Betterment Review: Investing Made Simple

Betterment Review: The Way Investing Should Be

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Put simply, Betterment is an ideal way to invest for anybody who doesn’t want to worry about picking stocks or mutual funds. Rather than creating an online brokerage account and facing tens of thousands of investment choices, Betterment automatically invests your money into index funds. They’ll divide your money between baskets of stocks and bonds based upon your risk tolerance. They’re simple, cheap, and a great point of access to the investing world.

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  • Low annual fee
  • Low min. investment
  • Stock investing

Editor's note - You can trust the integrity of our balanced, independent financial advice. We may, however, receive compensation from the issuers of some products mentioned in this article. Opinions are the 's alone, and this content has not been provided by, reviewed, approved or endorsed by any advertiser.
If you’ve been avoiding investing because you’re unsure how it works, that’s no longer a problem.

Betterment can provide full investment management, from portfolio creation, to periodic rebalancing, and reinvesting of dividends.

You’ll have your choice of a taxable account or a tax-sheltered retirement account. They even have strategies to minimize your investment tax liability in taxable accounts. And they perform all these functions for a very low annual advisory fee.

Once you open an account, all you need to do is fund it – Betterment takes care of everything else.

About Betterment

Founded in 2008, Betterment was the first automated, online investment platform, now commonly referred to as a “robo-advisor”.

Dozens of robo-advisors have come about since, but Betterment remains on the cutting edge of the industry. It continues as one of the most innovative platforms in the robo-advisor space.

Today, nearly every major brokerage firm in America has its own robo-advisor option, and some even have several. But Betterment remains the largest independent robo-advisor, with $16.4 billion in assets under management.

The company provides full-service investment management, comparable to traditional human investment advisors, but at a fraction of the cost.

Using the service, investors can have a portfolio diversified across stocks and bonds in literally thousands of companies, with an investment of just a few hundred dollars. Betterment offers both taxable accounts and tax-sheltered retirement accounts.

How Betterment works

Betterment uses MTP

As is typical of Modern Portfolio Theory (MTP) to create and manage your investment portfolio. It’s an investment strategy that emphasizes asset allocation based on targeted risk levels.

You begin by completing a questionnaire that establishes your investment goals, time horizon, and risk tolerance. Depending on your situation, a portfolio will be designed for you in various levels ranging from conservative (more bonds, less stocks) to aggressive (more stocks, less bonds).

They invest in 14 different asset classes

Your portfolio is comprised of investments in 14 different asset classes – six stock funds and eight bond funds.

Each asset class is represented by a single exchange traded fund (ETF). Since the ETFs are index-based, they’re invested in a portfolio that matches the underlying index. With the use of index funds, Betterment can keep investment expenses to an absolute minimum, which is a major reason why they can manage your portfolio at such low fees.

Your account will be fully managed

Once your portfolio has been created, it will be fully managed for you going forward. Betterment will provide periodic rebalancing, to keep each asset class consistent with the target investment percentage. They’ll also reinvest dividends, consistent with portfolio targets.

Tax-loss harvesting

On taxable accounts, they provide tax-loss harvesting. This is a strategy in which losing asset positions are sold off near year-end, to offset gains in other asset classes. The losing asset classes are later replaced with comparable ETFs to maintain the target asset allocation in the portfolio.

Betterment investment methodology

Betterment invests portfolios in both US and international stocks and bonds. This is typical of robo-advisors.

However, Betterment’s portfolio mix is more limited than many other robo-advisor platforms, who may offer alternative investments, such as real estate or natural resources.

Value stocks

But Betterment offers one asset class feature that’s unusual among robo-advisors. Of the six stock asset classes included in their portfolios, three represent value stocks. They’re offered for

large-, mid-, and small-cap US stocks. Value stocks trade at a lower price than what the company’s fundamentals indicate. Those fundamentals can include dividend yield, price-to-earnings ratio, and revenue growth. The companies are sound financially, but their stocks trade at low prices relative to their competitors.

