Author Topic: Betterment or Vangaurd?  (Read 64004 times)

Will

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Re: Betterment or Vangaurd?
« Reply #50 on: January 29, 2014, 08:15:54 PM »
nd Betterment is also good for small-dollar stuff, since for example one of my weekly deposits is under Vanguard's $50 minimum. 

FYI, Vanguard's minimum is $1, not $50. I've made contributions less than $50 many times.

Hm, maybe I was misled then.  Definitely said $50 here.  Though that's for auto-deposit, maybe the minimum is $1 for manual deposit.  https://investor.vanguard.com/mutual-funds/fees

Back when I first started investing (which was so far back I would actually mail in a check with a deposit slip), I had read somewhere to pay no attention to the minimum amount for subsequent investments, as no company would actually send your money back to you.  Back then, I wouldn't always have the minimum to send in and sure enough, I never got one of my smaller checks back.  I understand wanting to invest as much as possible as quickly as possible, but not having $50 every week?  Personally, I'd still wait a week.

CanuckExpat

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Re: Betterment or Vangaurd?
« Reply #51 on: January 29, 2014, 11:10:20 PM »
I'm surprised nobody has mentioned the free $25 for opening (and funding) an account :)
I had been curious about Betterment, and the $25 promotion was incentive enough for me to open an account and satisfy my curiosity.

I like Betterment: the site was easy to use (maybe too easy), and I think it would be useful to a lot of people. It might not be required or ideal (or lowest cost) for people who frequent a personal finance / investing message board, but for people less comfortable with investing, or who want a hands off experience, you could do much worse.

As for me, I probably won't keep the account open for too much longer (long enough to get my bonus I guess). I'm actually someone who wouldn't mind paying a (very) small fee if the site would actually do all my rebalancing for me with every deposit, and I could forget about updating my spreadsheet. However, cost aside, this isn't really the case, as ultimately I will have funds and investments outside of Betterment (401k, emergency fund, etc) and so I would still need a spreadsheet to keep track of my final asset allocation no matter what.

TL;DR: nice service, nice website, probably not the right choice for people here, but a good choice nonetheless. 

Edited to fix link
« Last Edit: January 30, 2014, 01:57:11 PM by CanuckExpat »

monarda

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Re: Betterment or Vangaurd?
« Reply #52 on: January 29, 2014, 11:58:58 PM »
Here's a comment regarding Betterment.

I was learning and browsing around their web site, and after some research decided to split my original $11,000 investment in my "Build Wealth" goal in half.  The new plan is to have one longer term goal with a higher percentage stocks, and one shorter term goal, with a more conservative allocation.  This is the kind of thing a new customer might decide to do.  In the course of adding the second goal and changing the allocation for the first goal, I found that I made an error, (newbie mistake, now I see how it works), but I found that I can't cancel the request to change allocation.  I can make another request to change it back tomorrow to what I'd intended, after it first completes my wrong order.

On other sites, lets say you schedule a trade when the market is closed - you can change your mind and edit or cancel it, right? I think I've been able to edit my trade requests at Schwab in the past.   I'm not seeing a way to do that on Betterment. I've asked their support team, we'll see what they email back to me  in response.

If Betterment wants to be a site friendly for beginners, they should definitely include a way to edit oopsie requests....

ASquared

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Re: Betterment or Vangaurd?
« Reply #53 on: March 05, 2014, 10:06:54 PM »
Google around for the $100 promo - worked for me

Will

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Re: Betterment or Vangaurd?
« Reply #54 on: March 05, 2014, 11:30:54 PM »
Google around for the $100 promo - worked for me

Yes, you could use that $100 to pay the extra fees they will charge you.

ASquared

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Re: Betterment or Vangaurd?
« Reply #55 on: March 06, 2014, 12:37:44 PM »
That's what I did! No joke.  I figure it essentially pays for my fees for quite awhile, and I can try it out and see how it goes.  So far I like never having to "think" about anything after it's set.  I think the fees are actually very reasonable.  I understand that to many people no fee is the only way to go, and I get that, but I'm at a point in my life where extra time/hassle/etc is worth a (tiny) amount of money.  With young kids, never enough family time, etc the little things add up.

arebelspy

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Re: Betterment or Vangaurd?
« Reply #56 on: March 06, 2014, 01:21:15 PM »
Google around for the $100 promo - worked for me

Yes, you could use that $100 to pay the extra fees they will charge you.

That's what I did! No joke.

Hah.  Not a bad idea.
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jasman18

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Re: Betterment or Vangaurd?
« Reply #57 on: April 10, 2014, 03:00:58 PM »
Vanguard seems to be more expensive at first glance
Commission of $7 for every stock/ETF purchase.
Betterment does not appear to have any buy or sell fees.
I do systematic investments out of every check so the fees could add up fast.

Am I understanding the fee structure incorrectly?

seattlecyclone

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Re: Betterment or Vangaurd?
« Reply #58 on: April 10, 2014, 03:19:21 PM »
Vanguard seems to be more expensive at first glance
Commission of $7 for every stock/ETF purchase.
Betterment does not appear to have any buy or sell fees.
I do systematic investments out of every check so the fees could add up fast.

Am I understanding the fee structure incorrectly?

You can purchase Vanguard ETFs for free. The $7 commission only applies to individual stocks and non-Vanguard ETFs. I'm not sure what your asset level is right now, but the commission drops to $2 once you have $500k invested in Vanguard funds. (See https://investor.vanguard.com/what-we-offer/personal-services/view-benefits-at-a-glance for more info).

renaite

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Re: Betterment or Vangaurd?
« Reply #59 on: April 10, 2014, 06:59:35 PM »
I have been wondering about this! I opened a betterment account late last year and have a pretty modest amount in it. Then I found this site and in the last few weeks I have been considering switching to a Vanguard account. On one hand, I already have the account with Betterment, and the UI really is LOVELY. So simple. And, ok yes, their automatic deposit confirmation emails include stuff like "The investing force is strong in this one." (Yeah yeah, marketing.) But in reality I know the slick UI shouldn't matter that much because I should be letting the thing sit there and hang out.

