BETTERMENT Review- Make Investment Easy

Hey everybody welcomes to Finance Companies my name is Pratap and I’m here to help you master your money and build your wealth today.

I’m going to review betterment the time of this recording is actually Aug 31st so all the information you’re getting is updated until right now and a lot of things haven’t really changed over the years with betterment.


Assets under management: 1,640 crores USD (April 2019)
Founded: 2008
CEO: Jon Stein (Aug 2008–)
Headquarters location: New York, New York, United States
Parent organization: Betterment Holdings, Inc.
Founders: Jon Stein, Eli Broverman

So how to invest or how to start investing in the stock market so I decided to point everyone in the direction that I would go as a beginner if I wanted to start investing so in this blog, I’m going to introduce betterment to you I’m going to explain who it’s for some of the pros and cons we’re gonna take a tour of the platform.

I’m gonna share my screen and do that and then, in the end, I’m gonna do something fun and give it a quote-unquote Marco score where I kind of rate different facets and different factors within betterment.

So what is betterment?

Betterment is a robo-advisor it’s essentially an online financial advisor that’s run by algorithms and software

So I know that sounds kind of scary like the Terminator is coming out you know into it your finances however that couldn’t be further from the truth.

what is a Robo advisor?

Essentially a Robo advisor is automated investing using algorithms that I mentioned and it also allows you to automatically rebalance your portfolio daily the cool thing about betterment is that it actually offers tax-loss harvesting which helps you out if you’re in a higher tax bracket or pretty much any tax bracket.

But the results are magnified if you’re in that higher tax bracket there’s little to no human interaction unless your provider provides that and in betterments case you actually can sign up for an actual CFP (certified financial planner) to actually be able to talk to you one-on-one if you choose so this allows them by having no you know physical address and physical locations it allows them to offer very low fees very low minimums.

Betterment is actually zero dollars to get started and it takes literally three or four minutes go through that entire process to open up your betterment account

So Robo advisors are super cheap super fast super easy super convenient and again if you do use the link below I will get compensated for that so ultimately let’s get into introducing betterment.

So you understand what you’re getting yourself into if you choose to go this route so betterment is the largest independent online financial advisor and they actually pick the funds for you and recommend asset allocation.

Talking about ETFs etf’s just stand for exchange-traded funds and this is primarily what you’re investing your money in when you allocate money towards stocks and also bonds however this is the biggest portion and the only thing you can invest in.

So essentially what betterment does is they take your overall portfolio and also your personal information like your age and things like that and they want to figure out ok I think you know Marko at the age of 31 should be in 90% stocks 10% bonds and it ultimately allows you to allocate your money automatically.

So in a prior time or in a prior age people did this manually with a financial advisor you had to set a meeting with them you have to go get coffee or lunch or spend you know an hour to every quarter or you know buy annually that financial advisor is kind of going by the wayside the reason for that and the reason why I’m recommending betterment for the average person or the beginning investor.

Because financial advisors are very expensive and they won’t even talk to you unless you have a net worth of six figures that’s typical.

The case unless their fee only in which you have to pay them per consultation so ultimately my buddy runs a financial advising firm he’s a really good guy he works with bigger companies and higher net worth individuals he won’t even talk to you unless you have six figures to invest because it does not make financial sense for them by the time.

He pays for advertising compliance you know overhead of an office space I’m marketing all that good stuff he’s not making any money on the lower.

The smaller fish in the sea or the lower income or the lower net worth individual so it’s nothing wrong with that and that’s a and why I recommend betterment.

So again this ultimately invests in ETFs which is pretty much a basket of stocks or a basket of funds and that way all your eggs aren’t in one basket. so you’re not gonna you know get any crazy returns from this in terms of you know investing in Amazon fifteen years ago for example however you’re not gonna lose your shirt if one of those companies were to go bankrupt or you know go out of business or whatever.

So it’s just a great way of diversifying your investment portfolio so some of the accounts that betterment offers and I’ll show you this on the back end when we tore it our essentially taxable accounts joint IRAs or excuse me joint accounts Roth IRAs SEP IRAs traditional IRAs rollovers.

There’s a million different things I’ll show to you once we get into that and finally betterment actually does allow you to get hooked up with a CFP a certified financial planner for a slightly higher cost.

So who is betterment for so personal finance is obviously personal so you could be a trust fund baby you could be someone who you could be the first person your family tree to and ever invest a dollar in the stock market it’s really different for everyone.

