www.Betterment.com/Start – 5 Reasons to Invest with Betterment

By now, any smart investor knows that the key to successful investing lies not in trying to beat the market by trading individual stocks, but investing for the long term in low-cost index funds. It might not be as exciting, but it will put you ahead of the average investor, and even many expensive personal financial advisers. Recently, robo-advisors such as Betterment have made that kind of investment strategy easy and affordable, leveraging automation and algorithms to give investment advice at a fraction of the cost of a human financial advisor. Here are five reasons to invest with Betterment.

#1 – No minimum deposit (Betterment offers up to 6 months of service free if you sign up here.)

Some robo-advisors require a minimum deposit to start investing. Don’t even think about trying to find a financial advisor to provide personalized advice unless you have a sizeable amount to start with. You can open a Betterment with $0, and you’ll never be charged a minimum account fee, although they do charge a minimum $3 per month fee if you don’t set up a $100 per month auto deposit.

Even though Betterment allocates your money to different goals, your fees are based on the average balance of your entire Betterment portfolio, not each goal. You can set up as many different goals as you want without incurring any additional fees.

#2 – Tax loss harvesting

Nobody wants to pay more taxes than necessary and tax loss harvesting can help you lower your tax bill by selling loser securities and buying a similar asset to replace it. Those capital losses can be used to offset gains on other securities, or even offset up to $3,000 of ordinary income. Some other investment platforms require that investors have portfolios worth at least $100k before they can take advantage of tax loss harvesting. Betterment customers can take advantage of this feature regardless of balance, at no extra cost.

#3 – Low fees

Cost is one of the most significant drivers of investment advice so it cannot be ignored. Betterment believes in charging their customers transparent commissions in exchange for goal-based investing advice. For accounts of $0 – $10,000, they charge 0.35% with a minimum of $100 per month auto deposit or $3 per month without an auto deposit. Accounts with balances between $10,000 and $100,000 pay commission at a rate of 0.25%. Accounts with balances greater than $100,000 pay a 0.15% commission.

Some robo-advisors may offer lower fees for accounts on the low end, but these initial savings are very small and not worth giving up all of Betterment’s other advantages.

Betterment’s single management fee covers everything you need including transactions, trades, transfers, rebalancing, advice, and account administration. Betterment never charges transaction fees to buy or sell securities.

#4 – Ease of use

Betterment has one of the simplest signup processes around. Provide some basic identification information, link a bank account, set a goal (such as save for an emergency fund or a down payment on a house), answer a few questions to allow Betterment to figure out your risk tolerance, and you are up and running. And that’s the hard part.

Once your account is set up, Betterment handles the heavy lifting by automatically rebalancing your portfolio when cash comes in or out or when the allocation to a particular asset class strays more than 3% from its target level.

How often do you have idle cash sitting in your checking account? Betterment helps you put that money to work for you with a feature called Smart Deposit, harvesting unneeded cash out of your checking account. Just set a maximum amount you need in checking and Smart Deposit monitors your account weekly to withdraw the excess. You can also set the maximum you want Betterment to pull out at any one time or opt to skip any Smart Deposit before it happens, such as when you have a large upcoming expense.

#5 – Good returns

First things first: Betterment is not intended to “beat the market.” Their portfolios are designed to keep up with the market. Your expected returns depend on your asset allocation and are subject to market fluctuations.

That said, in 2014 Betterment backtested the Betterment portfolio’s historic performance against the average returns earned by an investor using an advised portfolio. Over more than 30,500 periods, the Betterment portfolio outperformed advisor-managed portfolios 88% of the time, proving that an all index fund portfolio beats an actively managed portfolio in the vast majority of cases.

The bottom line

Betterment combines the advantages of more sophisticated investing with a simple user interface. Their low fees are well worth it when you consider how well they’ve delivered thus far. Their focus on simple asset allocations and goal setting creates the perfect starting point for young investors and their low fees and valuable features make it a no-brainer for the experienced investor who is sick of overpaying for advice.