One of the top robo-advice services is provided by Betterment, an automated investment platform. Additionally, it offers custom investment portfolios that can manage themselves. Betterment is ideally suited for investors who choose to take a passive approach and wish to use individual or joint accounts, IRAs, trust accounts, cash reserve or checking accounts, among others.
Additionally, a wide variety of portfolio alternatives are available on the site, including those involving cryptocurrency. The mobile app is one of the greatest tools for automated socially responsible investment. If you want continuous financial adviser advice that is less expensive, though, you should go elsewhere.
On iOS and Android devices, the Betterment mobile app is accessible.
Investment Methods with Betterment
Automated portfolio management
Betterment creates and maintains customized portfolios using computer algorithms. The site also provides IRAs, 401(k)s, cash reserve accounts, and bank accounts that are FDIC insured. Its price structures are also easy to understand. It provides two choices:
- Betterment digital: Although there is no minimum balance requirement for this plan, there is a yearly charge of 0.25%. It has options including asset placement, tax-loss harvesting, portfolio rebalancing, and dividend reinvesting. Additionally, as you approach your goals, Betterment automatically modifies the allocation of your portfolio to maintain a healthy level of risk. This level likewise provides a variety of portfolio choices, but it excludes free advisor access.
- Betterment premium: The premium account requires a minimum investment of $100,000, but you’ll have access to all the services it provides in addition to limitless one-on-one CFP advice. Additionally, its CFPs may advise you on other assets you have that are not via Betterment.
At Betterment, you may also make investments for certain objectives. There are now six options available: monetary objectives, safety net, large purchase, general investment, and retirement (savings and income).
Cryptocurrencies
For an additional 1% yearly charge, Betterment now provides automatic bitcoin investment. Given that other cryptocurrency exchanges impose spread costs of as much as 1% each transaction, this rate is pretty reasonable.
Four distinct cryptocurrency portfolios are accessible through the platform:
- Universe: You will be exposed to a variety of diverse crypto assets through this portfolio. The majority of its assets are bitcoin, ethereum, and bitcoin cash, but it also has 21 other stakes, including dogecoin.
- Sustainable: For investors who want to have a positive influence through their investments, the sustainable portfolio is preferable. The emphasis is on cryptocurrencies that seek to cut carbon emissions, while Betterment focuses especially on assets that use less energy to validate blockchain transactions. Its assets include Ethereum, Solana, and Chainlink.
- Metaverse: By choosing this option, you’ll put money towards cryptocurrencies that promote virtual experiences and digital commerce. Roughly 30% of its allotment is made up of bitcoin. Ethereum makes up another 14% of the portfolio, and 7.85% of it is invested in Axiom Infinity. The remaining 20 assets make up the portfolio’s remaining funds.
- Decentralized Finance: This portfolio is concentrated on cryptocurrencies that operate services and transactions independently of banks and other centralized organizations. The portfolio, which consists mostly of bitcoin, has a total of 23 cryptocurrencies.
If you like, you may invest in both a crypto portfolio and a traditional ETF portfolio, but you will need to take both advising costs into consideration. Betterment uses two-factor authentication for security purposes. To keep your accounts secure, there are additional steps that must be taken. These consist of system outage prevention, automatic logout, account ownership verification, identity verification, transaction scrutiny, and more.
Portfolio types
Betterment provides a number of portfolio choices. The first, called the Core portfolio, prioritizes long-term investment by distributing your funds among a variety of international stock and bond ETFs. Its innovative technology portfolio focuses on businesses with great growth potential. These encompass industries including semiconductors, blockchain startups, sustainable energy firms, and more.
Its three socially conscious portfolios—Broad Impact, Climate Impact, and Social Impact—are excellent for anyone looking to use their assets to change the world for the better. Finally, its BlackRock Target Income portfolio strives to safeguard your assets against loss by investing mostly in bond ETFs, while its Goldman Sachs Smart Beta portfolio seeks for firms that will beat the market.
Investment types
Betterment primarily provides stock ETFs, bond ETFs, and cryptocurrencies as investing options. ETFs are widely available on automated platforms, thus this investment selection is comparable to that of most rivals. Alternatives are provided by certain automated platforms, nevertheless. For instance, Wealthfront offers crypto trusts, index funds, and ETFs. Fidelity Flex mutual funds, which have no cost ratios, are available through both of the automated Fidelity accounts, Fidelity Go and Fidelity Personalized Planning & Advice.
Betterment Cash Reserve Account
You might want to look at Betterment’s cash reserve account if you enjoy their brokerage accounts. The cash reserve account has a 5.25% annual percentage yield (APY), making it a high-yield savings account rather than an investment account.
Although Betterment is primarily a platform for investors, having a checking account or cash reserve account there might be a big benefit. There is a minimal deposit required for the Betterment cash reserve account.
Betterment Advantages
The services offered by Betterment seem to be designed to meet the demands of young professionals who are advancing in their jobs, beginning and expanding families, and require assistance understanding investing.
Although there is a $10 minimum to start investing, there is no minimum balance requirement, making it possible to get started right away. The possibility and simplicity of building a low-cost SRI portfolio also appeals to a generation that values social responsibility. SRI portfolios are not provided by every robo-advisor.
Goal-based approaches, where you save a set amount by a given date, are quite popular with us. Any objectives you enter when you first set up your account require you to specify how much you want to save by a specific deadline, such as $10,000 by March 2025. Such specifics increase the likelihood that clients will adhere to their objectives rather than give in to an uncertain desire for additional money.
The cash management accounts are capable of taking the place of your regular bank accounts. Two-Way Sweep is a highly useful function that may help you increase the amount of interest that your idle money earns in the liquid checking account when it’s not needed.
Tax-loss harvesting is not available from all robo-advisors, and some charge extra fees or have minimum balance requirements. Betterment provides free tax-loss harvesting, which can reduce your prospective tax liability and automatically rebalance your portfolio to ensure you only retain the level of risk you are comfortable with.
Betterment Disadvantages
Although the several portfolio options are helpful, novice investors could feel a little paralyzed by the alternatives. How can you tell if, for example, an SRI fund is the correct choice for you? How can a smart beta portfolio be distinguished from the default option? It seems excessive to pay $299 for a 45-minute conversation with a CFP from Betterment to help you set up your investing account.
The default Core Portfolio choice, which matches your risk appetite and savings requirements, offers diversity at a reasonable cost. SRI, however, is a moral decision, although the expenditure ratio fees are frequently larger. Meanwhile, novice investors presumably won’t need to fiddle with smart beta funds or adjust the asset allocations in a portfolio.
The emergency fund recommendation portfolio doesn’t particularly impress us. You’ll probably see one that puts 15% into equities and 85% into bonds. It’s still too much risk for money that is expected to be available at a moment’s notice when you need it, even though the majority of it is probably invested in a very liquid asset, like short-term Treasury bonds.
We can see their justification: savings account balances will be eroded by inflation, and according to Betterment’s algorithms, a fund like this will preserve value by earning a little bit more without taking on excessive risk.
That could seem appealing to some, but when you lose your job and need access to emergency funds to pay your expenses, it’s simple to picture a scenario in which the value of stocks and bonds both decline at the same time. You don’t want to be pressured into making a low-ball offer at such moment. Some users may feel more comfortable putting emergency cash in their Betterment Cash Reserve account or, even better, in a different high-yield online savings account.