So if I had to classify you know who betterment is for I would say that it’s for the beginner investor all the way up to intermediate or expert depending on your net worth because it just helps you get started.

So it provides a hands-off approach to investing retirement planning and rollovers and they also offer checking and savings with a pretty generous APY I think at the time of this recording the annual percentage yield for those products are two point six nine percent and I know in my capital one money market account.

I’m getting two percent so this is pretty significantly higher so ultimately betterment is for someone who wants to have all of their finances in one place so again the checking the savings the retirement the stocks and it all solo it also allows you to set goals for like a major purchase like a car or a home things like that.

So it’s ultimately for someone who wants all their finances in one convenient location. so let’s go over some of the pros some of the pros of betterment is that it’s super simple asset allocation.

So going back to that little chart you know exactly where your money is going and it couldn’t be any easier to invest you don’t need to burn the midnight oil to understand oh you know what’s this stock doing did they fire their CEO you know what is the board voting on no none of that it’s super simple.

So asset allocation is easy your money as diversified and it’s maximized for that algorithm the minimum investment is also zero dollars to get started so I’ve mentioned that a couple times in this blog with the Finance Companies as I mentioned it may take a little bit of money to get involved with them you know $50,000 $75,000 $100,000 the nice thing about Robo advisors is that the barrier or cost to entry is very low their pricing is straightforward and I’m actually going to erase these two to make some room Butterman’s pricing is pretty simple you have two plans the first one is digital.

So essentially digital only costs 20 basis points per year okay so this gets you access to pretty much everything that I mentioned and what I’m going to show you in the back end here when we tour it but ultimately if you don’t know what fees mean 20 basis points on $10,000 will equal basically 20 dollars a year, okay if you get to a hundred thousand it’s gonna be two hundred a year a million two thousand a year okay it’s pretty simple the second plan that they have and this is the plan that gets you access to the Finance Companies is called the premium.

Premium is gonna be 40 basis points so pretty much just what I showed you if you have 10 grand it’s gonna cost you 40 bucks a year if you have a hundred grand under management 400.

So forth okay pretty simple to understand so the the pricing is very straightforward and you know exactly what you’re getting.

So then a couple other pros of betterment is that there is a retirement calculator and it asks you for your retirement needs so it sinks in all your other portfolios and it tells you exactly where you need to be or actually it asks you where you want to be and it tells you what you need to do for retirement finally there’s that personalized advice packages through the certified financial planners.

So if you’re planning for like marriage you know big purchase you know you had a baby you want to set up a 529 plan you know things like that is going to be under that premium plan that I just mentioned and there’s also gold based investing which I mentioned earlier in the blog.

So if you want to plan for like a house a car and emergency fund things like that it helps you set up those funds and those returns have typically been better than your typical you know CD or investment account at the bank.

So finally let’s talk about some cons before we get into that tour this all sounds fine and dandy but there’s obviously going to be some negative side effects to working with a robo-advisor the biggest one is pretty obvious this is not for do-it-yourselfers I just call it di wires okay so the people that go to Home Depot and everything themselves that’s not for you.

I’m one of those people by the way so not for the DI wires so what do I mean by that the DI wires is typically what I’ve been in my entire life since I was 18 I’ve been investing I’ve always you know had my nose in the stock market and researching investing and I’ll tell you what it does get kind of fatiguing after a while/

So that’s why with my Roth IRA I just set up a target date fund and set it and forget it I know it’s not the most efficient way to make money or the best returns but ultimately that’s not who this product is for so if you’re a DIY or and you’re someone wants to burn the midnight oil and you know look at all the different performances and metrics and K ones and all that stuff this probably isn’t gonna be for you.

The reason for that is because you’re investing in funds rather than individual stocks so the second biggest con is if you’re someone with you know maybe a higher net worth or just someone who wants to get their whole picture this does not ask that allocate with third parties okay I’ll just call this third party.

So asset allocation is basically well let me explain what why I can’t do it so you and allocate assets with a third party so essentially if you have your 401k with a third party and you link it with betterment it’ll show you what’s in that 401k but it’s not going to ask that allocate based already on what’s in that 401k so if that 401k is a hundred percent coca-cola just for easy examples they still may put you in stocks of Coca Cola in those ETFs and betterment does that make sense.

So it doesn’t know it they don’t talk to each other it only shows you what it is so this is good because it actually shows you you know your whole holistic profile but again the programs are not going to talk to each other and then finally the third con that I found is that you can’t invest in REITs or commodities okay so what a REIT is essentially a real estate investment trust okay so if something is a REIT.

