Betterment is the largest robo-advisor service currently on the market. With an impressive $10+ billion under management, they are responsible for a lot of money.
Betterment is one of the first and now largest robo-advisor services in the investing realm. With Betterment, you create an ETF portfolio that invests in several different funds consisting of stocks and bonds based on your risk tolerance and investing goals. As certain asset classes outperform the market and underperform the market, robo-advisors automatically rebalance your portfolio so it doesn’t become too aggressive or too conservative.
Your parents or grandparents might use a financial advisor who does the same thing but costs more money. For example, Betterment charges 0.25% to manage your investments while a financial advisor charges 1.35%. Those investment management fees ultimately reduce your total account value and mean you can have tens of thousands fewer dollars to spend in retirement.
This Betterment review will help determine if automated investing with Betterment is a good option for you.
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To start investing with Betterment, you only need $1 to make your first investment. Although, you can create an account for free without an initial commitment.
If you want access to their financial advisor team, you will need a minimum account balance of $100,000. Even if you open an account with an initial balance of $100,000, the advisory service is optional if you just want the basic plan to automate your investments to only pay 0.25% instead of 0.40% in annual management fees.
The onboarding process only takes a few minutes. You will first be asked your name and annual income. The next screen will take you to three different investment goals: Safety Net, Retirement, or General Investing. Unlike other brokerages, there isn’t a quiz determining your risk tolerance based on several hypothetical market conditions.
The safety net goal is the most conservative strategy and an ideal place to park a portion of your emergency savings. You can also open a Traditional IRA, Roth IRA, or rollover your 401k to Betterment for your retirement goals.
At this point, you will create an account and submit all the necessary tax information. You can also create a joint account at this time as well. This can be beneficial if you plan to use Betterment’s tax-harvesting tools that come standard with both investment plans.
After creating an account, you will be able to adjust your asset allocation between stocks and bonds using a sliding scale from 0% to 100% stocks if you do not agree with Betterment’s recommendation based on your age. Betterment’s suggestion stock allocation will always be at least 55% and never exceed 90%.
Finally, Betterment will allow you to fund your account and make your first investment. Using a graph, Betterment will show you the best-case and worst-case end balances for when you retire based on your one-time or monthly commitment. Don’t worry, you can always increase the commitment later.