Investing in value stocks is one of the most successful investment strategies available. Value stocks tend to outperform the general stock market in the long-term.

You can get a financial advisor

Another unique feature of Betterment is that they provide financial advisors on accounts of over $100,000. This is part of Betterment’s Premium plan, and it’s available at a fee that’s just a fraction of the 1% to 2% normally charged by traditional human financial advisors.

Betterment investment mix

The Betterment investment mix applies to both the Digital and Premium plans (see descriptions of each under “Betterment Fees and Pricing” below). The tables below show the ETFs used for the six stock asset classes and eight bond asset classes.

For each stock asset class, there are three ETFs used. This is done to enable tax-loss harvesting, so that Betterment can liquidate one ETF in an asset class, and later replace it with a comparable fund.

But notice the use of alternative ETFs is much more limited with bond allocations. Four of the eight bond classes have no alternative ETFs, and two have only one each. That’s because bonds, which focus primarily on interest income, are less likely to generate significant capital gains requiring tax loss harvesting.

Betterment stock asset classes and ETFs:

Asset ClassPrimary ETFSecondary ETFSecondary ETF
US Total Stock MarketVanguard US Total Stock Market (VTI)Schwab US Broad Market ETF (SCHB)iShares S&P 1500 Index Fund (ITOT)
US Value Stocks – Large CapVanguard US Large-Cap Value (VTV)Schwab US Large Cap Value ETF (SCHV)iShares S&P 500 Value ETF (IVE)
US Value Stocks – Mid CapVanguard US Mid-Cap Value (VOE)iShares Russell Midcap Value Index (IWS)iShares S7P Mid-Cap 400 Value Index (IJJ)
US Value Stocks – Small CapVanguard US Small-Cap Value (VBR)iShares Russell 2000 Value Index (IWN)iShares S&P SmallCap 700 Value Index (IJS)
International Developed Market StocksVanguard FTSE Developed Markets (VEA)Schwab International Equity ETF (SCHF)iShares Tr/Core MSCI EAFE ETF (IEFA)
International Emerging Market StocksVanguard FTSE Emerging Markets (VWO)iShares Inc/Core MSCI Emerging (IEMG)Schwab Emerging Markets Equity ETF (SCHE)

Betterment bonds:

Asset ClassPrimary ETFSecondary ETFSecondary ETF
US High Quality BondsiShares Barclays Aggregate Bond Fund (AGG)Vanguard Total Bond Market ETF (BND)N/A
US Municipal BondsiShares National AMT-Free Muni Bond (MUB)SPDR Nuveen Barclays Capital Muni Bond (TFI)N/A
US Inflation-Protected BondsVanguard Short-term Inflation Protected Securities (VTIP)N/AN/A
US High-Yield Corporate BondsXtrackers USD High Yield Corporate Bond (HYLB)SPDR Barclays Capital High Yield Bond (JNK)iShares iBoxx $ High Yid Corp Bond (HYG)
US Short-term Treasury BondsiShares Barclays Short Treasury Bond (SHV)N/AN/A
US Short-term Investment Grade BondsiShares Short Maturity Bond (NEAR)N/AN/A
International Developed Market BondsVanguard Total International Bond (BNDX)N/AN/A
International Emerging Market BondsiShares Emerging Markets Bond (EMB)Vanguard Emerging Markets Government Bond (VWOB)PowerShares Emerging Markets  PCY Debt (PCY)

Socially Responsible Investing (SRI)

SRI is the type of investment strategy that invests in companies that meet certain social, environmental, and governance rules.

Betterment has created a portfolio of ETFs invested in companies that generates a 42% improvement in social responsibility scores.

Each of the 14 stock and bond asset class ETFs in a regular portfolio are replaced with SRI alternatives. Where appropriate, there are two or more ETFs representing each asset class. Just as is the case with the regular portfolio, the SRI portfolio makes use of tax-loss harvesting to minimize investor tax liability.

