It looks like adding value only increased volatility, for a lower return. VCSH 6.9 Short Term Corporate Bonds IMHO, it’s better to invest in something with higher fees than to do nothing at all so get it invested somewhere. No it’s not “one-stop” investing, but I think it’s important to see how easy rebalancing is, before paying someone a yearly percentage fee on your portfolio to do it for you. – TRP Blue Chip Growth Trust Weird. Thank you for this article and the follow up. The money there is invested in a mix of mutual funds and ETF’s. I can choose to sell the shares or transfer them to a personal account, and will need to take action within 2 years. 9/10. It’s not like they have high variable costs….it’s software doing the work, and it works just as hard for someone with $10,000K as it does for someone with $100K (in theory). It is all the same stuff with no fees. Bettermentâs use of secondary ETFs enables Tax Loss Harvesting+â¢. It’s not a bad choice, but the only concern is that absolutely new investors can get scared way even from a small amount of volatility. That is a rookie move. We've employed evidence-backed optimizations that tilt a recommended portfolio toward value stocks and investments with a smaller market capitalization. It’s easy to do and it will save you the 401k management fee (which you don’t get to see) for the same thing at Vanguard. Past performance does not guarantee future results, and the likelihood of investment outcomes are hypothetical in nature. At lower stock allocations, these bonds, with U.S. Short-Term Investment-Grade Bonds, help to decrease the risk of an overall portfolio. You could invest the same portfolio on your own for 0.082% (ETFs in parenthesis): 56.6% VTSAX (or VTI) with 0.05% ER; 23.3% VTIAX (VXUS) with 0.14% ER; 16.1% VBTLX (or BND) with 0.08% and VTABX (or BNDX) with 0.2% ER. http://research.tdameritrade.com/grid/public/etfs/commissionfree/commissionfree.asp, “TD Ameritrade features more than 100 commission-free, non-proprietary ETFs. This is the first time ever that I comment a blog, so I hope it works, I live in Australia and would like to know if there is a similar company to Betterment here or can I still invest with them? The LifeStrategy are actually a combination of 4 “Total X Market Index” funds. MMM, seeing as you have probably done your taxes by now, did you only get the $14.60 in tax losses? Somehow, I managed to fund my new account with $300k from my checking account. Many consider this the robo advisor that started it all.. Others resort to a Wild West financial adviser whose claims and fees exceed his actual financial knowledge. debt instrument is a wash sale and has accrued market discount, code Having IRAs in other places and struggling to learn or understand their systems and what was happening with our money makes me really pleased with our own Betterment experience. I also max out my Roth IRA, most of which is invested in Vanguard’s 2045 and 2050 target date funds. Thanks. It’s so automatic, that after you create your account, and tell Vanguard how much you want to contribute monthly from your bank account, *you never have to login again until you need the money*. Also, I’ve already prepared a will for my assets as well as a living will, and have designated beneficiaries in my 401k in case something happens to me. The secondary ETFs enable Tax Loss Harvesting+â¢. “So investors should not ignore the obvious costs of implementing a strategy that rises, pristinely, out of academic studies that cannot be precisely replicated in the real world.”, I would prefer not to try to summarize a complicated story, and I don’t see any soundbites to cherry-pick that would serve as a short summary. Betterment vs. Vanguard Review Recap Coming down the home stretch, we’re sitting at a 2-2 tie between Vanguard and Betterment. Give it a valid comparison, Vanguard’s Mid Cap index fund, and you’ll see the effects of adding “Value” to the mix: 1. Betterment has lower fees (.15 x .25) but doesn’t offer direct indexing. Our secondary ETFs, SCHF and IEFA, are highly correlated with VEA. So it all depends on which option you feel best about. —————————–, Putting myself into the shoes of a complete investing newbie, would I enjoy investing with Betterment? People think the pretty boxes for 15 seconds are worth paying hundreds of thousands of dollars in extra fees over their lifetimes? On the surface, Betterment and Fidelity Go share many similarities. They manage the first $15k for free, so I only pay .25 on the remaining $85k ($212), and that qualifies me for the Direct Indexing service, which they claim it is way better than indexing on whole ETFs. I think is very helpful to see how it works with real life investing. MMM, I’m curious why you chose Betterment over Wealthfront? On average all TLH activity stops on any particular deposit after about a year. Last words: your investment choices are NOT as important as how much you save!! I also hate the idea of my money being locked; therefore, I as well had only contributed up to my employer’s match. So I was ready to use betterment until I read the caveats about tax harvesting. Remember, investing is a “game of inches” and paying out a guaranteed fee for the promise of greater gain gives up