At this point I've been putting off switching over to Vanguard largely because I am afraid I will do it wrong. I'm so happy to have come across this thread with such great advice!

Joel

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Re: Betterment or Vangaurd?
« Reply #60 on: April 10, 2014, 08:03:56 PM »
Vanguard. Without a doubt. Why pay extra fees with betterment? They add no value for me.

innerscorecard

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Re: Betterment or Vangaurd?
« Reply #61 on: April 10, 2014, 08:55:25 PM »
Readers of this site and other personal finance blogs who like optimizing things should of course go with Vanguard.

But I think Betterment offers real value for the general population. People who understand processes well often vastly underestimate the friction and difficulty of those same processes for the general population.

buckkatherine

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Re: Betterment or Vangaurd?
« Reply #62 on: April 23, 2014, 05:23:46 PM »
Readers of this site and other personal finance blogs who like optimizing things should of course go with Vanguard.

But I think Betterment offers real value for the general population. People who understand processes well often vastly underestimate the friction and difficulty of those same processes for the general population.

innerscorecard, agreed. What we're trying to do at Betterment is save people from themselves, and from a system they may not be prepared to deal with. The portfolios are optimized, but perhaps more importantly, so is investor behavior. The behavioral guardrails we put in place for customers are worth the management fee we charge.

drewfromutah

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Re: Betterment or Vangaurd?
« Reply #63 on: April 24, 2014, 11:16:36 AM »
I am actually a Vanguard fan that switched from Vanguard to Betterment. Right now, the fees don't really hurt (plus I received a $25 bonus, and get $10 anytime I refer someone) and their whole package is really nice. I love that I can auto deposit $25 a week and they'll balance it for me.

RapmasterD

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Re: Betterment or Vangaurd?
« Reply #64 on: April 27, 2014, 05:50:48 PM »
I am not the GENERAL POPULATION*. And I want as much SET AND FORGET as possible. And so I go with.....

VANGUARD.

I keep my desired asset allocation percentages in one column in a Google Sheet. Every time I deposit a lump sum in Vanguard, I know exactly how much to put in each of three places (2 stock ETFs and BND -- this doesn't include the 5% I simply leave in CASH). If/when I rebalance overalll, it's just a matter of buying more of the slice o' pie that is undersized.

Overall I'm 75% stock / 20% BND / 5% cash.

Takes almost no time at all.

And I save $4,000 per year.


*I'm no BETTER than anyone else. I'm just different, and yes, some would say weird.

« Last Edit: April 27, 2014, 06:15:48 PM by RapmasterD »

milesdividendmd

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Re: Betterment or Vangaurd?
« Reply #65 on: April 29, 2014, 11:11:43 PM »
I'm going to weigh in on Betterment.

But first my disclosures.

I have about $28,000 in a taxable Betterment account.

And Betterment once sent me a T-shirt when I wrote this complementary article on their service.

[MOD EDIT: Link removed.  Please stop spamming links promoting your own site.  A single link in your signature is sufficient, and will be under every post you make.  Thanks.]

It is easy to write off any non-Vanguard investment company.
(And I too believe Vanguard to be the best brokerage firm there is.  I love their underlying ethic. I love the shareholder owned structure. And I love their low fees.)

But Vanguard is not for everyone.

Betterment offers an alternative for a fee.

But a management fee of 0.25% for assets over $25,000 seems very fair in my book.

For that fee you get the following:

1. Tax efficient reinvestment of dividends and appreciation.

2. A near constant asset allocation regardless of market conditions due to  constant micro rebalancing. Because of this your risk exposure remains constant.

3. An automatic rebalancing dividend that requires no decision on the investors part (behaviorally this is hard to pull off as an individual when you have to sell recently well performing assets and buy recently poorly performing assets.

4. Little risk of style drift as in the Vanguard Target date funds.  (and better diversification in my opinion)

5. The most transparent Interface that I've seen. I Have never seen another brokerage that clearly displays exactly how much money you have invested and how much money you have made and what your percentage return is updated on a daily basis.

So in my opinion, as much as I hate paying fees, I believe you get real value for the low fees that Betterment charges.

And I would particularly recommend their services for people who are not that interested in investment theory and just want to get a well diversified low-maintenance passively managed portfolio that will take care of itself.

Alexi
« Last Edit: May 20, 2014, 09:05:28 PM by arebelspy »

foobar

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Re: Betterment or Vangaurd?
« Reply #66 on: May 01, 2014, 11:48:08 AM »
It would cost me over 5k/yr to use betterment. I find it hard to get excited about 25 dollar bonuses:) And for 5k, I am willing to spend 1 hour a month figuring out where to invest my new money. With a smaller balance, the service makes more sense as the amount of time spend remains pretty much constant.


I am actually a Vanguard fan that switched from Vanguard to Betterment. Right now, the fees don't really hurt (plus I received a $25 bonus, and get $10 anytime I refer someone) and their whole package is really nice. I love that I can auto deposit $25 a week and they'll balance it for me.

drewfromutah

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Re: Betterment or Vangaurd?
« Reply #67 on: May 01, 2014, 08:59:33 PM »
It would cost me over 5k/yr to use betterment. I find it hard to get excited about 25 dollar bonuses:) And for 5k, I am willing to spend 1 hour a month figuring out where to invest my new money. With a smaller balance, the service makes more sense as the amount of time spend remains pretty much constant.