Smart Beta

This portfolio option is available for accounts with a minimum of $100,000. Betterment Smart Beta is managed by Goldman Sachs, and is designed to outperform conventional market strategy. Unlike typical robo-advisor portfolios – which are famous for being passively managed – smart beta involves active management.

That means the fund manager is actively buying and selling securities in an attempt to outperform the benchmark index.

BlackRock Target Income Portfolios

BlackRock Target Income portfolios are for investors looking for investment income, but also minimizing capital losses. Betterment offers four different portfolios based on your risk tolerance:

Betterment Targeted Income

Flexible Portfolios 

This is another unique Betterment feature. Most robo-advisors choose your portfolio for you, then you have no control over the assets it contains.

Betterment allows you to adjust individual asset class weights based on your own personal preferences and risk tolerance. This doesn’t mean you can choose the individual ETFs used in your portfolio. But your ability to adjust the allocations can increase your position in certain asset classes, while lowering others.

Tax-Coordinated Portfolio

This is an allocation strategy, in which assets likely to generate large tax liabilities are held in tax-sheltered accounts, like IRAs. Investments with lower tax liabilities will be placed in taxable accounts.

For example, capital gains generating ETFs will typically be held in taxable accounts, since long-term capital gains have the benefit of lower tax rates. As well, tax-loss harvesting can be used to offset those gains. Proper tax coordination has been shown to increase portfolio value by an estimated 15% over 30 years.

Features and benefits

Minimum initial investment

The good news here is that Betterment has no minimum initial investment requirement. You can open an account with no money at all, then begin funding it with regular deposits.

Available accounts

Available accounts include:

Betterment Cash Reserve

Betterment Cash Reserve offers a nice interest rate of 0.40% APY. There’s no minimum balance required and no fees to worry about.

One other great feature that many savings accounts don’t offer is unlimited withdrawals from your account. Typically, you’re only allowed six withdrawals per month.

Betterment also offers a Checking account, that offers no fees, no minimum balance, and your funds will be FDIC-insured up to $250,000. Plus, your ATM fees are reimbursed worldwide.

Mobile check deposits

Betterment Mobile Check Deposit image

Mobile check deposits are now available as well which is mighty convenient because it means you can deposit your checks without even leaving the comfort of your own app德扑圈官方网址home. Moreover, can take care of all your checking accounts needs with Betterment, all in one place.


This is a tool recently added by Betterment to help investors project their retirement needs. Using a retirement savings calculator, it will ask you for the following information:

Betterment RetireGuide

Once you complete the information requested, you’ll sync your external accounts, like your employer-sponsored retirement plan.

Betterment will track your progress, and match investment recommendations with your retirement goals.

Financial advice packages

Robo-advisors are set up as automated investment platforms with only minimal customer contact. But recognizing the need many investors have for direct financial advice, Betterment offers five different packages to help you plan for the future.

You’ll get one-on-one help from a dedicated financial expert, who will spend one planning session with you for up to one hour.

This is a premium service, and available for the following advice packages, with their respective fees:

  • Getting Started Package – $199
  • Financial Checkup Package – $299
  • College Planning Package – $299
  • Marriage Planning Package – $299
  • Retirement Planning Package – $299

External account syncing

Similar to financial account aggregators, like Personal Capital, Betterment enables you to add external accounts to your Betterment account. Betterment doesn’t actually manage them, but including them helps provide a more holistic view of your entire financial situation.

For example, you can sync an employer-sponsored retirement plan, like a 401(k). Betterment can then make recommendations on how to better manage your plan, as well as other asset accounts.

This service is available only with the Premium plan, which requires a minimum initial investment of $100,000.

Betterment mobile app

Betterment offers its Mobile App with all the functions and capabilities of the web version. It’s available at the App Store for iOS devices, 11.0 and later, and is compatible with iPhone, iPad, and iPod touch.

