In response to our post on Cutting Out Middle-Men, one reader asks:
A good question. How do Betterment customers choose the level of risk that’s right for them?
First, Betterment focuses its customers on the most important choice in investing: the allocation between Stocks and Bonds. Over a long horizon, the allocation accounts for upwards of
90% of the variance in returns (here’s one of multiple sources), which is another way of saying it’s basically all that matters. By focusing on one choice, many customers are able to make better decisions than they might if they were distracted by other, less meaningful choices.
Second, Betterment gives customers tools to help make this choice. We offer a forecast of future returns based on a customer’s investment allocation and we recommend an allocation based on a customer’s profile and preferences.
Third, we show customers the allocation decisions of others like them. That’s not only reassuring, it’s also helpful information for deciding how to invest.
All this gives customers the better outcomes they want – without middle-men.
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Explore your first goal
This is a great place to start—an emergency fund for life's unplanned hiccups. A safety net is a conservative portfolio.
Whether it's a long way off or just around the corner, we'll help you save for the retirement you deserve.
If you want to invest and build wealth over time, then this is the goal for you. This is an excellent goal type for unknown future needs or money you plan to pass to future generations.