I am actually a Vanguard fan that switched from Vanguard to Betterment. Right now, the fees don't really hurt (plus I received a $25 bonus, and get $10 anytime I refer someone) and their whole package is really nice. I love that I can auto deposit $25 a week and they'll balance it for me.

Yes, that is pretty much what I was trying to say.

jstash

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Re: Betterment or Vangaurd?
« Reply #68 on: May 02, 2014, 11:36:54 PM »
Here's something no one ever mentions, but what if I think Betterment's portfolio is just better and will outperform Vanguard's all-in-one funds? Let me explain.

With $100,000, you're paying a total of about 30 basis points at Betterment (15 in management, 15 in underlying ETF fees). Vanguard's Growth Lifestrategy fund, in contrast, is only 17 basis points.

But what if I think Betterment's value-tilt portfolio of 12 different ETFs is going to outperform Vanguard's set of 4 ETFs by over 13 basis points? Moreover, Vanguard's allocation is set at 80/20, whereas I can maintain 90/10 at Betterment, which should outperform over the long term. Vanguard's Target Date funds take asset allocation even further out of your control, and if you prefer a stronger allocation in equities, Betterment is appealing.

I understand that you could just buy a basket of 12 ETFS in a Vanguard brokerage account that mimics Betterment's and end up saving several basis points, and if you don't mind tinkering around with rebalancing, that's probably the best option. But I do think Betterment is better than Vanguard's all-in-one funds for the reasons above - and I could also add, it has a much better interface and allows new investors with less than $1000 or $3000 (Vanguard's thresholds for all-in-ones) to get in the game and stay there, and I think that's great.


arebelspy

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Re: Betterment or Vangaurd?
« Reply #69 on: May 03, 2014, 09:50:17 AM »
You aren't constrained by having to choose a certain Vangaurd fund (target retirement, or whatever).

You can slice and dice to your heart's content.

You even acknowledge this:
I understand that you could just buy a basket of 12 ETFS in a Vanguard brokerage account that mimics Betterment's and end up saving several basis points

So I don't see how you'll end up with the conclusion that BM is better in that case.

How much money will the laziness of not wanting to rebalance cost you?  Want to run the numbers on that?  :)
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milesdividendmd

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Re: Betterment or Vangaurd?
« Reply #70 on: May 03, 2014, 03:10:04 PM »



It would cost me over 5k/yr to use betterment. I find it hard to get excited about 25 dollar bonuses:) And for 5k, I am willing to spend 1 hour a month figuring out where to invest my new money. With a smaller balance, the service makes more sense as the amount of time spend remains pretty much constant.


Foobar,

From your comment I deduce that you have >330,000$ In your vanguard account.

The question, if that is the case, becomes do you get more than 15 basis points of value from a Betterment account? If you do it's worth it, and if you don't then it's not.

And the answer is that it depends.

It's possible that you do. And it's possible that you don't. It's tough to quantify how much the rebalancing bonus is worth as it changes in different market scenarios and with different investor behavior.

If you're a savvy investor, with good discipline, I probably wouldn't waste my time with Betterment. But  you just wanted to put  money away and forget about it and knew that it was being managed intelligently and automatically for a fair price, I think Betterment is well worth the money.

RapmasterD

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Re: Betterment or Vangaurd?
« Reply #71 on: May 03, 2014, 07:11:47 PM »
It would cost me over 5k/yr to use betterment. I find it hard to get excited about 25 dollar bonuses:) And for 5k, I am willing to spend 1 hour a month figuring out where to invest my new money. With a smaller balance, the service makes more sense as the amount of time spend remains pretty much constant.


I am actually a Vanguard fan that switched from Vanguard to Betterment. Right now, the fees don't really hurt (plus I received a $25 bonus, and get $10 anytime I refer someone) and their whole package is really nice. I love that I can auto deposit $25 a week and they'll balance it for me.

foobar -- You are so dead on....IMHO of course. Nice!

jstash

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Re: Betterment or Vangaurd?
« Reply #72 on: May 03, 2014, 07:46:19 PM »
Quote
You aren't constrained by having to choose a certain Vangaurd fund (target retirement, or whatever).

So you concede my main point, which is that Betterment is better than Vanguard's all-in-one funds.

Quote
You even acknowledge this:

Not only do I acknowledge this, I say "that's probably the best option." Best option for investors with oodles of money and time.

However, I think you're making the whole thing way too black and white: either you use Vanguard or you're "lazy." That's just not the case, especially for new investors. First of all, you need a minimum of $3,000 to start a Vanguard brokerage account. Second, with a Vanguard brokerage you can't buy fractional shares of ETFs - the minimum purchase is 1 share. So let's say I have a really simple basket at Vanguard of, say VTI ($97 per share) and BNDX ($50 per share). Can you see how difficult it would be, with small sums of money, to maintain an asset balance on those two funds, not to mention how much more exponentially difficult it would be if I had 12 funds with 12 different prices that I'm forced to buy share by share? Betterment provides fractional share purchase, which means every $100 or whatever I invest is fully invested in a completely balanced way. If I invest $100 per month with Vanguard and buy one share of VTI, my asset allocation is out of whack and I've got 3 soldiers sitting around doing nothing.

So basically, there are all kinds of factors and individual circumstances involved in this decision, not laziness. If you're just starting out and have less than $3,000, Betterment is by far the best option out there. Even after that, it's a strong contender with a lot of real benefits.

arebelspy

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Re: Betterment or Vangaurd?
« Reply #73 on: May 03, 2014, 08:22:00 PM »
Quote
You aren't constrained by having to choose a certain Vangaurd fund (target retirement, or whatever).

So you concede my main point, which is that Betterment is better than Vanguard's all-in-one funds.

