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Novel Investor

Betterment Review: Simple Investing For Everyone




By J.P.

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’s the perfect combination for the beginner and seasoned investor.

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 put 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.  A Betterment account 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 is 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 0.15% to 0.35%, makes it a very competitive choice for investing your money and you won’t find any hidden fees popping up either.

There are three pricing plans known as the “Builder”, “Better”, and “Best” plans.  Each plan has its own requirements based on a minimum balance.

The “Builder” plan has no minimum balance requirements but does need a $100/month minimum deposit.  When your account reaches $10,000 it moves to the “Better” plan, the monthly deposit becomes optional and next day deposits are available.  There is also the option to upgrade between plans for a small monthly fee.

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.

Our Take

With all the options out there, Betterment offers a highly competitive choice that should be considered by everyone.

If you are looking to invest in individual stocks or bonds, go with a discount broker, Betterment isn’t for you.  If you are looking for the diversity of mutual funds or ETFs, Betterment fits that bill.  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 investment research, asset allocation, and regular portfolio rebalancing, I believe it puts Betterment on top.

I’m a big fan of the account dashboard, being one of the easiest to use and navigate.  Something you won’t find at most discount brokers.  It’s perfect for beginners and the regular brokerage account users will find it refreshingly simple.  It’s worth taking the time to try out the demo account Betterment has set up.

As the title suggests, Betterment offers simple investing for everyone.  The company automates everything and does all the leg work for you.  If you are new to investing or just a seasoned veteran looking for something simpler, Betterment has an account for you.

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This article originally published February 23rd, 2012 on Novel Investor