It’s also available at Google Play for Android devices, 6.0 and up.

Deposits and withdrawals

The most convenient way to make a deposit into your account is through electronic transfers from your checking account through the ACH network.

You can also transfer assets from outside brokerage accounts, using the Automated Customer Account Transfer Service (ACATS). Transfers from retirement accounts can be completed through IRA rollovers.

Transfered funds are automatically invested within one or two business days. Betterment does not accept deposits made by check, or by credit or debit cards. Wire transfers are recommended only for large transfers, due to the fees involved.

Customer service

Betterment can be contacted by either phone or email, Monday through Friday, from 9:00 am to 6:00 pm, Eastern Time.

They’re also available Saturdays and Sundays, from 11:00 am to 6:00 pm. However, Saturday and Sunday customer service is available by email only.

Betterment account protection

Your account is protected by coverage from the Securities Investors Protection Corporation (SIPC) for up to $500,000 in cash and securities, including up to $250,000 in cash.

For additional account security, you can set up two-factor authentication to access your account. This can protect your account even if a hacker were to gain access to your password.

Two-factor authentication requires the entry of a unique verification code to gain entry to your account. You can set it up such that you get the code either by text or email.

Betterment fees and pricing

Betterment offers to plans, each with its own fee schedule. The plans and pricing are as follows:

Betterment fees and pricing

The Digital plan is the basic service, and applies to account balances under $100,000.

The Premium plan requires a minimum balance of $100,000, and is the version that offers external account syncing as well as unlimited access to certified financial planners.

Each plan also offers a discount of 0.10% on the portion of your account balance that exceeds $2 million. That means you’ll pay 0.15% for the Digital plan, and 0.30% for the Premium plan on the higher balances.

Betterment current promotions

Betterment is currently offering to waive the advisory fee for a limited amount of time based on certain deposit sizes.

Betterment Annual Fee

Pros & Cons


  • No minimum initial investment required — Open an account with $0, then fund it through regular contributions.
  • Low annual fee — The annual advisor fee on the lower end of the robo-advisor range.
  • Complete investment management — Your entire account is managed for just 0.25% per year.
  • Tax-loss harvesting offered on taxable accounts — This strategy will minimize the tax liability generated by your investments.
  • Value investing in several stock asset classes — Three stock asset classes offer this highly successful investment strategy.


  • Limited investments — Investments are limited to stocks and bonds. there are no other alternatives.
  • Higher advisory fee on larger portfolios — You need at least $2 million to get lower pricing. And you continue to pay the regular fee on all amounts up to $2 million. The discount will only apply on higher balances

Betterment compared

  • Rating
  • Minimum Investment Required
  • Best For
  • Fees
  • Unique Features
  • Promotions
  • Review
  • Betterment 120
  • 10/10

  • $0
  • Simple platform, competitive pricing
  • Betterment Digital: 0.25% Betterment Premium 0.40%
  • Ability to open sub-accounts that use different portfolios for reaching multiple goals
  • $15,000 – $99,999: one month managed free; $100,000 – $249,999: six months managed free; $250,000 or more – one year managed free
  • Visit Site
  • wealthfront_120
  • 9/10

  • $500
  • Strong financial planning component
  • 0.25% per year
  • Free financial planning They offer a Cash Account with a high APY
  • The first $10,000 is managed free
  • Visit Site
  • M1 Finance 120
  • 8/10

  • $100
  • Automated and/or hands-on investing
  • None
  • Pick and choose investments and the percentage of your portfolio you want it to make up, or let M1 make a portfolio for you
  • M1 Finance will pay the transfer fees on $15,000 or more moved from another investment account
  • Visit Site

Who is Betterment best for?

Betterment certainly won’t work for anyone who prefers self-directed investing. That’s simply not what they’re about. But there are others who may be very interested in opening a Betterment account.