No, I don't, I just addressed something else that made it moot.  You set up a false dichotomy between the two, and so there's no point in even addressing that.
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monarda

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Re: Betterment or Vangaurd?
« Reply #74 on: May 03, 2014, 09:53:56 PM »
Since this thread is active, I thought I'd check in with a quarterly update.  These comments reflect my personal preference and I'm posting mainly in case a newbie or hands-off investor might find their style similar to mine.  To address the recent discussion, I think the Vanguard life strategy funds and Betterment are pretty much the same. I'm treating them the same, just commenting on my customer experience.

After taking a little time getting used to it, I'm really liking Betterment.
It's really easy to make monthly contributions, and I especially like the fact that it's organized by goals- I have three different stashes (goals) there- with different intentions (time frames for spending) for each stash. One "safety net" (60% bonds), one "conservative" (60% stocks) and one "moderate" (80% stocks, containing the bulk of my investment, for the longer term).  On the grand total, so far I've made 2.5% since December 2013.  To date, fees have totaled $6,  or 0.04% of my total balance. I think Fees are charged quarterly? not sure, so far I've only been charged once, on April 1.

My Sharebuilder account is also ok.   I'm comparing Sharebuilder to an account at Vanguard, and find the two pretty much the same. I like the Sharebuilder user interface and web site a little better (personal preference). I've also made 2.5% since December at Sharebuilder, with three similar sub-allocations to what I've set up at Betterment (VSCGX, VSMGX, MITFX).  BUT I haven't made any contributions, because of fees that I'd be charged to do so. A point against Sharebuilder in that regard. But I like them because of their easy connection to my savings accounts at CapitalOne. Also a very nice web site.  Vanguard may also have a user friendly web site, but so far, I'm not drawn enough by it to want to click around and see.

I predict my tendency will be to continue to make small automated monthly contributions to Betterment, and only occasional (annual?) larger contributions to Sharebuilder or Vanguard directly.  We'll see if that holds in a couple of months.

I hope this helps somebody,

Mr Mark

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Re: Betterment or Vangaurd?
« Reply #75 on: May 03, 2014, 09:58:35 PM »
Alexi/milesdiv etc

what a load of bs.

0.25% is a huge fee for basically doing nothing that you cant easily do with Vanguard. Oh, except you "microbalance",  lots of trades = lots of fees there too. 'Helpers', to quote Bogle.

Snake oil for the little guy, because indeed when you actually have money, ( say >400k)  the obscenity of the fees becomes apparent.

I almost expect you to try to sell me a variable annuity...

milesdividendmd

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Re: Betterment or Vangaurd?
« Reply #76 on: May 03, 2014, 10:24:01 PM »
Mr Mark ,

Easy cowboy!

I've made some specific points about the value of betterment as I see it.

If you see fit to counter those points with facts then maybe someone can learn something from our different points of view.

Ad hominem attacks and insinuating that my points are in some way analogous to my promoting variable annuities (which I would never do) have no such benefits.

As an example, in your short diatribe you made 2 errors.

1.  If you have greater than 100K  invested you are charged .15 not  .25%  by. Betterment.

2 .  "Micro balancing" ( as you call it) does not lead to any additional fees for the Betterment customer. All fees are included in the 0.15 or 0.25% global fee and the fees of the underlying etfs.

Again, I love vanguard and use vanguard. But betterment provides unique benefits at a reasonable rate and I also use Betterment. Blindly assuming that any non vanguard brokerage is selling snake oil is usually right, but not always.  Your critique of Betterment is one instance where such blind faith is exposed.

Alexi

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Re: Betterment or Vangaurd?
« Reply #77 on: May 04, 2014, 07:22:05 AM »
How much value is in the unique benefits compared to the costs? Do these unique benefits provide you with more growth than the costs?

No one is having blind faith on Vanguard. They have an anger towards a company charging .15 or .25 to do the same exact thing that someone could do with very little amount of education and time. That adds up. It's a pure numbers game. If you really want to pay someone else to do something that costs you very little time and you're comfortable with that fine. But don't expect a group like Mustachians to cheer you on as you piss your money away.

Quote
1. Tax efficient reinvestment of dividends and appreciation.

2. A near constant asset allocation regardless of market conditions due to  constant micro rebalancing. Because of this your risk exposure remains constant.

3. An automatic rebalancing dividend that requires no decision on the investors part (behaviorally this is hard to pull off as an individual when you have to sell recently well performing assets and buy recently poorly performing assets.

4. Little risk of style drift as in the Vanguard Target date funds.  (and better diversification in my opinion)

5. The most transparent Interface that I've seen. I Have never seen another brokerage that clearly displays exactly how much money you have invested and how much money you have made and what your percentage return is updated on a daily basis.

The question isn't "do you find the above worth .15 or .25 fees?" The question is, does it actually give you more money? I doubt it.

If it's fancy interface or other things you miss out between Vanguard and Betterment then Vanguard isn't the only game in town who will provide low cost index funds.

In the end you're just going to pay more for essentially a target date fund.

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Re: Betterment or Vangaurd?
« Reply #78 on: May 04, 2014, 08:08:19 AM »

Alexi,

it's not ad hominem to disagree with your opinion. You come across, to me, like some kind of IFA pushing a product and trying to justify 'only 0.15 / 0.25%' in fees for something I can do with Vanguard, better and cheaper.

-tax
vanguard are integrated with all the big tax preparers,  and gives great tax reports, handles IRAs, Roths, etc

constant "micro rebalancing" (your words)  does not confer an advantage,  as Grant pointed out. And it implies more trades within the fund, which by definition generates fees somewhere. 

