Author Topic: Newbie: Betterment or Vanguard  (Read 4139 times)

austachian

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Newbie: Betterment or Vanguard
« on: January 04, 2017, 12:01:14 AM »
I'm new to investing and have been putting it off for years. I'm 34, Australian but currently residing/working in the US. I've got a bunch of money just sitting in the bank ($120k USD + ~50K AUD) at a very low interest rate and want to do something more productive with it.

I've been reading MMM's Betterment article (http://www.mrmoneymustache.com/betterment-vs-vanguard/) and am strongly considering investing my cash with Betterment since it looks fairly simple, but I've seen a few people in the comments recommending going through Vanguard directly due to lower expense ratios. Dodge suggests either:

Opening a Vanguard Lifestrategy account: https://investor.vanguard.com/mutual-funds/lifestrategy/#/ with 80/20 stocks/bonds

or open a Vanguard account and allocate as follows
Quote
56% Total Stock Market Index Admiral Shares VTSAX (3804 stocks across the USA)
24% Total International Stock Index Admiral Shares VTIAX (5785 stocks across the world, excluding USA stocks)
20% Total Bond Market Index Admiral Shares VBTLX (6948 bonds across the USA)

Any thoughts on the best way to go? Other options instead? I'm planning on reading and learning more about how to manage things myself, but want to get started as soon as possible so that I don't put this off for another few months.

Since I have a fairly large (to me) amount to invest, should I put it all in at once, or DCA over a longer period of time? I've read a few things about this, and since this money is all of my savings I'm leaning towards investing it over the course of a year.

Thanks for any advice!
« Last Edit: January 04, 2017, 12:24:30 AM by austachian »

Derrian

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Re: Newbie: Betterment or Vanguard
« Reply #1 on: January 04, 2017, 05:03:34 AM »
The general consensus is it is more cost effective to go with vanguard and save the additional 0.25/0.15 in fees. Betterment, while slick, is ultimately charging a premium for things you can do on your own (tax loss harvesting and rebalancing) with minimal effort. Mathematically speaking, in most cases it is beneficial to lump sum invest (more time in the market) but psychologically this may be challenging so dollar cost averaging is fine. Just set up an auto deposit and let it go.

Heckler

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neo von retorch

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Re: Newbie: Betterment or Vanguard
« Reply #3 on: January 04, 2017, 07:45:13 AM »
As someone who has done both, including "Betterment for beginners" (and thus the transition to Vanguard...)

I recommend you figure out a dead simple asset allocation by reading the above Bogle Heads link and/or Jim Collins - Stocks Part 23: Asset Allocation and use the Vanguard ETF/mutual funds. (ETF if you can't hit the $3k minimums on the mutual funds, but I don't think that'll be an issue for you with the money you have sitting).

Why? Well, one - Betterment is very heavy on "emerging markets"; does that really fit your personally defined AA? MMM was showing Betterment gains... while EM stocks were doing well. But they're doing poorly now, while the Vanguard Total Stock Market fund is doing well. There will always be some ebb and flow, but the more you read, the more VTSAX makes sense. Plus - if you "start with" Betterment, you can do "in-kind transfers" of funds from taxable Betterment to taxable Vanguard, but then you have ~10-12 funds owned instead of the dead simple 3-4 you might end up with using the Bogle Head approach and Vanguard funds, which will make rebalancing less fun in the future. (Transferring from a Betterment IRA to Vanguard will trigger a liquidation of funds so you can then purchase the desired Vanguard funds, and it shouldn't be a taxable event if you follow the steps laid out before you.)
« Last Edit: January 04, 2017, 01:47:25 PM by neo von retorch »

soccerluvof4

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Re: Newbie: Betterment or Vanguard
« Reply #4 on: January 04, 2017, 01:30:52 PM »
Vanguard

catccc

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Re: Newbie: Betterment or Vanguard
« Reply #5 on: January 04, 2017, 01:57:25 PM »
Another vote for vanguard.  Nobody's going to take better care of your money than a well informed you.

austachian

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Re: Newbie: Betterment or Vanguard
« Reply #6 on: January 04, 2017, 11:41:30 PM »
Thanks for the advice all. I'll go with the consensus here, do some reading and work out the best way to invest with Vanguard. Will update with what I decide in case it helps anyone else.

wienerdog

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Re: Newbie: Betterment or Vanguard
« Reply #7 on: January 05, 2017, 07:55:31 PM »
Do some poking around on here:

http://paulmerriman.com/pauls-important-advice/

http://paulmerriman.com/how-to-invest-series-complimentary-download/

http://paulmerriman.com/vanguard-tax-deferred-etf-portfolios/

https://www.youtube.com/watch?v=Ou9X4E4Y7kE

You'll do just as good as Betterment if not better.  i left betterment after a year once I realized it really didn't add that much value.  If you are already asking questions here then you don't need Betterment.