those inches. Google Play and the Google Play logo are trademarks of Google, Inc. Apple®, the Apple logo®, the App Store®, and iPhone® are trademarks of Apple, Inc. Any links provided to other websites are offered as a matter of convenience and are not intended to imply that Betterment or its authors endorse, sponsor, promote, and/or are affiliated with the owners of or participants in those sites, or endorses any information contained on those sites, unless expressly stated otherwise. Betterment compared to doing it yourself: I can have my account setup to automatically deposit a chunk of money into Vanguard after every paycheck (twice a month). But also since then I’ve learned a few things about WB from some of you on MMM. I don’t see the point in paying the fee for a service like betterment vs investing in a low cost target date index fund. You don’t sell when stocks are going down – this is the time you start getting excited about buying more. Dear MMM, You absolutely cannot beat the expense ratios of the TSP. That said, it’d be great to see a non-fee company like WiseBanyan in the experiment, so we can see if the extra fees are worth it :), How did you get that $568k figure Dodge? TIA. I don’t want to get screwed with management fees that will add up over the next 40+ years. While municipal bond credit risk is slightly higher than risk-free U.S. Treasuries, it still remains very low, which is attractive for risk-averse investors. Its in “addition” to the actual fees are much higher you have to add the fee .15-.25 to the fee of each individual fund. I occasionally read articles regarding money, investing, and retirement accounts and whatnot, but I have yet to start actually investing. OK, maybe we could add a second word to that: Efficiency. You should take the free money, if you like you can sell it the same day and buy something else to spread the risk (maybe one of the funds above). The market is “due for a correction” and it would suck to put that money in and see it go down 10-15%. I’m finally asking the right questions, and I have you to thank for that :). In this Betterment Review, we will be discussing the pros and cons of this robo advisor. In fact, that’s why I was reading this thread initially and then realized that I needed to look into the expense ratios of my many retirement plans after reading all the comments :). The underlying bonds are issued by state and regional governments to finance capital expenditures, such as infrastructure spending. Please take a look at these 3 portfolios. Hope this explanation helps. This would be an invalid comparison. “W” will be in box 1f and the amount of the wash sale loss disallowed will I love Betterment. I only contributed enough to get the employer match on my 401k in the past, but I’ll likely max out the contributions in a future job. WiseBanyan’s automatic fund doesn’t include any extra fees outside of the ETFs they put you in, making their automatic fund the cheapest of them all, with an average ER in 2013 of 0.11% (compared to Betterment’s 0.31% and Vanguard’s 0.16%). I also transferred an additional 19k from my wife’s Roth. With that said, I say skip American Funds for sure. The only draw back I see is that Vanguard does not currently offer Tax Loss Harvesting, but I suppose a person could do a hybrid approach, sending $100k or so to a Wealthfront taxable account, to get their superior Direct Indexing service, and leave all the tax-advantaged money with Vanguard. I ask myself, “will this thing really increase the level of my lifelong happiness?”. 10 years is not a long time in this game, and it just happens US stocks have … What matters is you pick an allocation and stick with it and rebalance occasionally. We have only started with IRA’s in the last two years and were getting killed with fees. I have no problem taking some of that for myself, just as I have no problem using coupons or discounts at other businesses. 20% Total Bond Market Index Admiral Shares – VBTLX (6948 bonds across the USA). Just found MMM and am intrigued. It can’t get any simpler. Thanks for the correction information. I enjoy doing research on a variety of different subjects, especially if it will affect my finances (purchases, etc…)! Of course, none is talking about that, definitely not betterment! What allocation to use? I think after reading about Charles Schwabs SIPs and what ETFs they use and keeping 7% in their bank, that I will go 100% I wonder- how difficult would it be for you to put the results in after-tax terms? Then you can manually plug that in to determine how much it would help with taxes. Again, there are never fees assessed when depositing funds and the expense ratio from each fund only will be assessed prior to dividends being reinvested.”. The blue line in this handy graph shows the results of my real investment at Betterment. But, I think using VTI/VTSAX/S&P500 outperforming Betterment over the last 10ish years to not really be fair. One disadvantage of using Betterment for IRA’s is the method of paying their management fee which is taken from your retirement account. And you should almost never base investment purchase/sale decisions on what happened over a 3 month span. 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