Automatic rebalancing? Again, just sounds like an excuse for lots of trades. I get auto rebalanced wrt my equity bond ratio via vanguard. My asset allocation within equities I rebalanced annually.

style drift, if youre an idiot and dont have and apply an AA, or cant even run a 3/4  type basic allocation, ok. Ill manage your money for 0.14%  ;-)

A good interface... well, I find vanguard good enough for me, veryslick, full of independent advice.

So, as above, I think its a total ripoff. I want to minimise the fees I pay to invest, and I think vanguard does it, perhaps with fedelity and some others. Paying money to anyone to just help me invest is a waste of money, znd even 0.15% adds up.




Mr Mark ,

Easy cowboy!

I've made some specific points about the value of betterment as I see it.

If you see fit to counter those points with facts then maybe someone can learn something from our different points of view.

Ad hominem attacks and insinuating that my points are in some way analogous to my promoting variable annuities (which I would never do) have no such benefits.

As an example, in your short diatribe you made 2 errors.

1.  If you have greater than 100K  invested you are charged .15 not  .25%  by. Betterment.

2 .  "Micro balancing" ( as you call it) does not lead to any additional fees for the Betterment customer. All fees are included in the 0.15 or 0.25% global fee and the fees of the underlying etfs.

Again, I love vanguard and use vanguard. But betterment provides unique benefits at a reasonable rate and I also use Betterment. Blindly assuming that any non vanguard brokerage is selling snake oil is usually right, but not always.  Your critique of Betterment is one instance where such blind faith is exposed.

Alexi

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Re: Betterment or Vangaurd?
« Reply #79 on: May 04, 2014, 08:46:10 AM »
+1 to Mr Mark and matchewed! 

Alexi,  disagreement is not a personal attack, unlike referring to someone as "cowboy".  %s and points add up big time in investing. 

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Re: Betterment or Vangaurd?
« Reply #80 on: May 04, 2014, 09:16:47 AM »

Note the new members of the forum all very enthusiastic about betterm*nt, and especially the use of the word "we at betterment"

Astroturfing, and plugging fees to financial middlemen.erecting straw man arguments, and getting super defensive.

Spam.



Readers of this site and other personal finance blogs who like optimizing things should of course go with Vanguard.

But I think Betterment offers real value for the general population. People who understand processes well often vastly underestimate the friction and difficulty of those same processes for the general population.

innerscorecard, agreed. What we're trying to do at Betterment is save people from themselves, and from a system they may not be prepared to deal with. The portfolios are optimized, but perhaps more importantly, so is investor behavior. The behavioral guardrails we put in place for customers are worth the management fee we charge.

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Re: Betterment or Vangaurd?
« Reply #81 on: May 04, 2014, 11:05:07 AM »
+1 to Mr Mark and matchewed! 

Alexi,  disagreement is not a personal attack, unlike referring to someone as "cowboy".  %s and points add up big time in investing.

Right, like Mr. Mark calling Alexi an "idiot" is not a personal attack. Or the mod calling me "lazy" on my first post to the forum (ironically, the same mod who marked someone else's post as a "personal attack" - because that person called someone else lazy! Don't worry, the attitude of the big mustachioed men around here sucks so bad the newbs won't stay around long. You can go back to telling each other what you want to hear.

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Re: Betterment or Vangaurd?
« Reply #82 on: May 04, 2014, 11:28:19 AM »
+1 to Mr Mark and matchewed! 

Alexi,  disagreement is not a personal attack, unlike referring to someone as "cowboy".  %s and points add up big time in investing.

Right, like Mr. Mark calling Alexi an "idiot" is not a personal attack. Or the mod calling me "lazy" on my first post to the forum (ironically, the same mod who marked someone else's post as a "personal attack" - because that person called someone else lazy! Don't worry, the attitude of the big mustachioed men around here sucks so bad the newbs won't stay around long. You can go back to telling each other what you want to hear.

Before you start pulling the martyr card you might want to actually have someone call someone an idiot or you being called lazy. The actual quote regarding lazy was about laziness of not rebalancing. Laziness by definition is disinclination to do an activity. It is the exact correct word for not wanting to rebalance and pay someone else to do it.

Mr. Mark did not call Alexi an idiot he said that if you don't have an asset allocation and can't rebalance it you are an idiot.

That being said your post is adding nothing but butthurt. I hereby label you complainypants. Have a nice day. :)

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Re: Betterment or Vangaurd?
« Reply #83 on: May 04, 2014, 11:36:26 AM »
Mr Mark

If advocating for a product that I believe to be a good one is spam, then your advocating for Vanguard (which I also advocate for) is equally spam.

Before I wrote my first word on this thread I provided my disclosures. Which were that I have a small amount of money invested in Betterment, and after I wrote an independent  review of their product on my (not for profit) blog they sent me a T-shirt.

I do not know what the term IFA is (independent financial advisor?), but have never made one penny from financial advice. Investing is a hobby for me. I make my money practicing medicine.

And your definition of "Mustachian ," seems quite narrow. I consider myself a mustachian as this blog has had a tremendous and positive effect on my life.

So if you have money invested in Vanguard, the only thing separating you and me in terms of integrity in this discussion is the T-shirt.

I'm going to pull out of the personal back and forth here because it takes away from the discussion on the thread which is actually a useful one. Feel free  to land the  last shot.

Back to  the meat of the discussion.

1.  There are no additional fees charged for any trades in Betterment above the transparent management fee that we've been discussing. If you disagree with this statement, show some evidence to the contrary. Just saying it's not true is not convincing. I have scoured my statements I have looked at my returns, and I see no evidence to the contrary here.

