Betterment Investing Review: Make Investing Automatic

Joseph Meyer
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About Betterment

Betterment was launched with the mission to transform the financial lives of people by making investing simple, easy and affordable.

It’s a goal that’s ambitious enough to excite some but daunting enough to have others asking questions or even raising their eyebrows.

How do they do it?

How can they possibly provide investing tools and services at the same level as a full-service financial advisor for a fraction of the price? How can they eliminate all the hassles and headaches of investing for their customers?

As with anything, you have to try it to find out. The investment world is notoriously complex and intimidating for most investors. But it doesn’t have to be. Betterment has changed my life by making investing accessible and affordable. You can see Why Betterment Is Different.

How Betterment Works

After spending years in a rock band, I lost a lot of money. I had to join a string of temp jobs to cover ordinary living expenses, and I hadn't saved up any money at all. I was one of the world's worst savers – until I met my wife, that is. Marrying the love of your life is the most magical experience in the world, but it also creates a new set of financial challenges.

I decided that I needed to fix what I'd broken. So I set a goal: to be worth more than one million dollars. My wife was supportive, but she also thought that we would never get there. She was making a decent salary at the time, but her salary increased by only a small percentage each year. Would we really have enough?

A better question, I thought, was how to make enough happen quickly. I started asking my friends who were older than I was and had been through the same kind of life event – buy a house, get married, have children, all while making decent money. It had all worked out in the end for them, but how were they able to do it?

Betterment Advantages And Disadvantages

Investment companies have been around for more than 100 years. In that time, they have offered a variety of services for retail investors and the institutional investor markets. The ability of investment companies to offer a variety of services is because each company targets a different audience. Some companies aim their services at retail investors, while other firms aspire to service the professional or institutional trader.

With the advent of the internet in the 90s, investment companies have moved away from mail and telephone based customer services to a digital platform. This platform allows investors to interact with each other in a social network while learning about the market and the investment company’s products and services.

Investment companies have found that a social network is good for attracting and retaining customers. Not only does it facilitate the delivery of information about the company and their products, it also promotes loyalty and brand awareness through reviews, ratings and participation.

When you are looking at investment companies, you may find it is difficult to form an opinion about the company and their products because you do not have a wealth of peer reviews to evaluate. This is the reason that many people choose Betterment Investing. As a digital investor review platform, the Betterment Investing website is one of the best places to find investment companies and their services discussed by peers. Using the Betterment Investing website to compare investment companies is one of the easiest ways to find the company and their services that best meets your needs.

Betterment Pros:

Betterment Cons:

The Betterment fees are high compared to traditional mutual funds. However, the fees are lower compared to other robo-advisors with “tax-loss harvesting.”

Betterment doesn’t offer Traditional Individual Retirement Accounts (IRAs). But, investors can hold a backdoor Roth IRA.

The Betterment Investment Methodology

Betterment is what’s known as a robo-advisor, which means they have an algorithm to guide you beyond asset allocation (which is what they provide with advice).

Instead they have a plan for you to save and invest for retirement automatically based on your goals, timeline and risk tolerance. These plans are guided by a few key principles:

Asset Allocation.

By having a most of your money invested in the stock market, you’ll have a very well-balanced portfolio. To do this, they take advantage of ETF (exchange-traded funds) which provide instant diversification across several asset classes.


Betterment’s portfolio is designed to work in almost any market. They do this by using many different asset classes like stocks, bonds and real estate, and then by choosing the right proportion of each. With a stock and bond allocation, you’re automatically taking the market risk out of your portfolio if one of these sectors goes down.


Tax-loss Harvesting

Liz McGladrey points out that one huge potential benefit of the automatic investment service is tax loss harvesting.

Keep in mind that tax loss harvesting and rebalancing aren’t automatic functions of the service. However, you can set it up to happen automatically. If you do, it’s essential to understand that this does not mean Betterment will be tweaking your allocation once a week or even month based on your current market situation. What it does mean is that investments declared as taxable assets will be sold when your theoretical tax liability is the highest, thus saving you money on those taxes.

This will happen on a very small scale and is more about protecting your overall investment than making huge payoffs. Yet, over the long term, it absolutely has the potential to make a significant impact.

How Betterment Compares

Banks and traditional brokerages are charging you a lot of money to maintain your investment portfolio. At the same time, the minimums required to get started with these services is higher.

In addition, most traditional service providers take a long time to execute your sell/buy trade, leaving you with very little oversight and control of your investments.

And as you’re reading this, you’re probably thinking, “Why would I trade my traditional broker for a betterment investing review?” There are number of reasons for it. Let’s list them down:

Betterment Accounts and Options

If you want to invest regularly, attractively, and with an eye on long-term growth, Betterment can be a great account to have. You can set up your account and automate deposits at a very low cost. Betterment is a full-service financial management service. You can do everything from setting up your account to following your accounts progress right in the Betterment website.

