Betterment.com Website Review & Ratings + Betterment.com Coupons
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Betterment.com Website Review & Ratings + Betterment.com Coupons

Betterment.com is basically a managed portfolio service or a wrap account where you tell the investment advisors what your allocation between stocks and bonds you would like and they pick the ETFs.  They buy from a small list of six stock index ETFs (exchange traded funds) and two Treasury bond ETFs.

Betterment.com is listed with the SEC (Securities and Exchange Commission) as investment advisors and a member of the Securities Investor Protection Corporation (SIPC). Their investment advisors will re-allocate your mix of stock and bond ETFs so that your allocation stays within the parameters you set when you open up the account. They also look for the ETFs that have low expense ratios or fees per year.

You can mix up your basket of funds into any allocation you desire, for example if you are young and have a high risk tolerance, you might invest into 20% Treasury bonds and 80% stock ETFs. If you are older, you might want 60% Treasury bonds and 40% stocks. As the market moves, your allocation might get out of balance and be something like 60% stocks when you only wanted 40% of your money allocated to the stock ETFs.

At this time, these are the six stock index ETFs Betterment.com has in their stock basket:

  • 20% Vanguard Total Stock Market (VTI)
  • 20% iShares S&P 500 Value Index (IVE)
  • 20% iShares Russell 1000 Value Index (IWD)
  • 15% iShares Russell 2000 Value Index (IWN)
  • 15% iShares Russell Midcap Value Index (IWS)
  • 10% Diamonds Trust Series 1 (DIA)

The bond basket contains:

  • 50% iShares Barclays TIPS Bond Fund (TIP)
  • 50% iShares Barclays 1-3 Year Treasury Bond FUN (SHY)
Betterment.com: What makes it different?

Many other brokerage accounts have a minimum balance to open an account. At Betterment.com, there is no minimum amount required to open your account. You can invest small amounts each time directly from your checking account. Over time as the stock and bond markets move up or down, your allocation to stocks and bonds can change and sometimes can change a great deal. Betterment.com will do the re-allocating of your stocks and bonds for you when it changes.

Their web site says that there are no transaction costs like a regular brokerage would have and no hidden fees, just a straightforward pricing schedule.

With any other brokerage firm, you have to pick and choose between hundreds of ETFs, stocks and bonds that will fit your allocation. At Betterment.com, you pick your asset allocation and they pick the proper mix of ETFs. This can basically automate and simplify your asset allocation and investing.

Betterment.com vs. primary competitors (sites similar to Betterment.com)

There are several competitors of Betterment.com. They all have different fees, some are lower and some are higher. The fees you will pay will depend on your account balance and you should always take that into consideration since any fees take away from your total return. The larger portfolio management services will usually have a larger choice of ETFs to invest in.

Fidelity Portfolio Advisory Service (PAS) will do the same thing as Betterment.com. With Fidelity, you first answer a questionnaire and you pick your asset allocation for your age and risk tolerance and the Fidelity investment team will manage your assets based on your asset allocation and your situation. You can use this with an IRA type of account and non-retirement accounts. Fidelity offers a larger choice of ETFs to invest in but their fees are higher than Betterment.com.

Vanguard has a Managed Account Program which is part of their Vanguard Retirement and Savings Plan (RSP). This plan has lower fees than the other portfolio management services and more investing choices than Betterment.com does at this time. They will look at your plan choices and analyze your portfolio. Once you set your goals, asset allocations and risk tolerance, Vanguard will make quarterly adjustments and rebalance your portfolio. You will also get personalized recommendations and advice.

Betterment.com: Pricing & packages

The fees that Betterment.com charges per year for the management fees vary according to the amount in your account. Their fee is between 0.3% and 0.9% of your balance annually and charged to your account every quarter. On top of the management fee, you will also pay around 0.2% on average for the expense ratio fees of the funds they pick. The fees at Betterment.com vary according to your portfolio balance and are as follows

  • $0.00 - $25,000 the fee is 0.9% annually
  • For the portion above $25,000 - $100,000 the fee is 0.7% annually
  • The portion of the balance over $100,000 - $500,000 the fee is 0.5% annually
  • The portion of the balance above $500,000, the fee is 0.3% annually

The Fidelity Portfolio Advisory Service management annual fees range between 0.63% for very large account balances to 1.7%. The fee schedule is:

  • For assets less than $200,000 the annual fee is between 1.48% - 1.7%
  • The first $200,000 is between 1.38% and 1.60%
  • The next $200,000 ranges between 1.08% and 1.30%
  • For the next $500,000, the fee is 0.88% - 1.10%
  • For accounts of $3 million or more, there are lower rates.

The fee schedule for the Vanguard Managed Account Program will deduct the annual fee monthly and has a minimum annual fee of $57.

  • The first $60,000 is 0.10% annually
  • The next $60,000 is 0.05% annually
  • And on any balance above $120,000 is 0.01% annually.
Betterment.com: Product images & screenshots
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Betterment.com: Customer reviews & comments

One complaint about Betterment.com was about their slogan of “Better than a bank”. Realize they are not a bank. Betterment.com is a member of SIPC which means if they go bankrupt, you will usually get your money back, but you can still lose money investing in any stocks, bonds or ETFs. Banks are FDIC insured.

Another concern is there weren’t any global stock ETFs to choose from for a broader range of investments. And some argued you should learn for yourself instead of hiring any portfolio manager.

There were favorable comments from people who didn’t have much money to start investing, but wanted to get money into some ETFs. Many would deposit what amount they could from their paychecks each week and didn’t have the time yet to learn asset allocation or which ETFs would be best for them. Betterment.com could be good for people in this position.

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Comments (7)
Ranked #5 in

Thanks for your review Sam

Ranked #29 in

Great job. the review was well explained.

Nice review. Thanks

Outstanding

Great detail for a true education in this area. Thank you for clearing up some questions I had regarding Fidelity. Promoted

Returning with a well deserved vote up.

As I thought, he's copied this one as well. Grrr.

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