Betterment: The simplest way to start investing today

The easiest way to get started investing today...Over the last few years, I’ve been hearing about an investment company called Betterment, so I decided to take a look to see what they’re all about.

If you’re not familiar with Betterment, they’re a brokerage firm with one goal: make investing better.

How?  By making it easier!

There are a lot of people who want to invest, but they just don’t know where to start, what type of account to open or how to manage their investments.

If you have put off investing because of these reasons, you may want to consider Betterment.

How Does Betterment Work?

Betterment simplifies investing with its goal-based investment strategy.  Here’s how it works:

1. Open an Account

When you open a Betterment account, they ask you what your goals are.  Are you saving for retirement, vacation, new car, or college?  Since Betterment is a Registered Investment Advisor, they use your age, investing time frame, starting balance, and monthly contributions to suggest a strategy for each goal that you have.

betterment savings plan

2. Fund Your Account

Funding your investment with Betterment really is simple.  After you create a goal, they show you how much you need to save each month and give you the option to draw it monthly, weekly, or every other week from your bank account.

Yes, that means you need to sync up your bank account but that’s simple too – they walk you through each step.

3. Select Your Investment

This is where Betterment shines.  Their interactive asset allocation tool gives you a visual picture of how aggressive or conservative you can invest your money.  They even have an interactive demo that you can use to see how easy it is to use Betterment.

Betterment investment allocations

How Your Money Is Invested

I mentioned that Betterment gives you an easy way to visualize how aggressive or conservative your investments are.  They use stocks via ETF (exchange traded funds) and bonds via U.S. Treasury Bonds as investments.  Instead of choosing individual companies and risking your entire savings on the performance of one stock, you’re well diversified among 3500+ companies that are represented in the ETFs.

Here’s a breakdown of the actual ETFs and bonds that Betterment uses.

For Stocks:

  • 25% VTI: Vanguard Total Stock Market
  • 25% IVE: iShares S&P 500 Value Index
  • 25% VEA: Vanguard Europe Pacific
  • 10% VWO: Vanguard Emerging Markets
  • 8% IWS: iShares Russell Midcap Value Index
  • 7% IWN: iShares Russell 2000 Value Index

For Bonds

  • 50% TIP: iShares Barclays TIPS Bond Fund
  • 50% SHY: iShares Barclays 1-3 Year Treasury Bond Fund

It’s important to know that, like any investment in the stock market, nothing is guaranteed.  Investments in the market can lose value, which is true with the investments used with Betterment.

Are There Fees, Minimum Balances, or Transaction Costs?

Fees: You’re always going to pay a fee to invest somewhere.  Some places try to hide the fees, but Betterment is up front about it.  Their fees range from 0.15% to 0.35% per year.

Minimum Balance:  The nice part about Betterment is that they don’t have a minimum balance rule. You can set up an account with $25, $100, or $1,000+ and add money as you go based on Betterment’s recommendations.

Transaction Costs:  Nope.  You won’t find $7 trades here because Betterment doesn’t charge you a transaction cost to invest your dollars.

My Thoughts on Betterment

I had the chance to meet the CEO, Jon Stein, and personally talk with him about Betterment, how it works, and the investment philosophy of the company.  Betterment has turned a once-intimidating practice of investing into an accessible tool that is customer focused 100% of the time.

Jon called it smart, intuitive, and accessible, and I agree.  I had to try it myself, so I opened my account in about 5 minutes and created my first goal.  It seriously couldn’t have been any easier.  Plus, I got a $25 bonus just for signing up with just $250 – an awesome return right away :).  Here’s a look at my account (before the $250 cleared):

Betterment Account Overview

I really am excited to use Betterment because it’s simple and automatic.  You don’t have to be an investment guru to save and invest your money.  You just have to have the right tools, and I’d encourage you to explore Betterment to see if it helps you reach your goals more easily.

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  1. Hunter

    Thanks Jason, this a very comprehensive review. It seems like an investment alternative with a high degree of interactivity.