2. Being able to invest in fractional shares can be a big deal because it means that every penny that you invest is actually invested and not sitting on the sidelines. This effect becomes more important the less amount of money you have (because in a Traditional brokerage account more of your money will be sitting on the sidelines at any one time)

3. Probably the biggest deal though is the behavioral aspect. The more sure you are about your immunity to behavioral mistakes, the more likely you are to succumb to them. Men are more susceptible to this overconfidence than women. And I am no different. In my other accounts I do find it difficult to sell stocks and buy bonds in a bull market such as our current one. But I find it even more difficult to sell bonds and buy stocks during a severe bear markets. So the set it and forget it aspect of Betterment has the potential to deliver returns out of proportion to its cost.

Alexi



« Last Edit: May 04, 2014, 12:30:44 PM by milesdividendmd »

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Re: Betterment or Vangaurd?
« Reply #84 on: May 04, 2014, 12:15:03 PM »
My taxable money is in Betterment, as well as a Roth an Traditional IRA. I have spent 0 minutes this week thinking about my investments. If spending more time with my family and less time thinking about money makes me "lazy," then I am proud to be among the laziest.

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Re: Betterment or Vangaurd?
« Reply #85 on: May 04, 2014, 12:28:47 PM »
My taxable money is in Betterment, as well as a Roth an Traditional IRA. I have spent 0 minutes this week thinking about my investments. If spending more time with my family and less time thinking about money makes me "lazy," then I am proud to be among the laziest.

Many people rebalance once per year.  They spend maybe 15 minutes doing so, around January.

They'd have also spent 0 minutes this week thinking about their investments.

I don't know for sure, but your family might be okay with not spending those few minutes with you once per year in order to save thousands of dollars.
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Re: Betterment or Vangaurd?
« Reply #86 on: May 04, 2014, 12:29:06 PM »
Honest Abe,

That's awesome. You are the "true" Mustachian!

Alexi

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Re: Betterment or Vangaurd?
« Reply #87 on: May 04, 2014, 12:39:03 PM »
Alexi,

if you are advertising an investment you own shares in, that imho offers nothing substantial for 0.25% fees, I call that spam, especially when its supported by others also associated with the same company who have just joined. Declaring your interest doesnt make it not spam.

Vanguard,  as well as being non profit, and founded by the inventor of index investing, is a huge and well established company that gains economies of scale. If your fund trades more often, taxes and fees will be higher, even if that's hidden in the underlying fund fees. And it is indeed one reason why the company charges an extra 25 points ( I refer to the 0.25% fee because you keep saying that's who it's mainly for, small investors). There is no quantification of this magical benefit in terms of returns to justify the extra fees  (about 100% higher fees than Vanguard in many cases, and a 500% increase on vanilla SP500).

what I do see is a list of so-called benefits that are either available free on Vanguard already, or are things that sound sophisticated " micro rebalancing" yet do not offer increased returns anyway.

That some vanguard/index members tend to react so forcefully to the pay for financial advice crowd is that it is such poor advice,  and less sophisticated mustachians may think paying 0.25% is a good thing. It isn't, and not just in my opinion, but demonstrably. 








as thankfully pointed out by matchewed, I didnt call you an idiot, unless you can't self rebalance a basic asset allocation. It is not about simply vanguards target year funds vs betterment.

The going on and on about 100 dollar asset allocation is pointless. If you have a tiny portfolio the last thing you want is wasting returns on paying betterment shareholders and management.

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Re: Betterment or Vangaurd?
« Reply #88 on: May 04, 2014, 01:24:06 PM »
Mr Mark,

You keep on making mistakes. I never claimed you called me an idiot. Do some reading.

By your definition of spam, you are spamming for vanguard and I am spamming for both  vanguard and betterment. Fair enough. We're both spammers.

Alexi

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Re: Betterment or Vangaurd?
« Reply #89 on: May 04, 2014, 03:04:12 PM »
Here's something no one ever mentions, but what if I think Betterment's portfolio is just better and will outperform Vanguard's all-in-one funds? Let me explain.

With $100,000, you're paying a total of about 30 basis points at Betterment (15 in management, 15 in underlying ETF fees). Vanguard's Growth Lifestrategy fund, in contrast, is only 17 basis points.

But what if I think Betterment's value-tilt portfolio of 12 different ETFs is going to outperform Vanguard's set of 4 ETFs by over 13 basis points? Moreover, Vanguard's allocation is set at 80/20, whereas I can maintain 90/10 at Betterment, which should outperform over the long term. Vanguard's Target Date funds take asset allocation even further out of your control, and if you prefer a stronger allocation in equities, Betterment is appealing.

I understand that you could just buy a basket of 12 ETFS in a Vanguard brokerage account that mimics Betterment's and end up saving several basis points, and if you don't mind tinkering around with rebalancing, that's probably the best option. But I do think Betterment is better than Vanguard's all-in-one funds for the reasons above - and I could also add, it has a much better interface and allows new investors with less than $1000 or $3000 (Vanguard's thresholds for all-in-ones) to get in the game and stay there, and I think that's great.

jstash -- I don't understand this perspective at all. With a Vanguard brokerage account I can buy anything I want. I don't pay a fee to trade the dozens of ETFs Vanguard offers, and for folks without a balance that I can't remember right now, they'll pay $8 per STOCK trade. I pay nothing for the first 25 trades per year, and don't trade nearly that much.

Speaking for myself, the folks objecting to Betterment are not making false comparisons of funds. They're objecting to paying something for what is close to nothing.

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Re: Betterment or Vangaurd?
« Reply #90 on: May 04, 2014, 03:24:21 PM »
miles -- I was going to respond to this last night but was too lazy. And look at all the drama since then. Please see all caps below your points for my thoughts.

I'm going to weigh in on Betterment.

But first my disclosures.