New investors

There’s no minimum initial investment, which makes it perfect for new investors. You can open your account, then fund it gradually with regular contributions.

Those with no time to manage their investments

Maybe you know quite a lot about investing, but you have a demanding job and an active personal life. You may prefer low-cost professional investment management as an alternative to managing your own portfolio.

Hybrid investors

You might prefer self-directed investing for part of your portfolio, but want at least some of it professionally managed. Betterment is the perfect management option for that purpose, given its very low annual advisory fee.


Betterment is one of the best robo-advisors for new investors. With their low annual fees and their no minimum investment requirements, almost anyone can open an account.

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About the

Total Articles: 352
David Weliver is the founder of Money Under 30. He's a cited ity on personal finance and the unique money issues he faced during his first two decades as an adult. He lives in Maine with his wife and two children.
Article comments
We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their s; they do not represent the views or opinions of Money Under 30. Comments have not been reviewed or approved by any advertiser, nor are they reviewed, approved, or endorsed by our partners. It is not our partner’s responsibility to ensure all posts or questions are answered.
newbie says:

I can’t understand all the good reviews about Betterment. My wife and I decided to test their services and shortly decided to leave. They were almost impossible to reach by telephone, usually waited on hold to receive a recording promising to call back. Sometimes they called, sometimes not but the call was usually a recording saying their representatives were too busy to call back “serving other customers”. After several of these we transferred out.

Over 20 emails (some completely ignored) and several phone calls later, we still haven’t been able to get complete cost-basis info for the fractional shares. Although promised a few times it never materialized. They usually say they already provided it, sometimes instructing me to download each fractional purchase (dozens) and divide by the price per share, etc, etc. One person said to ask our new custodian. Other companies we tested provided the info without being asked. I cannot understand why they just won’t.

They also held one account longer than the other and I noticed a fee added after the transfer request date. Can’t say for certain but it looks like they waited to fee it.

Rafael Montero says:

I have 1,000 and need to know what is the best investment i can make with that amount of money.

Lauren Barret says:

Hi Rafael! This post is about investing $10,000, but we think the advice applies to smaller amounts as well: /best-way-to-invest-10000

Anisa says:

Hey there,

silly question – can I roll over my existing 401K from a job I just finished into a Betterment account? if so, I suspect I wouldn’t be able to withdraw from it the way you are suggesting others who put their own money (not pre-tax retirement funds) into this account would do.
If that is the case, what would happen if I added funds from my own account? Would it differentiate the two?
Or am I simply not able to roll a 401K and I should stick with using this as an alternative to my savings account?


Fred says:

How much are you getting paid when people sign up for betterment? That link to the betterment site is interesting…

Zach says:

David, judging by one of the comments made, it is really easy to withdraw money from your Betterment account if you need it. What are your thoughts on using a heavily weighted bond account with Betterment in lieu of a traditional savings account? Then for mid-term savings (if your savvy enough) you could invest directly through Vanguard or wapp德扑圈官方网址homever and avoid the extra fee going through Betterment. Thoughts?

David Weliver says:

Honestly not a bad idea. You could do at least slightly better than sub-1% savings accounts with a mostly-bond Betterment account and access the money fairly quickly when you need it. Of course even relatively safe bonds involve risk and are not FDIC insured like the savings account, but this is definitely an option for somebody who just can’t see their savings fail to even keep pace with inflation.

Crystal says:

I’m (soon to be) a first time investor with no real knowledge of this kind of thing. Betterment is attractive to me because I don’t need to go though all the research involved with picking out which companies to invest in and how to allocate my assets. I like the idea of just telling them how much risk I want to take and letting them divy it up. I’ve gone crazy over the last few weeks trying to educate myself on asset allocation and seeing the vast difference in everyone’s opinion. I think this may be a good way to just get started as David suggests. My question is this…..David you mentioned in an earlier comment that this would be something you would use as an additional investment after getting an IRA. Betterment offers both IRA’s and Roth IRA’s correct? Am I missing something?

