There’s a new investment website making waves in the market: Betterment.com. As a start-up online financial investment firm, Betterment.com wants to change the way people invest by making investing easier and by supplying better market research to its members.
It’s so easy, think of it like an online savings account with a better return (of course, there is always a risk of losing money while investing).
NEW! For a limited time, open a free Betterment account and get a $25 bonus.
So How Exactly Does It Work?
At the core of Betterment you’ll find a standard brokerage account, like many others on the web, which offers stocks and bonds in the form of exchange-traded funds (ETFs). One of the main differences is that Betterment provides much more automation and simplification to minimize an account holder’s daily required involvement.
Betterment uses a short questionnaire that its members must fill out upon granting them a new account. This is part of the setup and security process. Members can then choose a basic asset allocation of stocks and bonds (for example, 80% stocks and 20% bonds). Then, members simply link their checking accounts and transfer money into their Betterment account to begin investing.
When you transfer money into Betterment, they’ll buy ETFs automatically for you according to your chosen asset allocation. The only downside that I can think of is that some seasoned investors might want more fine-tuning “under the hood” control than what Betterment.com offers.
If you want to withdraw, they’ll make the needed sell trades for you. Dividends are reinvested automatically, and your portfolio is rebalanced quarterly if off by more than 5%.
So What Does It Cost?
The cost is one of the first questions on your mind, right? When I hear of a new product that offers ease of use and new tools for the user, that’s always my first question, “So how much are they going to charge me for this?”
Well, not too much when you compare it to the industry standard. Betterment’s business model allows you to pay a “low annual management fee of 0.3% to 0.9% of your average balance depending on how much money you have in your account. That means if your account has around $1000 in it, you’ll pay at most $9 a year. There are no minimum balances, no transaction fees, no holding periods, no hidden costs.”
Once your account reaches over $25,000, the cost begins to dwindle by about 0.2%.
- $0-$25,000 has a annual fee of 0.9%,
- $25,000-$100,000 has a fee of 0.7%,
- $100,000-$500,000 has a fee of 0.5%, and
- $500,000+ has a fee of just 0.3%.
Final Thoughts on Betterment
With Betterment, you can get started right away by setting just how much and how risky you want to be with your investments by using the simple slider. You can also access research an advice right from the website. Betterment.com has analyzed decades of research to make sure their members get the best returns for the level of risk that they are comfortable with.
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