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

Portfolio Strategy

What Were Your Total Betterment Returns in 2013?

We wanted to share all the ways we’ve made your portfolio as profitable as possible—and set the stage for an even better 2014.

Articles by Sarah Michaelson

By Sarah Michaelson
Senior Product Marketing Manager, Betterment  |  Published: January 17, 2014

We helped customers keep $2.6 million more of their returns with our behavioral guardrails.

We saved a total of $27 million in trading costs for all customers.

We saved customers a total of 2,719 days by efficiently managing their account.

The start of a new year is a point of reflection as well as forward thinking for your investments. But if you made the common mistake of assessing only your raw returns for 2013, you probably didn’t get the whole picture. Here’s why.

It’s important to think about returns net of costs, net of time, and net of behavior. These are three powerful factors that play into the amount of your actual take-home return. At Betterment we work hard to optimize your portfolio on all three fronts.

What does that mean for you, as an individual investor? We decided to quantify the real value we provide in terms of saving you time and money, as well as the behavioral guardrails we’ve built into the Betterment product—which help you avoid poor investment choices (or emotional reactions to the market) and thus increase your actual take-home returns.

Note that our end-of-year email to you included numbers as they pertain to your individual account (if you’re a Betterment customer and didn’t receive this email, please email me.)

Read on to learn more about your true returns with Betterment.

Betterment = Better behavior

You know that Betterment automates good behavior; it’s part of our mission and philosophy. Good behavior means: not reacting to market swings; rarely changing allocations; and depositing regularly to build wealth (which also helps us rebalance without selling shares). By automating excellent investment habits, we take you out of the picture, so you keep more of your gains.

But we wanted to quantify this particular value for you. Better behavior sounds good, but what’s it worth?

According to our new, rigorous analysis of investor accounts, what we found is that Betterment helps to close the behavior gap in significant enough ways that our investors take home an extra 1.25% on average. That amounts to a total of $2.6 million in returns to all customer accounts.

Betterment = Cost savings

In 2013, we made 3,915,871 trades, which would have cost about $7 per trade at a DIY brokerage. That’s a total of $27 million in trading costs we saved for Betterment customers.

What’s the potential benefit to you? Let’s say you made 51 deposits last year, roughly one per week. We used those deposits toward rebalancing your account, so that every dollar was distributed across our 12 ETFs.

Now let’s say we made about 371 trades (roughly once a day) to balance the allocation in your portfolio, not including dividend trades. If you’d made those 371 trades yourself through a DIY brokerage, it likely would have cost you about $2,597.

Betterment = Time savings

At Betterment, you don’t have to execute any trades—we take care of all that. But if you’d gone the DIY route, we estimate that each trade would have taken you about a minute.

Given that we made 3,915,871 trades in 2013 on behalf of customers, that amounts to 2,719 days in total time saved for everyone who uses Betterment.

What might that have meant for you, personally? With Betterment making those 371 trades, as in the above example, that’s an estimated 6.3 hours saved—almost a full work day that you didn’t have to worry about or even touch your portfolio.

Bonus: Our trading and automatic allocation helped us rebalance your account without selling shares, because we rebalanced with every deposit. Not having to sell shares means that we kept your capital gains tax bill low.

As you can see, 2014 is off to an even better start than you thought, because now you know in detail how we’re optimizing your behavior and your portfolio so that you end up with bigger returns.

Curious to learn more about returns? Check out our primer, “The Right Way to Gauge Investment Returns.” 

Recommended Content

View All Resources
Are Bonds Safe When Interest Rates are Rising?

Are Bonds Safe When Interest Rates are Rising?

History shows that fears of bond losses when interest rates rise are largely overblown.

How Will the Election Affect Your Investments?

How Will the Election Affect Your Investments?

Elections and political events aren’t likely to impact your long-term returns. Instead, focus on lowering your fees where possible, and maximizing your tax efficiency across your portfolio.

4 Common Mistakes When Investing in Target-Date Retirement Funds

4 Common Mistakes When Investing in Target-Date Retirement Funds

Target-date funds are very common in retirement accounts because they automatically adjust over time. However, plenty of people make mistakes choosing TDFs, which can hurt long-term returns.

Start your investment plan

I am

years old and

  • Not Retired
  • Retired

.

My annual income is

.

Experience the new way of investing. Sign up today.

Start investing smarter

Get started

Refer a friend or family member and get up to 1 year managed free

Refer a friend

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.

Search our site

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