Brent says:

Betterment is great but don’t be fooled by the $25 bonus marketing ploy! You can’t actually withdraw it from your betterment acct to your bank acct. These bonuses are just meant to sit in your betterment acct and bump up your returns by a fraction of a cent by increasing your principal investment. However betterment is still very innovative and great! And gotta give them credit for that marketing ploy b/c that’s pretty much the only reason I invested ha!

Justin says:

Never heard of Betterment, seems like a good service though.

I personally use Vanguard and TRP, but may also start something with them (I don’t want to have all of my money with one MF company- you never know what might happen to them)

Brent says:

So is it better to do this or invest in an IRA?


In general, I recommend 1.) saving an emergency fund in CASH “just in case” 2) saving for retirement via a workplace plan and/or an IRA and 3) investing for other goals.

Since Betterment falls into #3, I would start with the IRA. If you’re contributing $5,000 to an IRA and have more to invest, that’s when it’s time to look at something like this.

Brent says:

Thank you David that’s what I was thinking but Betterment looked so cool I was tempted to forget about IRA’s haha. That may have been a newbie question but I am just a college student trying to make better financial decisions than the previous generation. Good thing I stumbled upon moneyunder30! Keep the great articles coming!

Luke says:

Doesn’t look like it could hurt to give it a try. I’m all about set-it and forget-it investments.

Nathalie P says:

This sounds like a great idea for a newblet such as myself. I was going to try ShareBuilder first only because I am an ING Customer, but I like the laid-back style of this a lot. I haven’t invested yet, so I think this’ll be a good start.

Mickey says:

I am wondering how easy it is to pull money out once it is invested…anybody have an idea?

Brent says:

It’s as simple as typing in the amount you want withdrawn and clicking submit. Try out the demo version and you’ll see.

MD Sam says:

More specifically, don’t all the ETFs they invest in (below) also have expense ratios? If so, are those expense ratios included in their fees or additional?


* 20% Vanguard Total Stock Market (VTI)
* 20% iShares S&P 500 Value Index (IVE)
* 20% iShares S&P 1000 Value Index (IWD)
* 15% iShares Russell 2000 Value Index (IWN)
* 15% iShares Russell Midcap Value Index (IWS)
* 10% DIAMONDS Trust Series 1 (DIA)


* 50% iShares Barclays TIPS Bond Fund (TIP)
* 50% iShares Barclays 1-3 Year Treasury Bond Fund (SHY)

David Weliver says:

I suspect that you’re onto something—you’re still paying the expense ratios for the ETFs they invest in plus Betterment’s fee, which amounts to a management fee. The difference between investing in the same ETFs on your own is they handle rebalancing for you.

Adam says:

If you are at the point in your life where you are reading this blog and paying attention to your money, you don’t need someone to rebalance for you. I agree with Brian above, my wife and I started investing with Vanguard right about the time the market bottomed out, and since then my 401k at work has also been switched to them. Very happy with their products, and I am too much of a control freak to leave someone else in charge.

Brad says:

I beg to differ Adam. I am young and just starting out with stocks, but don’t have any time for asset allocation adjustments and knowledge. This is a great way for me and others to get our feet wet. Even though there are many interested, there are many whom still haven’t taken the plunge.

MD Sam says:

Anybody out there know if there are additional hidden fees: any other fees from buying/selling the stocks and bonds included in the 0.3-0.9% fee or no?

Brian says:

I like the idea, but I am wondering what makes this better than a target date retirement fund, which also automatically rebalances and automatically shifts to a more conservative allocation as you near retirement.

Betterment’s expense ratio, while in general pretty good, is still much higher than, for example, Vanguard’s target date funds (which range between 0.16% and 0.19% with just a $3,000 minimum)

Brian says:

Correction – Vanguard’s minimum for target date funds is now $1,000.00


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