I’m not going to turn the whole blog into what a REIT?

Basically a REIT is a real estate investment trust basically you cannot invest in that with betterment there are other ways to do.

So but that is the third con that I found so I don’t want to bore you guys to death let’s go and share the screen and let’s take a tour of betterment right now hey everybody welcomes back to the second part of this review without further ado let’s get right into it.Sso ultimately this is the home screen for betterment what I’m gonna do is I’m just going to navigate these side tabs because there is a lot of information in these different areas in each page and I want this to go too long.

So if you click on the general investing tab you can see here that shows you your total balance your betterment earnings when you can view your performance here there are different goals that you can target and then there’s overall risk profiles based on what you want to invest in.

So the cool thing about this tab is that you have the open the goal forecaster so this will pretty much tell you based on historical results you know where you’re gonna end up with certain investments.

So if I want to invest five hundred bucks a month you know my initial deposit was a thousand and then over the course of 20 years it’ll tell you where you pretty much will be at an average outcome obviously the stock market is risky and things can go up or down but this will give you a good idea if you stick to the plan-it’ll show you where you’re gonna be at so with that being said you can actually plan for certain things you can use the portfolio analysis to see kind of where your allocation is that you can auto-adjust this.

If you want right now this is set at 90 percent stocks 10 percent bonds you know you can change this to whatever you want it to be so if I do click on adjust it’ll actually show you here that you know the likely one-year return for this risk profile is anywhere from negative 15 percent to 33 percent gain obviously these are just estimates this could be you know anything depending on you know economic conditions you know the war you know whatever.

So if you do go to 100 percent stocks I just like to do this for fun it’ll show you negative 17 percent plus 37 percent and then you can move this up and down so it’s really easy because this is that automatic asset allocation if you will so I’m gonna exit out of this we’ll go down to the safety net basically you can set up kind of like an emergency fund or keep pace with inflation and do all that good stuff the retirement is nice because it’ll ask you a few questions to identify your retirement needs.

So I’ll give you your full retirement picture and you can click on personalize this goal there’s savings and this is kind of that savings account that I mentioned right now it’s up to two point six seven percent annual percentage yield and it’s FDIC insured which covers up to a million dollars.

So if you go to add new this is kind of cool because you can add it by goal type so you can either do kind of like I want to add savings I want to add education safety net general investing retirement and major purchase the nice thing about major purchase is that you can actually kind of save for a car if you will or you know a vacation or a dream house it’s pretty much any big ticket item.

So if I click on a major purchase and click continue it’ll ask me how I want to fund this and it’ll either be an individual taxable account or it’ll be a joint account basically designed for couples or family members so it’s kind of cool for more advanced planning you can one last thing is you can actually start by account type and these are the different account types that I mentioned you individual individual sorry I don’t know I can say individual today joint traditional IRA Roth IRA SEP IRA and Trust so there’s a lot of stuff you can do here.

So I don’t want to spend any more time on this review just because it’s been going pretty long and I’m glad that you’ve stuck with me thus far.

So if you want to sign up for it you can click on the link right here I just pretty much tell you what it what it is this in this case it’s a robo advisor.

So let’s start with the first category commissions and fees so I think that if you’re comparing this to basically a traditional financial advisor I mean I gotta give this a nine out of ten obviously there are other ETFs and lower cost funds like with Vanguard and things like that however 25 basis points a year is very cheap especially if you’re comparing it to mutual funds as well customer service from what I’ve read online it’s all like four and a half stars five stars. so in this case I’m gonna give this a nine as well I have not personally dealt with the customer service but all the research I’ve done leads me to believe that it is legitimate the ease of use since this pretty much can’t get any easier to use than what it is it’s kind of like a one-stop shop.

So I’m gonna give it a nine and a half the tools and resources that they have with being able to link other other accounts pretty much getting your whole holistic overview of your portfolio and also the different personalized questions they ask you I think it’s very good for what it is so sense for what it is I’m gonna give it an eight and a half just because there aren’t tools and resources that you would get with a traditional stock broker.

So investment options all the options that I looked at are very good it’s mostly Vanguard products a lot of Vanguard ETFs and Vanguard is the 800-pound gorilla in the room for Roth IRAs and things like that so I’m gonna give this a nine and then asset allocation is pretty much how they you know put your money to use and where they put your money since it doesn’t have REITs.

Thank you so much, everybody, and have a prosperous day Ta Da!

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