals

After answering 3 initial questions, you’re presented with 3 goals, based upon your answers in the first screen. You can add to the standard goals later.

Jenae’s 3 goals are:

  • Start with a safety net of $10,000. According to her $50,000 annual income the $10,000 is earmarked for 3 to 6 months of emergency expenses.
  • Her second goal is to amass $1,233,000 for retirement (found under the drop down retirement goal tab).
  • The 3rd goal is to invest. This goal is general without an attached amount.

From the 3 goals Jenae begins her exploration.

Betterment Goals Based Investing-Should I sign up for Betterment?

Jenae chooses the “Safety Net” as her first goal to explore.

For further information, there are drop down menus under each goal.

The Safety Net Goal

Since Jenae wanted more information about the Safety Net Goal, she clicked on the down arrow and this explanatory screen appears:

Betterment Safety Net Goal

Betterment recommends that safety net funds should be invested in an allocation of 40% stocks and 60% bonds.

What if I take money out of the ‘safety net’ account during the next few years?

The recommended 40% stocks and 60% bonds allocation is designed to grow faster than a savings account and the inflation rate. Over 5 years, this allocation is intended to allow for a certain percent withdrawals while still maintaining a reasonable value.

On this screen there are additional choices. Jenae has a choice to read more: where Betterment explains the rationale for the safety net as well as the recommended investing choices. That’s where she received a deeper understanding of the reasoning behind the goal an explanation for the recommended asset allocation.

This is helpful for the novice as she wonders, ‘Should I sign up for Betterment?‘ Whereas the more sophisticated investor can skip the ‘read more’ button and simply ‘select this goal’.

This is an area where we think the portfolio is a bit aggressive. Safety net means that the money is there in case of emergency. Although the 40% bond/60% stock allocation is conservative, it will fluctuate in value. If you need $5,000 for a major roof repair, you don’t want to be forced to withdraw money from this fund after a market correction.

The ‘Read more’ button takes Jenae to the following detailed screen with the rationale for the safety net recommendations:

Betterment Safety Net Goal Explanation-Should I sign up for Betterment?

The instructive graph compares returns of a savings account, a typical ‘emergency fund alternative’, with Betterment’s recommended 40% stocks versus 60% bonds asset allocation.  The  rationale for this safety net, investing in stock and bond funds is to grow the investors funds more quickly.

Next, Jenae taps the ‘Select this goal’ button on the Safety Net screen:

Safety Net Goal + Asset Allocation + Betterment Features 

After Jenae clicks on “select this goal” button she gets an image of the her recommended Asset allocation on the left with Betterment features on the right; Diverse portfolio of ETFs, Low fees, Smart rebalancing, Personalized advice, Extreme tax-efficiency, and Tax loss harvesting+.

This screen provides a summation of the safety net goal and the features of the Betterment platform. Fortunately, you can change the recommended allocation or add more goals-after you sign up for the program.

Sign up for Betterment

Safety Net Goal-Recommended Allocation-Details

For those that want to know all, you can click on a details button under the asset allocation image for more information about the Betterment platform:

Betterment philosophy - diversification + efficiency

Here’s where you get into the nitty-gritty of the Betterment platform portfolio construction.

This screen was very helpful in understanding the why’s of the Betterment approach. It was refreshing to view the transparency of the recommended ETFs and detailed allocation percentages. Jenae’s assets would be apportioned among 12 low cost ETFs. The content explained why those asset classes were chosen. This approach is consistent with the best investment research today.

For those consumers who want more information, you can drill down to a landing page with information about the underpinnings of their “Nobel-prize winning research” which claims to offer the “best investor returns possible.”

Betterment Optimal Asset Allocation - Should I sign up for Betterment?

 

For investors interested in the most detail, there is a handy page for each of Betterment’s recommended ETF’s. The transparency of listing every ETF is refreshing. As an experienced investor, familiar with the research in the field, I applaud their selection of well diversified, low cost funds.