Betterment automates the investing process. After you set up an account you don’t have to choose funds or rebalance your account. Betterment incorporates the best portfolio timing formulas with the financial capabilities that only a big financial institution has. This means that Betterment can manage all of your investments across all of your accounts. This results in complete investment management as they’ll keep the investments you have in your brokerage accounts added to your Better account.

Betterment Digital

The Betterment Digital Portfolio is the flagship product of a fast-growing online investment service that automates portfolios of traditional and alternative investments.

The company was founded in 2008 by Jon Stein, an accomplished serial entrepreneur. With Betterment, Stein has taken the principles of modern technology (graphical interfaces, cloud computing) and applied them to the time-tested practice of investing. Since Stein’s first company, Magpi, was acquired by Intuit in 2010, he’s been on a steady path to disrupt the financial services industry. Since his experiences were largely positive, he launched a second robo-advisor (Betterment) in 2010.

At the heart of the Betterment Digital Portfolio is an active-passive hurdle rate portfolio management method called SmartEst. The SmartEst methodology draws from the ideas of Modern Portfolio Theory and a blending of Modern Portfolio Theory and the Modern Value Approach. Under SmartEst, investments are selected and weighted based on modern portfolio theory, or MPT. Portfolios are automatically rebalanced using Modern Value Theory, or MVP.

Betterment Premium

Sometimes it’s not about taking the plunge to make bigger investments, but about taking the plunge to make investment work for you instead of you working for your investments. Instead of investing manually, you could account where your investments can actually be smarter investments.

Betterment provides a premium platform to help you do this. Whether you want to do automatic investing or are a seasoned investor, Betterment has the right investing platform for you. When automatic investing is used with the other features of Betterment, it can improve the way you automatically invest faster.

Betterment is growing in popularity with people who don’t necessarily want to be caught making poor investment decisions just because they are a new investor. If you’re one of these people, Betterment Premium Investing is one of the great features you will want in your account.

Here are other reasons why Betterment Premium Investing is recommended for everyone:

It uses robo-advising technology to provide automatic portfolio management, retirement planning, and tax-loss harvesting.

It updates your financial situation automatically with every auto-deposit, account, and investment you make.

Betterment Cash Reserve

Vs. Betterment Complete: What to Choose?

Betterment has some great attributes. For instance, their goal is to safely provide an investor with positive returns. This is done through a diversified portfolio program that is carefully developed to avoid loss.

Each investor creates an individual portfolio based on their risk tolerance and money management goals. This is a great opportunity for those who are new to investing and would like to start a retirement fund, as this can probably help them avoid the possibility of realizing major losses.

Another great component of Betterment is their low fees. This is because of the way they go about investing. There are two components to it. First, they charge a low annual fee that is based on the amount you have invested with them. Second, you will not pay any account fees or trading fees. Because of you will not pay any trading fees, your investment can grow fairly rapidly.

The one thing that potential investors should know about Betterment is that it is a robo-advisor. This may not be what everyone wants to hear, but people who may not have investment experience may really want to consider using Betterment and these investment systems because of the years of experience that is provided by the company in how better to invest.

Betterment Socially Responsible Investing (SRI)

Betterment SRI funds are just like other Betterment funds. They use technology, not commissions, to deliver a great investing experience. You still get the same low management fee and personalized advice.

Now there are four ways Betterment makessocially responsible investing easy:

You can invest in over 1,000 new stocks and bonds …

120 of These Are ETFs from Companies that Meet a High Standard of Social and Environmental Activity…

And reduce your carbon footprint.

{1}. Your investment path- You decide which investment philosophy(s) are relevant to your own values and interests. You can try different combinations to discover your own investing profile.
{2}. You can opt out at any time- Just tell us on a form how you don’t want your money invested in a particular sector and we’ll do it.
{3}. An easy way to monitor your impact … is through an award-winning SRI video game, click here.

Betterment Flexible Portfolios

A Great way to Invest

Both my wife and I just got our very first 401k with Betterment for our new jobs. We plan on maxing this out, but we also wanted to contribute to an IRA.

We are young “ in our late 20s “ and definitely not wealthy, so we still need to invest conservatively.

I did a ton of research to find the best way to invest since I had no idea how to do it effectively or where to even start. Thankfully, I found Betterment.

They have a very cool service that automatically adjusts your allocation mix depending on your age, and also has an amazing tax sheltered account option that can be invested in either stocks or bonds. By automatically adjusting the portfolio based on age, we will slowly get more and more of our money invested in stocks as we get older. This would likely be a bad strategy to go with if I were 30, but since we are so young and the money is not significant, we can afford to lose some of the gains to enjoy the future tax benefits.