    How large are their assets under management?

  2. Craig

    Thanks. I’m going to check out their website. Anything to make it easier.

  3. Jason Price

    Hunter, good question, but I’m not sure. I looked around on their site but couldn’t find the answer for you. I recommend giving them a call (they have a contact page).

  4. Brian

    Thanks for letting me know about this, Jason! I hadn’t heard about this before but after checking it out signed up! The only thing I noticed that I wasn’t able to do is add my wife as a co-owner. I like to set up accounts under both our names in case something happens to me. The only thing we have separate is our IRA’s but those you can at least list a beneficiary. Thanks again for the information.

    • Sheri J

      Brian, I had the same concern when I opened my Betterment account and although you cannot do a joint account you are able to add beneficiaries by clicking on the profile “button” in the upper right hand corner of the homepage. If you have trouble or more questions, I found the CSR very helpful when I called. HTH

  5. Alan -

    Hi guys,

    I don’t know how I missed seeing this review, but first I just wanted to thank Jason for the writeup.

    I also wanted to address Hunter’s question. We have been growing at a breakneck pace so this number will likely be outdated very soon, but we currently manage between $5-10 Million.

    Hope this helps
    VP Marketing |

  6. Ryan

    I think this is a cool idea but I would be concernced about diversification with these holdings. I assume they aren’t concerned with small cap stocks, commodities, international stocks/bonds, corporate bonds, or real estate?

  7. Leo Cesna

    I was unable to find any indication that this advisor provides any type of active management based on changing market risk or periodic porfolio balancing. Am I missing something? If not, their fees are high for what you could simply duplicate on your own.

    There are many good free asset allocation tools on the internet.

    • Jeff Diercks

      Leo, it looks like they have model portfolios to fit certain goals you choose to pursue. Which is not a bad thing for most investors. It certainly is not active management and will only provide limited protection via diversification in the next major market decline.

  8. Linda Christianson

    Is it me or does their website seem hard to use? I tried to sign up but when you have to pick from a pull down menu, it so hard to use because it tends to disappear before I can pick anything. That concerns me. I feel like if you can’t get your website to be user friendly, then why do I want to invest with you. I didn’t finish signing up because of this problem.

    • Eric

      Hi Linda,

      Have you tried using a different Internet browser? Which one do you normally use (Chrome, Firefox, Internet Explorer, etc.)?

      I’ve noticed a couple glitches using Chrome regarding JavaScript, but I think it had to do with some plugins/extensions I’m using. Normally, the Betterment site works great for me.

      Hopefully you can get it working. It’s been (gasp) actually fun to start investing!


  9. Rose

    Only people residing in USA can open this account?

  10. Jessica S

    Thanks so much for this review! The website was super easy and I got an account set up and I’m on my way to investing in my future!

    Thank you

  11. Raschelle

    Had a quick question, are there any penalties for transferring or withdrawing funds from the account? Would that we considered an early withdrawal since this is an investment account?

    Thank you!

    • Bob

      Raschelle, I honestly am not sure. Now to be clear if you withdraw from your IRA early you would incur the standard government early withdrawal penalties, but I assume you are asking about non-IRA accounts? – if so I would just check their site, I am sure they mention it somewhere.

  12. mateo

    I recently signed up on betterment and recently linked my bank account and made my first deposit. It was super easy to use. Ive been searching for something like this that’s easy and accessible tot he non techie. where your money is also accessible were you to need it . I was wondering if you can talk to an advisor and ask to have certain stocks of you choosing incorporated in your portfolio ..?I am guessing not. after asking my self what I should invest in.. from gold to bitcoins I think this was a best choice. Thanks !!!

  13. Barry

    It says, “Fees: You’re always going to pay a fee to invest somewhere. Some places try to hide the fees, but Betterment is up front about it. Their fees range from 0.15% to 0.35% per year.”

    Is it really the above or 1 1/2% and 3 1/2 % respectively per year??

    Does anybody know??