Betterment is a computerized investing service that takes details about your age, and risk tolerance in order to organize an optimal portfolio for you to invest your money.
Betterment, as an investment platform is mainly made for people who want permanent long-term investments. It is among the lowest-priced robo-advisors in the investment industry. It currently has bout $14 billion of assets under management.
The main aim behind the setting up of betterment is to facilitate investment and make it take only a few minutes. The software highlights investments for you according to your goals and risk tolerance.
If you want your money to accumulate without you wasting a lot of time overseeing it, then Betterment is likely a good ground for you.
In the following lines of this article I’m going to help you understand the betterment rate of return and how this investment works generally.
Meanwhile, look through the table of content for an overview of what you’ll find in this article.
Table of contents
- How Does Betterment Work?
- How does betterment make money?
- Who should invest in betterment?
- Is Betterment a good Investment?
- How much do you lose to fees?
- Is it a good fit?
- Can you buy individual stocks on betterment?
- What is the average return on betterment?
- How to Use Betterment Checking and Betterment Cash Reserve to Earn More
- How does Betterment cash management stack up against the competition?
- How to gain access to Betterment’s Financial Advisors
- Conclusion
- Recommendation
How Does Betterment Work?
Betterment is a robo-advisor that offers personalized investment portfolios that are diversified across stocks, bonds, and other asset classes. Betterment aims to provide long-term returns while minimizing investment fees and taxes.
They typically charge a management fee based on the investment portfolio’s value, which can range from 0.15% to 0.40% depending on the portfolio size and the type of account.
Betterment reviews your goals and gives you a rough idea of how much risk they think you should take based on your age. Betterment’s rate of return, as it can vary depending on various factors such as the investment portfolio, market conditions, and more.
Since every decision you make immediately updates this sweet graph, you will always be mindful to know what type of growth you should expect or the precaution you’ll need to make to hit your goals.
How does betterment make money?
Betterment makes money from its annual fee: 0.25%, for its Digital Plan and 0.4% for its Premium Plan.
That amounts to $2.50 a year for every $1,000 you invest with them through their Digital Plan.
Betterment is the cheapest Robo-Advisor and the fact that they are also the biggest plays a huge part in their ability to maintain such low fees.
READ: 10 Simple Ways To Save Money On A Tight Budget This Year
Who should invest in betterment?
- Newbies who can’t invest on their own
- Investors who have less capital
- Hands-off investors
- Retirement planners investing long term
Is Betterment a good Investment?
Betterment is SIPC insured so it’s as safe as any investment service. Here below are what makes betterment worth investing in:
Zero trade or Withdrawal Fees:
You don’t need to be afraid of these Betterment fees. There’s no transaction cost for having access to your money. Add and withdraw money for free, just like you would a savings account.
Simple Hands-Off Investing:
Deep findings is not needed and you don’t need to monitor your investments daily, or worry about the tax implications of your actions. Everything is taken care of. If you haven’t invested yet, or are nervous to get started on your own, this service is for you.
Subsidized Portfolio Management:
Most portfolio management services will charge you 1% for an equivalent service. Even Lifecycle funds like what Fidelity offers will cost 0.75% or higher. These are 3x-4x more costlier than Betterment without half the features
Plot your Retirement with their Retirement Planning Suite:
This tool takes your entire financial picture into account as well as helping you determine what you’ll need when you retire. It plots the whole thing out for you and helps keep you on track so you can be confident you’ll have what you need when the time comes. It’s deeply integrated into the entire Betterment service.
ALSO READ: What Can I Invest In With 100 Dollars? An Expert Advice in 2023
How much do you lose to fees?
Betterment charges 0.25% annual management fee for their primary advisory service (or 0.40% for the optional Digital Plan). My total fund fee per year is 0.06%. So that’s a total of 0.31% being lost to fees per year.
How much does this give out at the long run? Let’s take these assumptions:
- An initial deposit of $1,000
- Monthly deposits of $1,000
- 30-year investment period
- 7% annual returns
At 30 years, you would forfeit about 5.89% of your returns (or $69k) to fees.
Betterment’s average fund fee is 0.07%–0.15%. Maximum of 7.52% of your returns being lost to fees.