I have about $28,000 in a taxable Betterment account.
SO YOU'RE PAYING THEM ABOUT $40 PER YEAR AT THIS LEVEL. I COULD SEE WHY YOU WOULDN'T HAVE AN ISSUE WITH THIS. WHAT ABOUT WHEN YOU HAVE $280,000? WHAT ABOUT WHEN YOU HAVE $2.8 MILLION? DEPENDING UPON YOUR AGE, THIS FIRST MILESTONE IS CERTAINLY ATTAINABLE, AND THE SECOND ONE COULD BE AS WELL. IF YOU WANT TO SADDLE UP TO PAY BETTERMENT $4,000 PER YEAR, HAVE AT IT.


And Betterment once sent me a T-shirt when I wrote this complementary article on their service.
MILDLY AMUSING, EXCEPT YOU SPELLED 'COMPLEMENTARY' INCORRECTLY IN THIS CONTEXT. PEANUT BUTTER IS 'COMPLEMENTARY' WITH JELLY. PEANUT BUTTER PAYS JELLY A 'COMPLIMENT' -- "DAMN, YOU SO SWEET.'

(http://www.milesdividendmd.com/do-i-bore-you-with-my-investment-talk/)

It is easy to write off any non-Vanguard investment company.
(And I too believe Vanguard to be the best brokerage firm there is.  I love their underlying ethic. I love the shareholder owned structure. And I love their low fees.)


But Vanguard is not for everyone.

Betterment offers an alternative for a fee.

But a management fee of 0.25% for assets over $25,000 seems very fair in my book.
I DON'T UNDERSTAND THE CONCEPT OF 'FAIR.' THAT'S WAY TOO ABSTRACT FOR ME. THE CURRENT EGYPTIAN LEADERSHIP THINKS IT'S FAIR TO ASSASSINATE 600 PEOPLE. IS THAT 'FAIR?' LIKE I SAID EARLIER, PAYING $4,000 ON A $2.8 MILLION PORTFOLIO IS A SUBSTANTIVE COST.

For that fee you get the following:

1. Tax efficient reinvestment of dividends and appreciation.
I DON'T EVEN UNDERSTAND WHAT THIS MEANS. AND I CAN ASSURE YOU THAT WITH A PORTFOLIO OF $28,OOO THE LAST THING YOU NEED TO WORRRY ABOUT IS TAX EFFICIENT RE-INVESTMENT.

2. A near constant asset allocation regardless of market conditions due to  constant micro rebalancing. Because of this your risk exposure remains constant.
THIS SOUNDS VERY BUZZ WORDY AND UNNECESSARY. MOST 'EXPERTS' CITE THAT ONCE PER YEAR REBALANCING IS SUFFICIENT. BUT THERE'S EVEN DISAGREEMENT ON THAT FRONT. MANY FOLKS CAN ANALYTICALLY PROVE THAT ASSET ALLOCATING INFLOWS IS ALL YOU REALLY NEED TO DO. BUT ONCE PER YEAR IS WHAT THE CONSENSUS SAYS.

3. An automatic rebalancing dividend that requires no decision on the investors part (behaviorally this is hard to pull off as an individual when you have to sell recently well performing assets and buy recently poorly performing assets.
THIS WOULD BE THE LAST THING I'D WANT. FOR EXAMPLE, MY WIFE'S 401K, MY 401K, MY ROTH IRA -- ARE ALL WITH FIDELITY. THE REST (AND THE MOST) OF OUR MONEY IS IN VANGUARD TAXABLE ACCOUNTS. I WANT THE FLEXIBILITY WHEN REBALANCING TO DETERMINE WHERE I'LL DO THAT. MYSELF. MANUALLY. BETWEEN FOUR DIFFERENT ACCOUNTS WE OWN THREE DIFFERENT TYPES OF INVESTMENTS. SO THIS IS PRETTY EASY.


4. Little risk of style drift as in the Vanguard Target date funds.  (and better diversification in my opinion)
I'VE HAD MY MONEY WITH VANGUARD FOR MORE THAN 20 YEARS. I'VE NEVER ONCE CONSIDERED INVESTING IN ONE OF THESE FUNDS. SO FOR ME THIS POINT IS MOOT.

5. The most transparent Interface that I've seen. I Have never seen another brokerage that clearly displays exactly how much money you have invested and how much money you have made and what your percentage return is updated on a daily basis.
VANGUARD'S USER INTERFACE SUCKS. BUT YOU CAN EASILY FIND ALL THIS INFO. I CAN ALSO GET A CLEAR AND EASY VIEW, ON ONE PAGE, OF ALL MY INVESTMENTS...INCLUDING THOSE IN NON-VANGUARD ACCOUNTS. AND I'D ALSO SAY THAT VANGUARD APPEARS TO BE DOUBLING DOWN ON IMPROVING ITS MOBILE APPS, AS IT SHOULD. THEY'VE GONE FROM SUCKING TO BEING AVERAGE.

So in my opinion, as much as I hate paying fees, I believe you get real value for the low fees that Betterment charges.
ONE OF THE THINGS THAT PISSES ME OFF ABOUT BETTERMENT AND ITS ILK IS THAT I THINK THEY PROVIDE LITTLE TO NO VALUE. I THINK THEY'RE SKIMMING AND FEEDING OFF THE NAIVETE OF YOUNG INVESTORS, PARTICULARLY THE SF BAY AREA TECH CROWD THAT IS FOOLED BY ALL THE THINGS -- LIKE A SLICK INTERFACE AND THE OVERINFLATED IMPORTANCE OF CONSTANT ASSET RE-ALLOCATION -- THAT YOU ARE.