Betterment’s fund choices are divided among broadly diversified stock and bond exchange traded funds. The actual percent invested in each individual fund depends upon the investors’ asset allocation. This ensures that your money is diversified across various companies across the globe.

Betterment Stock Allocation

SectorTicker
U.S.VTI
U. S. Large-Cap ValueIVE, VTV
U.S. Mid-Cap ValueIWS
U. S. Small-Cap ValueVBR, IWN
Foreign-Developed MarketVEA, SCIF
Foreign-Emerging MarketVWO, IEMG

Betterment Bond Allocation

SectorTicker
Short Term U.S. TreasuriesSHV
Inflation Protected U.S. BondsVTIP
U.S. High Quality Bonds (IRA accts.)BND
U.S. Municipal Bonds (Taxable accts.)MUB, NYF
U.S. Corporate BondsLQD
International Developed Market BondsBNDX
Foreign-Emerging Market BondsVWOB

Full disclosure: In my personal portfolio  I (Barbara) own several of Betterment’s recommended ETFs; VTI, VBR, and VWO.

At the bottom of this screen you have an option to change the allocation and/or the goal.

You’re also promised the opportunity to add more goals after signing up.

You have 2 final choices at the bottom of this screen; ‘go back’ or continue to ‘sign up’.

Pros and Cons of Betterment Overview, Sign Up and Savings Net Goal

Pros

So far, the sign up is seamless and fast. The initial goals are sensible with access to depthful information if needed. The theory of the program is based on well-researched modern portfolio research. The interface is perfect and easy to navigate.

Cons

The emergency fund invested in stock and bond funds is riskier than keeping the ready cash in a more liquid bank savings account or money market mutual fund. The ‘Safety Net-Read More’ screen claims that the model allows for up to 23% withdrawal over 5 years. But, what if the investor needs more than 23% of the funds, there may be a risk of running out of money.

Although the potential growth of the safety net funds is great, the problem is that if you need a good portion of the money for an immediate expense, you are at risk of withdrawing the money from the account at the ‘wrong’ time. For example, if the stock investment values are lower when you need the money, then you’re worse off than if you’d put the emergency cash in a savings account.

Because of the volatility of stocks and bonds, a simple alternative is to keep additional emergency cash outside the Betterment platform in your own savings, money market account or CD.

I wouldn’t necessarily let this drawback deter you from using Betterment. Should you sign up for Betterment? That’s a very personal questions, but I would certainly tell you to try it out.

Betterment Single Goal Summary

So far we dove into the Betterment philosophy, sign up and explored the Safety Net goal. You’ve got a good background to help decide the answer to the question, ‘Should I sign up for Betterment?’

Using their platform is a pleasure, and each screen is accessible and uncluttered. You can consume as little or as much information as you desire. If you want to work through the program quickly and get started investing, it’s a snap.

For those that want to delve into the rationale of the Betterment philosophy, each screen gives you an opportunity for more ‘detail’ before proceeding to the next.

Sign up for Betterment

Make sure to read the entire Betterment review series:

Betterment Review Part 2: You drill down further into the platform with details about goals 2 and 3; retirement and general investing. You’ll explore the RetirementGuide Calculator tool which teaches you how much you’ll need to save in order to meet your retirement spending preferences.

Betterment Review Part 3: Explains the sign up and fee structure along with a final evaluation of the Betterment platform. After this 3 part Betterment review you’ll have all the information you need to determine whether this robo-advisor is an appropriate choice for your investment dollars.

Read; Betterment now offers access to human financial advisors. >>>

Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable.

Previous post

Robo-Advisors Are Doomed - How Passive Investing Might Harm Them, or Not

Next post

Expert Betterment Review - Goal Based Investing + RetirementGuide

Barbara A. Friedberg, MBA, MS

Barbara A. Friedberg, MBA, MS

No Comment

Leave a reply

Your email address will not be published. Required fields are marked *