Betterment was started in 2008 as the first automated online investment platform. Nowadays, it is commonly referred to as the robo-advisor.
Since then, there are dozens of robo-advisors have come to the market. Although, Betterment is remaining the cutting edge of the industry. It the robo advisor space, it is one of the most innovative platforms.
Currently, almost every brokerage firm has its robo advisor option and some have more than one. Still, Betterment is considered to the largest independent robo advisor in the market and there are around $16.4 billion of assets under the management.
Comparable to the traditional human investment advisors, Betterment offers the full-service interment management but charges a fraction of the cost.
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How to Betterment Works:
Betterment Uses MTP:
Betterment is a typical robot advisor that uses the MTP (Modern Portfolio Theory. Using the MTP, Betterment creates and manages your investment portfolio. Using this investment strategy, they emphasize asset allocation based on the targeted risk levels.
Invest in 14 Different Asset Classes:
Your portfolio is investments in the 14 different asset classes and among them, 8 are the bond funds and 6 are the stock funds.
Every asset class is representing as the single ETF (exchange-traded fund). The ETF is index-based, so the ETF is invested in a portfolio which meets the underlying index. Using the index funds, Betterment able to keep your investment expenses minimum, that is how Betterment manages your portfolio with such a low fee.
Your Account will be Fully Managed:
After creating your portfolio, it will be managed by going forward. To keep your every asset class consistent with the target investment percentage, Betterment offers the periodic rebalancing.
Benefits and Features:
Minimum Initial Investment:
With Betterment, there will be no minimum initial investment requirement. Without any money, you can open your account, then start funding it with regular deposits.
These following types of account are available with the Betterment:
- Roth, Traditional, rollover and SEP IRAs
- Taxable individual and joint brokerage account
- Trust and nonprofit accounts
Betterment Cash Reserve:
With the Betterment Cash Reserve, you will get a good interest rate of 0.04% APY. Here, you don’t have to worry about any fees and there will be no minimum balance requirements.
Many savings account does not provide the unlimited withdrawals feature on your account. But with the Betterment savings account, per month you will get six withdrawals.
Here, with the Betterment, you will also get the checking accounts, without any fees or minimum balance requirements. Your funds will be FDIC insured up to $250,000 with the Betterment checking account. Also, the ATM fees with be reimbursed worldwide.
Mobile Check Deposits:
With Betterment, you will also get the mobile check deposit features. So, it became very convenient for you, because without leaving comfort you are home, you can deposit your check directly. Moreover, you will get every checking account needs of Betterment in one place.
Betterment has recently added this tool to help their investors to fulfill their retirement needs. It can track your process and match your investment recommendations with your retirement goals.
Betterment Mobile App:
With the Betterment mobile app, you can access all the functions and capabilities of the web version. Betterment app is available in both android and iOS platform. iPhone users will get the app from the Apple Apps Store. If you are an Android user, then you will get the app at the Google Play store.
Deposit and Withdrawals:
To deposit into your account, you can use the electronic transfer your checking account through the ACH network.
Using the ACATS (Automated Customer Account Transfer Service) you can transfer assets from outside brokerage accounts. If you want to transfer from the retirement accounts, then you can use the IRA rollovers.
Within one or two business days, the transferred funds will be automatically invested. You can not make the payment using a check, or credit or debit cards. For the large transfer, we recommend the wire transfers, due to the fees involved.
You can contact Betterment through phone or email. The customer service is available from Monday through Friday, from 9:00 am to 6:00 pm, Eastern Time.
You can contact Saturday and Sunday from 11:00 am to 6:00 pm. But you have to use the email.
Betterment Fees and Pricing:
Betterment plans are coming with its fee schedule. The Digital Plan offers the basic services of Betterment and applies to account balances under $100,000.
But, if you choose the Betterment Premium plan, then the minimum balance requirement is $100,00. It offers the external account syncing as well as the unlimited access to certified financial planners.
With each of the plans, you will get a discount of 0.10% of your account balance that exceeds $2 million. That means, for the Digital Plan, you have to pay 0.15% and for the Premium plan, you have to pay 0.33%.
Pros and Cons:
- There will be no minimum balance is the requirement to open an account. After that, you can fund it with regular contributions.
- The annual fees for the advisor are low because of the robo-advisor range.
- Betterment account management starts just at 0.25% per year.
- Investments are limited to stocks and bonds, you cannot find any other alternatives.
- To get the lower pricing, you will require at least $2 million. Up to $2 million, you have to pay the regular fee. You will only get the discount on higher balances.
Is Betterment Secure:
You are giving your details online and you are entrusting your money to, that can be scary. Betterment keeps the security top of the mind for investors these days. That is the reason, Betterment uses the strongest browser encryption and also store all the data on servers in a secure facility, that is secure 24 hours a day.
Using the two-factor authentication, they offer an extra layer of protection. Every time you log in to your account, you will be forced to enter a unique verification code, which you will receive through your mobile authenticator app or via text. Your account will be protected, even it was hacked by a hacker.
With the Betterment, you will get the fraud assistance, that will work for the loss resulting.
Is Your Investment Safe:
Betterment is the member of SIPC (Securities Investor Protection Corporation), which provides secure protection up to $500,000, including $250,000 for claims of cash. After providing your money to an investment intuition there always comes with some risk.
For new investors, Betterment is among the best robo-advisors. As there is no minimum investment requires and with the low annual fees, anyone can open an account.