Free for 90 days: Sign up now and get 90 days managed free after your first deposit. See offer details

<title>Dismiss</title>
Financial Goals

The Cost of Being Human

The following article, by Betterment CEO Jon Stein, came out in the Huffington Post today.   While the stock market swings like a trapeze artist – “for my next death defying trick, I’ll plunge from even greater heights…” – many investors are busy locking in losses, selling low after having bought high. This kind of self-defeating behavior is what behavioral economist Dan Ariely would call “predictable irrationality.”

Articles by Betterment Editors

By the Editorial Staff
Betterment Resource Center  |  Published: September 1, 2011

Image Source: s_falkow

It’s not what people would do if they were thinking rationally, but it’s what people do when their emotions get in the way of rational thought. We’ve seen it happen time and again.

David Swensen, of Yale’s endowment, recently wrote a commendable piece about this behavior for The New York Times. In it, he criticized the “mutual fund merry-go-round,” which does little to protect investors’ long-term interests.

Swensen makes a compelling argument for revolutionary change in the mutual fund industry, with aggressive regulation and fiduciary standards for brokers. These are great ideas that would help investors. He also advises individual investors to abandon over-priced, under-performing mutual funds and “take control of their financial destines, educate themselves, and invest in a well-diversified portfolio of low-cost index funds.”

This second part, about individual responsibility, sounds charmingly idealistic. It’s a little like saying the solution to healthcare costs is for people to eat better and exercise more. No doubt true, but unlikely to happen.

The reality? Even with the best of intentions, many of us are still going to panic and chase returns at the wrong time.

Read on …

Recommended Content

View All Resources
Redesigning How You Manage Your Finances at Betterment

Redesigning How You Manage Your Finances at Betterment

Our new design represents a synthesis of a large body of customer feedback. We hope it meets your expectations.

Optimizing Performance in Lower Risk Betterment Portfolios

Optimizing Performance in Lower Risk Betterment Portfolios

In this methodology, we provide insight into how we optimize the performance of the lower risk bonds in Betterment's portfolios, including Smart Saver.

Smart Saver and Other Savings Products: Our Recommendations

Smart Saver and Other Savings Products: Our Recommendations

We know from talking to Betterment customers that holding cash isn’t always intentional; it’s a choice by default—not knowing how, when, or why to put your money to work. We developed Smart Saver to help with that.

Explore your first goal

Safety Net

This is a great place to start—an emergency fund for life's unplanned hiccups. A safety net is a conservative portfolio.

Retirement

Whether it's a long way off or just around the corner, we'll help you save for the retirement you deserve.

General Investing

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.

Smart Saver

You could earn 20X more than a typical savings account with our low-risk investing account for your extra cash.

How would you like to get started?

Your first step toward a smarter investing future starts here.

Create a Betterment account

Go ahead and join the smart, modern way to invest.

See what we can do for you

Tell us a bit about yourself, and we'll show you the benefits of investing with us.

Get a free investing checkup

Help us get a sense of your investing approach and see how you could improve.

Transfer a 401(k) or an IRA

Move an existing retirement account into a Betterment IRA.

Download the mobile app

Enjoy the Betterment experience anywhere on the go.

<title>Close</title>

Search our site

For more information and disclosures about the Betterment Resource Center, click here. | See our contributors.