Betterment Review

by Jon Dulin · 2 comments

betterment reviewThere are two main problems many investors have when starting out: The first is not being able to hire a financial advisor because you don’t have enough assets. The second is figuring out how to diversify your investments.

These are problems because most financial advisors are looking for clients with $250,000 of assets or more. You can find some advisors who will take you on as a client with less, say $50,000, but most first timers don’t even have that. Up until recently, your option was basically save up until you have $3,000 and invest with Vanguard. But times have changed. Betterment solves this problem and solves the problem of diversifying your investments as well.

Betterment Review

How Betterment Works

To start investing (with as little as $100 per month) you simply choose your investing goal, risk tolerance and timeline. From there, Betterment will invest your money and periodically rebalance your portfolio for you. Betterment invests your money in one of their index portfolios consisting of ETF’s (see below). Depending on your risk tolerance and your goals, your portfolio will be created with a mix of the stock basket and the bond basket. That’s it.

Stock Market Basket

Vanguard Total Stock Market (VTI)
iShares S&P 500 Value Index (IVE)
Vanguard Europe Pacific (VEA)
Vanguard Emerging Markets (VWO)
iShares Russell Midcap Value Index (IWS)
iShares Russell 2000 Value Index (IWN)

Treasury Bond Basket

Vanguard Asset Allocation Fund (VTIP)
iShares Barclays Short Treasury Bond Fund (SHV)
iShares Barclays Aggregate Bond Fund (AGG)
iShares IBoxx Investment Grade Corporate Bond Fund (LQD)
Vanguard Total International Bond ETF (BNDX)
Vanguard Emerging Markets Government Bond ETF (VWOB)

When you are first starting out, Betterment takes a fee of 0.35% to manage your money and that decreases as your account size increases. There are no other fees that they charge. (Note that if you forgo the $100 monthly deposit, you will be charged a monthly $3 fee instead of the management fee). Of course, you still pay the management fees of the underlying ETF’s that you invest in. But since they are ETF’s, the management fees are low.


Betterment has been around since 2010 and is protected by SIPC insurance, like most investment brokers. Note that SIPC insurance does not guarantee you against loss of money like FDIC insurance does. It covers you in the event of fraud.

Betterment preaches investing to reach your goals and to focus on the long term along with diversification and balancing risk and reward.

Why I Recommend Betterment

I love Betterment because of its simplicity and low fee structure, not to mention it follows my rules for what you can control when investing. Additionally, it is a great way for first timers to begin investing. The downside of it is that there are only a handful of ETF’s you can invest in. However, since the site is tailored specifically to first time investors, less is more. I find for those just starting out, having more options gives them “analysis paralysis” and they end up doing nothing because they are overwhelmed.

More specifically, I like Betterment because:

It’s Simple: I set my goal and forget about having to play around with my allocation. This saves me time and money because I don’t have to make sure my portfolio is balanced correctly and I don’t have to pay to trade ETF’s so that my portfolio is in balance. Betterment takes care of all of this for me, and they don’t charge me for the trades when rebalancing my account.

In the event that I would want to change my allocation, say from it’s current 90% stocks/10% bonds, all I have to do is log into my account, move the dial and save. Betterment takes care of the rest!

Higher Returns: This is huge for everyone. By using Betterment, they invest my money for me. I am not on my own when the market drops and get scared. They keep me in the market which is exactly what you want to do when investing for the long-term. Constantly buying and selling is going to get you nowhere fast.

Access Anywhere: You can access your account at home and on the go with apps for Android and Apple.

In a nutshell, Betterment makes investing as easy as it possibly can be. They provide professional money management for those without a lot of money to invest and do so for a fee that is more than reasonable. All you do is open the account, tell them what you want to invest your money for (long-term savings, a house, etc.) and set up a monthly automatic transfer to Betterment. From there, Betterment handles the rest. They rebalance your portfolio, make sure it is instantly diversified, reinvest dividends for you and minimizes any taxes. All for a super low fee that you can’t get anywhere else for someone doing the same thing.

Full Disclosure: I am not getting paid for this review. If you do click on the ad below and open an account, I will get a commission. (Thank you in advance for anyone that does go this route.) I personally have a Betterment account and think it is a great thing.

Have you tried Betterment? What do you see as the benefits and drawbacks of the site?

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{ 2 comments… read them below or add one }

Simon @ Modest Money December 30, 2013 at 12:17 am

Betterment has removed the hassle from investing and given even the newbie investor a platform on which they can invest in a clear, consistent and well researched manner; in investments that have been demonstrated over time to be the better option for the average investor – index funds.
The beauty of it all, simplicity and affordability!
Simon @ Modest Money recently posted..Compare the 5 Best Online BrokersMy Profile


Jon January 2, 2014 at 9:56 am

That’s why I love it – it’s really simple to open an account and start investing. You don’t need to have a degree in investing. Just understand some of the basics, set it and forget it!


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