Let’s face it, investing is complicated, time-consuming, and just scary sometimes, especially when it’s looked at for the first time and Betterment believes it has the answer to these problems.
The typical brokerage firm can be downright intimidating for new investors and too costly for an experienced investor. A Betterment account eliminates the intimidation, providing easy to use tools at a low-cost, all while maintaining a goal oriented, long-term approach to investing your money. It sounds like the perfect combination for the beginner and seasoned investor. But is it?
What Is Betterment?
Betterment is an investment service aimed at simplifying the process of investing your money. I’d classify it as an alternative brokerage. Like any normal brokerage account, you still invest your money in the stock market. Only Betterment does all the hard work of researching where to invest your money. I don’t know of a discount broker that does anything like it.
With a typical brokerage account, you can spend days researching, reviewing, and evaluating different stocks, bonds, mutual funds, or ETFs and still not be sure what is best for your money. Betterment eliminates that time-consuming process. Which can be one of the most difficult investing obstacles.
The Betterment investment committee chooses a basket of stock and bond ETFs to make up the Betterment portfolio. Which is based on a long-term investment view. While the portfolio won’t change too often, it’s reviewed regularly and adjustments are made, like the recent addition of international exposure.
Your account will be invested in the Betterment portfolio. You just have to decide how much risk you want to take. It’s that simple. Betterment will automatically do the rest for you, set up the perfect asset allocation based on your selected risk level, and rebalance your portfolio regularly.
Competitive Low Costs Plans
Betterment recently overhauled its pricing structure. The new lower cost pricing – a flat fee of 0.25% – makes it a very competitive choice for investing your money and you won’t find any hidden fees popping up either. This plan has no minimum balance and is perfect for anyone just starting out or who has an understanding of investing.
Two other plans exist for those who might want addition advice. The “Plus” and “Premium” plans have an annual fee of 0.40% and 0.50% respectively. Each plan offers calls with Betterment’s team of CFP professionals. I’d argue both are worth thinking about if you meet the minimum balance requirements.
Great Long Term Approach
With the addition of IRAs as an account option, new customers can immediately start saving for their retirement. A welcomed change that fits perfectly with Betterment’s goal-oriented savings philosophy.
The IRA options are a great example of that long-term investing approach which includes traditional IRAs, Roth IRAs, and 401k rollovers. When you open a Betterment IRA, you’ll get the same features of a regular account with the tax advantages of an IRA.
The goal-oriented savings approach that Betterment offers is a great way to visualize your saving successes. Remember, the account is still an investment account. It’s best to use it for those longer term goals. Saving for that summer vacation should be done in your savings account, saving for retirement fits perfectly with Betterment’s philosophy.
My Take
With all the options out there, Betterment offers a highly competitive choice on par with other brokerage accounts. Is it enough to get me to switch from TD Ameritrade? No, because I still prefer a more hands-on approach to investing.
So if you’re like me, and prefer more control over your money, then use a discount broker.
But if you are looking for the diversity of ETFs and don’t want the hassle of researching funds, Betterment is perfect. It meets my three requirements every broker should have: low costs, easy to use interface, and great customer service.
The new low-cost pricing puts Betterment on par with the major fund companies. Throw in the automated investment research, asset allocation, and regular portfolio rebalancing, I believe it gives Betterment an edge.
I’m a big fan of the easy to use account dashboard. That’s something you won’t find at many discount brokers. It’s perfect for beginners and regular brokerage users will find it refreshingly simple.
As the title suggests, Betterment offers simple investing for everyone. The company automates everything and does all the legwork for you. If you are new to investing or just a seasoned veteran looking for something simpler, give Betterment a try.
