Taking a look at Betterment.com

Sigh, I’m still not a fan of the stock market. I guess being out of the market the last few years has probably cost me financially, but I still don’t think I could take the stress of the ups/downs. The funny thing is that I still watch quite a few stocks, daily even, but I don’t own any of them.

Betterment.com contacted me recently and wanted me to take a look at their new site. I’d usually just ignore the email, but their site looked so pretty I decided, what the heck, I’ll take their call.

So, they set me up with a sweet referral site of my own, and I setup my account last week. The registration was pretty easy, but they do require a deposit verification, which I just completed this morning. So, you can setup an account in about 3 days or so. Pretty painless for an online financial account.

security deposit verified

must verify your bank account with two small deposits

One things I immediately like about Betterment is how easy on the eyes the site is. I don’t know if I’m just used to be blinded on most financial websites, but everything about their site is very muted, and I really like it. It makes it easy to focus on the data and not be distracted. But I’m a design nut (not that you’d know it from my site…).

Once you’ve verified your account, you can setup your asset allocation. Betterment lets you choose between two main buckets: stocks / bonds. Simple. If you’re looking to invest but don’t want to get into the nitty gritty details, and just want things to go on automatic…well, Betterment is probably a good fit for you.

set your asset allocation

I'm still avoiding stocks for now

For me, I’m still avoiding stocks, so I decided to invest my initial $250 deposit into all bonds. Yeah, I know it’s not recommended, but bite me, this is my account and it’s called “personal” finance for a reason. Plus, I’m a former trading addict…so yeah, it’s all bonds for me.

Yeah, I know it.

No stocks for you!

The neat thing with Betterment is you can compare your allocation and returns to others in your age and income range. Here’s something interesting I found….for my age group, the higher income demographic has been doing much better at investing on betterment than the lower income group:

high income investors do well with betterment

Rich get richer last year?

lower income not doing so well on betterment

Hmmm...why is this? Why underperformance last year?

Any guess on that stat? Very interesting.

Anywho, once you get all setup, there is a nice overview page, although since my $250 hasn’t deposited yet, you don’t see much, but you get the idea:

overview of my account

The "Overview" Screen. Nice.

The Fees

So, how exactly does Betterment make money? I mean, all these fancy pants graphs cost money to build and manage right? Well, of course, nothing in life is totally free. It depends on your account balance but for most of my audience here (and myself) it’s going to cost you 0.9%/year.

So why pay that fee? Well, part of the appeal is that you get access to some nice index funds that normally have like 100K account minimums. Also, Betterment will automatically rebalance your allocation if it falls outside some set guidelines.

So if you’re like, “I just want to invest, and know it’s going to rebalance correctly, and not have to worry about picking individual stocks/bonds (with say, Sharebuilder)…then Betterment might be a good fit for you.

I’ll keep you updated on the status of my 100% bond account of course.

To sign up for your own account: Click HERE

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  • http://www.blake.co.za/blog/ Jade

    Very informative post, thank you Debt kid.

  • Skip E. DaMann


    Although it does look like some nice information I fail to see a real benefit. For 1/10 of a percent more (1% annual fee) I have a dedicated financial advisor that manages my money. I can call anytime and since he is affliated with a major firm I get all the online tools and then some. I get access to all the “closed” funds as well. Also your readers should note that, like my advisor, the .9% fee is on top of the fees associated with any fund that you are invested in.

  • http://www.nickelsteamroller.com Michael

    Just curious, what ETF requires you have a 100K balance? To my knowledge every ETF that makes up your betterment.com account is listed here:


    The reality is that you could buy a target fund and it will automatically rebalance and also change your allocation as you approach your target year with no 0.9% fee.

    Betterment.com finally added international exposure which was long over due. I like the idea and simplicity of their approach. I love the automatic dollar cost averaging. But 1% compounded over 30 years it quite a bit of money you forgoing to just have someone buy ETFs for you.

    In my opinion the only benefit to betterment.com is the there are no broker fees which makes dollar cost averaging painless. This is the most powerful argument in their favor. You can literally add 10 dollar per week if you wanted of fractional shares. I have yet to find a brokerage account that lets you do anything even close.

    If you wanted to mimic betterment.com’s approach yourself just buy vanguard’s total stock ETF and total bond ETF. Rebalance ever quarter to meet your target allocation.

  • Joel

    I’m betting the reason why the higher income folks did better than the lower income was perhaps because they were less likely to get “shaken out” of the market when it was down, thus missing the rebounds. But yeah, it seems too simple of a system to justify a 0.9% fee on top of mutual fund fees…