What is Betterment?
Betterment is a Robo-advisor that uses algorithms to recommend an investment portfolio with automatic investing to reach your financial goals. With Betterment, you get a simple, all-in-one investing and saving platform.
As part of a robust investment strategy, Betterment offers a comprehensive suite of products and tools. From taxable accounts to savings accounts. From college planning to retirement goals. You can improve your financial life with the help of financial advisors who has your best interest in mind.
How Does Betterment Work
Betterment starts to do its job after you’ve entered your personal information such as your age and income. The Robo-advisor assesses your risk level and existing financial accounts. Immediately afterward, you’ll be given a portfolio strategy and asked to pick one or more financial goals. These types of goals can be short-term like building an emergency fund or long-term such as investing in tax-advantaged accounts for retirement.
Through the Robo-advisor, you can do the following:
- Access no-fee checking account and cash reserve with advanced financial planning tools.
- Share how much you want to save and by when and get recommended stock-and-bond allocation based on your goals.
- Set recurring automatic deposits into your goals and investment accounts.
- Auto-adjust portfolio allocations as you near your goal to reduce risk.
- Easily adjust your asset allocation yourself or build a custom portfolio.
Betterment was founded in 2010 as an alternative to expensive financial planners with large minimum balance requirements. Betterment Securities is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash).
Betterment Portfolio Options
Betterment Core Portfolio uses low-cost ETFs (exchange-traded funds) that mirror established indexes to help build diversified investment portfolios. The strategy uses Modern Portfolio Theory as a basis for asset allocation. Betterment invests in up to 13 different asset classes. Your asset allocation mix depends on your individual profile and goals. You can review any investment strategy’s historical performance before selection.
Goldman Sachs Smart Beta Portfolio aims to provide better returns compared to the conventional investing strategy.
Socially Responsible Investing allows you to choose how your money is invested in social impact companies focused such as climate.
Features and Benefits
With Betterment you get the following features based on your plan:
Betterment Digital Plan
Invest in the entire market, not just an individual stock. Account choices include individual, joint accounts, IRAs, and trusts with no minimum balances.
Betterment Premium Plan
In-depth advice on investments outside of Betterment and unlimited calls to a certified financial planner for investment advice.
With each plan, you may have access to the following benefits:
- Recurring deposits: automate your deposits on your preferred schedule/
- Portfolio rebalancing: automatic rebalancing keeps your account at a preferred ratio of stocks and bonds
- Dividend Reinvestment: reinvest dividends to balance your portfolio.
- Retirement plans: open a tax-advantaged account like a traditional and Roth IRA.
- Tax savings tools: automated tax tools to avoid paying unnecessary taxes. These tax strategies include tax-loss harvesting, tax coordination, and tax burden previews.
- Be 18 years or older
- Valid Social Security Number
- Legal resident of the United States
Management fee: 0.25% per year on your invested balance (assets under management), which covers all trading costs. Also, there are no additional transaction fees. Every fund your portfolio invests in charges fund fees that, in total, range from 0.03% to 0.50%.
Additional fees may apply to the specific financial products used.
Who is it best for?
Betterment is best for the hands-off investor who wants access to advanced investing tools and financial advice. This is not the online brokerage for those wanting to actively invest in the stock market. For experienced investors with larger balances, it may be limited in scope and access to additional asset classes.
- Betterment Cash Reserve: no fee cash management account is a high-yield cash account held in partner banks with FDIC insurance.
- Betterment Checking: no monthly account fees, maintenance fees, overdraft fees, or withdrawal fees, and all ATM fees worldwide will be reimbursed, including the Visa 1% foreign transaction fees.
- Betterment Retirement: access retirement planning tools by linking external accounts and choose to transfer your tax-advantaged retirement accounts like IRAs and old 401(k)s. Learn more about Betterments Roth IRA.
- Betterment Premium: a premium plan or financial advice package to get CFP® professional advice on the phone.
Betterment is a legit company and service. The company has a 4.8 out of 5-star rating with 31K reviews in the App Store.
In our Betterment review, the Robo-advisor shines with its simplicity, features, and transparent management fee. The simplified account setup lets you start investing to reach your financial goal sooner. You can’t go wrong with no minimum deposit nor minimum investment for Betterment Digital.
After signup, you get portfolio recommendations based on your risk tolerance along with fractional share investing to tax-efficient withdrawals. Additionally, if needed, you can access a cash management suite that includes Betterment cash reserve, checking account, and debit card. There’s also the option to upgrade to Betterment Premium.
Betterment offers 24/7 customer support via email and chat.
If you’re looking for personal advice, then the Betterment Premium plan may fit your needs.
Pros and Cons
- No account minimums and low management fees.
- Quick and easy account setup.
- Cash reserve and no-fee checking account.
- Flexible portfolios of mutual funds (index and ETFs) and Bond ETFs.
- Tax-loss harvesting.
- Access to human advisors.
- Additional cost for financial advisors, but typically not offered with Robo-advising.
- No custodial accounts.
- No self-directed investments (choosing your own funds).
- No 529 plans (college savings).
How to start a Betterment account
The time needed: 3 minutes.
Step-by-Step to open an account
- Get started
- Create an account by clicking on the link here.
- Enter your information
- Provide your first and last name, social security number, and address.
- Share your financial goals and why you’re investing and your time horizon.
- Account verification
- Identity is verified electronically otherwise additional documents may be requested.