Is it a good fit?
Definitely, with a self-directed brokerage you’d save tens of thousands on management fees. But you need to spend time learning about investing and managing your portfolio.
Can you buy individual stocks on betterment?
No, you cannot invest in an individual stock or fund at betterment. The goal of betterment is to invest in a globally diversified portfolio (which includes over 5,000 companies) made up of low cost and liquid ETFs.
What is the average return on betterment?
The stock market has historically returned an average of 10% annually. However, stock market returns vary greatly from year-to-year, and rarely fall into average.
How to Use Betterment Checking and Betterment Cash Reserve to Earn More
The average checking balance in the US is $8,100, and it gains 0.08% ($6.48) interest yearly. That’s why Betterment created the new savings and checking platform.
With Cash Reserve, you’ll earn a competitive APY with Savings. As a result, you’re able to earn substantially more than your average bank offers.
SEE: 10 Proven Ways To Handle Unexpected Expenses In 2023
How does Betterment cash management stack up against the competition?
Here below are some of the strategies betterment has been using to slam its competition.
Cash Reserve:
- Competitive, high-yield APY
- FDIC-insured up to $1 million
- Zero account minimum balance
- Zero fees on balances
- Unlimited withdrawals (compared to a limit of six with most savings accounts)
Checking:
- Worldwide ATM fee reimbursement
- Visa foreign transaction fee reimbursement
- Tap-to-pay debit card
- Zero account fees
- Zero overdraft fees
- No account minimum balance
- FDIC-insured up to $250,000
Betterment Checking also comes with a brilliant blue Betterment Visa Debit Card when you open your account.
BlackRock Target Income
A 100% bond portfolio with a goal of steady income paired with low risk. This portfolio lets you choose your income target between short-term and long-term fixed-income securities.
Charitable Giving
Instead of donating your cash, donate your security. Betterment’s Robo-Advisor will locate funds in your portfolio that you’ve held longer than one year to donate.
When you donate securities that have increased in value to a charity, you pay zero capital gains come tax time. If you like charitable giving, this might be a fit for you with your overall investing strategy.
How to gain access to Betterment’s Financial Advisors
Apart from the number of features that come with putting your cash at Betterment, you also have access to a reservoir of financial advice.
Most times, you just want to interact with a person and make sure everything is in check according to plan. And with Betterment investing, you can do that.
Financial packages presently offered:
- Getting Started Package ($199): A 45-minute call with a licensed financial expert. A step-by-step guide that will set you up for financial freedom and show you how to make the most of your accounts.
- Financial Check-Up Package ($299): A 60-minute call with a financial expert who will examine your investment accounts with a fine-toothed comb and look for ways to optimize your portfolio.
- College Planning Package ($299): A 60-minute call with a Certified Financial Planner to get all your ducks in a row for your little one’s higher education.
- Marriage Planning Package ($299): A 60-minute call with a Certified Financial Planner to secure a financial-friendly ride off into the sunset with your lover
- Retirement Planning Package ($299): A 60-minute call with a Certified Financial Planner that will equip you with all you need to know to live comfortably in your golden years.If you want something more hands-on, Betterment’s Premium Plan grants you access to unlimited financial support through their CFP team of professionals.
If premium plans aren’t your brand of bourbon, consider getting set up with an independent CFP professional through Betterment’s Advisor Network.
RELATED: 15+ Money Making Hacks in 2023 | Do at least 7 immediately
Conclusion
Betterment is an easy to use computerized tool ideal for new and hands-off investors. Nevertheless, what it achieve is by no means easy. It is an easy, automated, financial planning tool for both beginner and experienced investors.
Among others, it’s a beast of a service putting traditional brokerages to shame with both its technological power and solid returns. Betterment currently has over 400,000 customers and $16 billion in assets under management (AUM).
A completely automated investing tool that’s the best for newbies and hands-off style investors. They use modern strategies to earn you a higher investment return than you could on your own.
Betterment provides maximum clarity and keeps you in check with tools like their Retirement Planning Suite and Tax Impact
Take your hands off the wheel and let Betterment steer you towards financial freedom.
Recommendation
