What You Need To Know About Betterment

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hat is Betterment?  Betterment is an SEC-registered investment advisor built to help you make the most of your money from cash management to investing smarter for the future.

As of April 2019, the online investment company managed $16.4 billion in its Assets Under Management (AUM).  


Although the official launch of Betterment was in 2010, there were many milestones for this platform to accomplish before becoming one of the largest "robo-advisors" for personal investments.  


The company was founded in 2008 by Jonathan Stein, because he wanted to make life better for consumers and to force change in the financial industry as a result of flaws that he witnessed working as an investment consultant at First Manhattan Consulting Group.   

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As a customer of Betterment, their algorithms designed a tailored retirement plan just for me.  Why is that important?  I've worked in the investment field, and I understand first-hand that I do not have the time any longer to research thousands of stocks and bonds.

The robo-advisor looks at a variety of factors from age to risk tolerance and customizes the plan that is right for me.


Is Betterment Good for Investing


Betterment is an excellent way to gain exposure to the investment market based on your risk tolerance and time horizon.  It is also an excellent resource for you to obtain a well-diversified portfolio if you are looking to put some money into stocks and bonds, or perhaps you are looking to start a retirement fund.

From risk reduction to asset allocation, Betterment uses Exchange Traded Funds (ETFs) for its investment classes.  ETFs are a basket of securities that invests in a variety of stocks or bonds.  For example, you may be interested in buying shares of Apple, Google, IBM, and Microsoft.  The hurdle many households face is each stock is relatively expensive to invest.  However, an ETF designed to invest in those above can easily be purchased with a tech ETF.

ETFs have broken down hurdles allowing anyone to purchase multiple stocks at once affordably.  For instance, you can gain exposure to tech companies, bank stocks, oil and gas, real estate, and many other sectors, industries, and countries.
When you invest, there are two types of securities: equities and bonds, and Betterment allows you to invest in one or both.

ETFs are great for investing and retirement funds because these investment tools have benefits and advantages from liquidity access and tax efficiency, to low commissions and fees.

Source: Betterment.com

Is Betterment a Safe Investment

When it comes to protecting your wealth, all investments have risks, and nothing is ever 100% safe.  From inflationary pressures to political uncertainty, any amount of money, whether invested in stocks or bonds, face a particular amount of risk.   

To help protect consumers, investments must be SIPC protected.  SIPC stands for Securities Investor Protection Act and "protects against the loss of cash and securities" up to $500,000 per account.  So if you have two accounts, you are protected up to $1,000,000 or $500,000 per account.  

The protection of SIPC is very different than that of the FDIC for bank accounts.  The SIPC does not protect the value of your securities because there is still the market risk that can depreciate or appreciate the asset's value.

All assets under the company's purview are protected by its fiduciary duty, ensuring personal investments and company funds never commingled.  

When you deposit money into an account, you maintain full control of the investment.  You can transfer, withdraw, and make additional deposits at will.  With their two-factor authorization protecting your account, the added layers of security make it very difficult against malicious hackers.

Can You Lose Money with Betterment

While Betterment is regulated by the Securities and Exchange Commission and is a member of  FINRA, all investments face risk in its value.  It is possible to lose money with Betterment through the value decline of your investments' value as a result of market risk.

What is the Minimum Investment for Betterment
Betterment offers two platforms for investors.  The "Digital" platform charges an annual fee of 0.25% with no minimum balance.  The second platform, "Premium," charges 0.40% but requires a $100,000 minimum balance.

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What Are the Betterment Fees?


As with many investment services, there are fees, and Betterment is no exception to the rule; however, the management fees are minimal compared to many in the industry. At a low charge of 0.25% management fee per year for investment and retirement, you'll be covered for all trading costs, transaction fees, and management fees in your account.  


Where else can you get access to a customized-tailored retirement plan for $2.50 for every thousand dollars invested?  


Betterment does offer a Premium service requiring a minimum balance of $100,000, and the fee increases from 0.25% to 0.40%, gaining you access to "unlimited over-the-phone access" to their Certified Financial Planners professionals. 


Can You Withdraw Money From Your Betterment Account

There are some investment advisors requiring a hold policy for a designated amount of time when you want to withdraw your money. With Betterment, there is no holding period and you can withdraw your funds at any time. The firm prides itself that your money is "always accessible to you." 


Now, this doesn't mean you will receive your funds immediately. The processing, transferring, and rolling over your money takes time and with Betterment, it generally takes four to five days.  


Can You Transfer Your Betterment IRA to a 401(k)


Because of when the retirement funds were taxed, the IRS rules against transferring Roth IRAs to your employers 401(k); however, if you are looking to move a Traditional IRA into your 401(k), this is allowed. Roth IRAs are invested after it has been taxed. A Traditional IRA has not been taxed when invested.  


Does Better Charge Fees for Closing an Account

Earlier, we mentioned that Betterment prides itself on your money is "always accessible to you." It is no different when you want to close your account.  


If you decide to delete or close your account, the annual fee will be prorated for only the months your account was activated. Other than the annual fee prorated, there are no additional fees with a $0 balance. Once your account reaches $0, you can delete the account.

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Why You Should Open an Account with Betterment


One commodity that can not be purchased is time.  Although many online brokers are quickly doing away with trading fees, there are not many households who have the time to evaluate and pick the right stocks for their portfolio. 


It is very time-consuming.  Let alone; you have to continue monitoring those investments after your purchase because you'll have to establish selling points because it is not wise to buy stocks and then not watch them for several years and find out these assets are worthless.

Opening an account with Betterment is one of the most affordable resources available to consumers looking to start saving money, investing, and build their retirement. 



At a 0.25% annual for the primary account service, there is only a hand full of competitors that can compete against this.  With easy access and exposure to a vast array of markets, countries, sectors, and more, you have no excuse not to save money. 

Take advantage of the low rates and start saving money today.  Whether small monthly amounts or lump sums, start today and remain consistent.



What You Should Know About Betterment.JP

Source: Betterment.com


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