The cool thing is that we can adjust this at any time. So if we wanted to go with a conservative stock allocation, we would be able to adjust that whenever we wanted. I really appreciate this flexibility.

Betterment Tax-Coordinated Portfolio

Let’s start out with the most significant change to Betterment’s tax-savvy automatic investing service since it was introduced in 2008.

The new service is called Tax-Coordinated Portfolio. The Tax-Coordinated Portfolio enables you to enjoy automatic rebalancing that considers both tax loss harvesting and your Betterment asset allocation, in addition to your individual portfolio. In fact, when you choose this option, Betterment automatically maximizes your stock exposure in your tax-advantaged accounts (like your IRA or 401(k)) and reduces your exposure to stocks outside of tax-advantaged accounts, where you’ll face higher tax bills if you sell.

Using Tax-Coordinated Portfolio, you can also use certain stock exchange-traded funds (ETFs) that Betterment automatically reallocates from your taxable to your tax-advantaged accounts when prompted. A few seem great on paper, but make you wonder if there’s a catch.

Goldman Sachs Smart Beta

Goldman Sachs came out with its “Imaginary Portfolio” of similarly priced, small-capitalization stocks, which scored a similar return to the S&P index over the past several years. The two load funds offered by Goldman Sachs may be a better alternative to funds offered by Charles Schwab (which have underperformed the S&P index over the past year) as well as funds offered by other financial institutions.

BlackRock Target Income Portfolio

Named for its ability to create relatively consistent (though possibly below average) income from a portfolio of high-quality dividend-paying stocks, BlackRock Target Income Portfolio carries a 4-star rating from Morningstar and is also one of the best-performing funds in its class (high-yield bond category) since its 1993 inception.

The description of its strategy is deceptively simple. When its liquidity forecast suggests ample cash, the fund makes opportunistic, income-focused investments, and when the forecast suggests less cash, the fund buys bonds and loans to generate income. This strategy, executed by a team of professional portfolio managers, has consistently delivered higher yields than many other bond funds.

Betterment No-fee Checking

Betterment Key Features

Automatic Savings – If you don’t feel like you have enough money to reach your retirement savings goal, having your savings withdrawn from your checking account automatically can be a huge motivator. This is what Betterment calls Smart Saver. It’s a unique automatic withdrawal program that systematically withdraws a set amount of money from your checking account and invests those funds in your Betterment account every month. Ultimately, the goal is to build a target retirement portfolio, and with Betterment, that goal is more achievable for people who do not have a defined retirement plan.

Investment Options – With Betterment, you have access to a wide variety of investment options, including a target retirement fund or a self-directed account. They also have a location-based investment strategy, which provides users with investments based on their age and retirement goals.

Investment Advice – Many people who use traditional investment options first seek out guidance from a financial advisor. With Betterment, you get personalized investment advice that is aligned with your risk preferences. So, if you’re the type of investor who is looking for advice on a diversified portfolio, Betterment can help. But if you’re the type of investor who prefers to construct a portfolio with self-directed investments, they won’t try to persuade you otherwise.

How To Sign Up For A Betterment Account

Betterment is a robo advisor that will automatically invest your money in low-cost ETFs. Robo advisors like Betterment are becoming more and more popular as they make investing simpler and cheaper than ever before.

To sign up for a Betterment account, you have to go through a sign up page. You fill in some basic information, including your birth date and your current income. You also have to select a risk tolerance.

Besides selecting a risk tolerance, you also need to agree to a kind of account creation agreement that describes the expected return Betterment will deliver to you. If you think you can “beat the market,” this may not be the right option for you.

Once you sign up, you will need to deposit money in your Betterment account in order to start investing in stocks and ETFs. you can use an electronic fund transfer, which takes two to three business days to process.

Once you deposit money into your account, you can change the risk tolerance you selected from the slider on the dashboard and begin making changes to your portfolio.

Why You Should Open An Account With Betterment

It’s the end of the year, and you’re doing your year-end taxes. Later you’ll have an argument with your spouse about whether you’ll put away money for taxes or buy a new TV.

Or you’ve just paid the loan on your car, and you’re ready to treat yourself with a new suit.

Or you’ve just paid off your credit card balance.

Are any of these starting to sound familiar?

Betterment is an automated investing service that can help you build wealth by investing small amounts of money on a regular basis through a low-cost automated investment plan.

The secret to successful investing is to boost your contributions over time, reinvest your dividends, and secure your profits through tax-reducing strategies.

All of that is done for you by Betterment, automatically.

In Betterment, you have a personal investing consultant, and an automated investing service. Betterment invests your money in a mix of stock and bond funds based on your risk profile. You can also choose target-date funds, which are designed for investors who want to invest with a goal in mind.