What Is Betterment?

Betterment is an online investment company based in New York City and is known as a robo-advisor. They create investment portfolios using low-cost indexed-based exchange-traded funds (ETFs) in broad market sectors. Betterment is an SEC-registered broker-dealer and member of FINRA/SIPC.

Betterment is Good For

Betterment is a good option for beginner investors and others who have low balances. There are additional benefits for using Betterment which may apply to those seeking a more hands-off approach, in retirement, and others seeking automatic rebalancing and users seeking goal-based tools.

The financial advice offering by actual experts is inexpensive compared with your traditional investment firms and independent hybrid advisors.

Betterment Offers

Betterment is an automated investing service that aims to provide optimized investment returns for individual, IRA, 401k, and rollover accounts.

Investments through Betterment are liquid and can be sold if funds are needed. Additionally, dividends earned are automatically reinvested and any portfolio that is off by 5% is automatically rebalanced.

There are two fee structures: Digital and Premium

Plan Annual Fee Features
Betterment Digital 0.25%

Fees based on account balance

$0 Minimum balance. Digital tools and access to in-app messaging with financial advisors
Betterment Premium 0.40%

Fees based on account balance

$100,000 Minimum balance. Access to a team of financial advisors for account monitoring and unlimited phone calls and emails support.

Digital

  • Personalized financial advice – know how much to invest, your recommended asset allocation, and more.
  • Low-cost, globally diversified investment portfolios – invest in funds chosen to help maximize your money at various levels of risk.
  • Automatic rebalancing – maintain your target allocation when the market causes it to shift.
  • Advanced tax-saving strategies – automate tax loss harvesting and asset location to increase your after-tax returns.
  • Everything in one place – sync external accounts to get a clear view of your money.
  • Reliable customer service – Customer support available 7 days a week.
  • Access to licensed financial experts – get the licensed expert answer your financial questions.

Premium

Get all of the benefits of the Digital plan

  • In-depth advice on investments outside of Betterment – create a plan for managing 401(k)s, real estate, and individual stocks.
  • Unlimited access to CFP® professionals for guidance on life events – talk to an expert during life's moments like marriage, new baby, new company benefits, or retiring.

What Differentiates Betterment?

Investments:Similar to many robo-advisors, Betterment investments follow modern portfolio theory focusing on benefits of diversification. Depending on your risk tolerance and goals, you have the option to choose among 12 asset classes with an automatic rebalancing of portfolios. The algorithms check your investments daily and invest in fractional shares so there’s no uninvested cash left in your portfolio. Additionally, the Premium account is monitored by financial advisors.

Account minimum: With Betterment Digital, there is no required minimum deposit. There is a $100,000 minimum balance required for the Premium product.

Goal-based saving: You begin the signup process by going through a goal-setting exercise which returns a series of goals based on your answers. Each goal gives you a recommended target and asset allocation. You can adjust these goals as you like and add additional goals.

How To Get Started With Betterment

It only takes a few minutes to sign up for Betterment. After answering a series of questions, you can link your checking account and transfer money once or set up recurring deposits. Whenever you move money into your account, Betterment automatically purchases exchange-traded funds (ETFs) based on your defined asset allocations.

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