AND SO NOW, LET'S INTRODUCE A THIRD OPTION BEYOND VANGUARD AND BETTERMENT -- TD AMERITRADE. IT COSTS VIRTUALLY NOTHING TO TRADE THERE. WITH TD AMERITRADE YOU CAN PURCHASE ANY ETF YOU WANT TO (MUTUAL FUNDS ARE SO 80S -- TOO EXPENSIVE, BABY). SO YOU CAN ASSET ALLOCATE AMONG A FEW ETF'S, AND REBALANCE ONCE PER YEAR. EASY PEASY. AND WAY LESS THAN 0.15%. THE ONLY REASON I RECENTLY CLOSED OUR TDAMERITRADE ACCOUNT IS THAT I'M JONESIN' FOR AS MUCH SIMPLICITY AS POSSIBLE. BUT I AM DEFINITELY A TD AMERITRADE FAN.

SO COME ON EVERYONE. LET'S GET IN A SHIT MATCH -- TD AMERITRADE!!!


And I would particularly recommend their services for people who are not that interested in investment theory and just want to get a well diversified low-maintenance passively managed portfolio that will take care of itself.

Alexi
« Last Edit: May 04, 2014, 03:37:56 PM by RapmasterD »

milesdividendmd

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Re: Betterment or Vangaurd?
« Reply #91 on: May 04, 2014, 05:43:11 PM »
+1 to Mr Mark and matchewed! 

Alexi,  disagreement is not a personal attack, unlike referring to someone as "cowboy".  %s and points add up big time in investing.

Right, like Mr. Mark calling Alexi an "idiot" is not a personal attack. Or the mod calling me "lazy" on my first post to the forum (ironically, the same mod who marked someone else's post as a "personal attack" - because that person called someone else lazy! Don't worry, the attitude of the big mustachioed men around here sucks so bad the newbs won't stay around long. You can go back to telling each other what you want to hear.

Before you start pulling the martyr card you might want to actually have someone call someone an idiot or you being called lazy. The actual quote regarding lazy was about laziness of not rebalancing. Laziness by definition is disinclination to do an activity. It is the exact correct word for not wanting to rebalance and pay someone else to do it.

Mr. Mark did not call Alexi an idiot he said that if you don't have an asset allocation and can't rebalance it you are an idiot.

That being said your post is adding nothing but butthurt. I hereby label you complainypants. Have a nice day. :)

matchewed,

Name calling is not very educational but I'll admit it, it can be can be fun...

If AJ Yooper is a "complainy pants" that makes you and your ilk card carrying members of the "mustache police."   

Alexi


arebelspy

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Re: Betterment or Vangaurd?
« Reply #92 on: May 04, 2014, 05:50:40 PM »
If wanting people to take charge of their life instead of hand it over to someone else - and consequently cautioning them to marketing bullshit and trying to educate them - makes me a member of the "mustache police," I'll gladly take that title.
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Re: Betterment or Vangaurd?
« Reply #93 on: May 04, 2014, 06:21:10 PM »
Rapmaster,

Thank you for giving me an education on the meaning of "complementary/complimentary"based on an iPhone typo.

You've exposed that I'm not good at typing with my thumbs. Bravo.

As to the definition of "fair" , it is of course entirely subjective.

Here are the reasons why I think Betterment is charging a fair price at 0.15 -.25% for their services on amounts greater than 25K.

1.  For investors just want to put their money into a rational evidence based  well diversified passive portfolio, that consistently keeps the same risk profile, and an annual fee of less than 0.5% all in, Betterment checks all the boxes. I believe it to be superior to the target date funds of Vanguard do to better diversification, no risk of style drift. Buying a bunch of ETFs and periodically rebalancing requires some effort and execution. I enjoy it. But others don't.

2.  There is the potential for better risk-adjusted returns with Betterment due to the constant rebalancing. As an example if you rebalance is 70% VTI 30% SHY portfolio once a year in January, then by December of last year you would've been very overweight and Stocks, and very underweight in bonds. For the sake of simplicity let's say you became 80/20 by the end of the year. If the stockmarket crashes 50% in December, then you would lose a significant amount of value in your portfolio, (about 5% of your overall portfolio value) that the Betterment customer would not because he would still be at a 70/30 allocation. This is by no means a guarantee, and it is true that on some years you will make a little more by not rebalancing. The problem is that you're taking on more risk than you originally intended in your investment policy statement. 

3. Betterment has a slick interface that is very transparent. I've never seen another brokerage that tells you exactly the amount of money that was invested and exactly the amount of money you have returned. And exactly how much you have been charged in fees.

Now your response tells me that these factors are not important to you. Fair  enough. I have no problem with that.

But I can think of no better service to recommend to a low knowledge, motivated saver who just wants to save his money in an intelligent way and get on with his life.

Hell, I love investing, and have multiple brokerage accounts, and I keep my sliver of money in Betterment because it has been such a positive experience.

Alexi


« Last Edit: May 04, 2014, 08:12:27 PM by milesdividendmd »

matchewed

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Re: Betterment or Vangaurd?
« Reply #94 on: May 04, 2014, 06:53:18 PM »
+1 to Mr Mark and matchewed! 

Alexi,  disagreement is not a personal attack, unlike referring to someone as "cowboy".  %s and points add up big time in investing.

Right, like Mr. Mark calling Alexi an "idiot" is not a personal attack. Or the mod calling me "lazy" on my first post to the forum (ironically, the same mod who marked someone else's post as a "personal attack" - because that person called someone else lazy! Don't worry, the attitude of the big mustachioed men around here sucks so bad the newbs won't stay around long. You can go back to telling each other what you want to hear.

Before you start pulling the martyr card you might want to actually have someone call someone an idiot or you being called lazy. The actual quote regarding lazy was about laziness of not rebalancing. Laziness by definition is disinclination to do an activity. It is the exact correct word for not wanting to rebalance and pay someone else to do it.

Mr. Mark did not call Alexi an idiot he said that if you don't have an asset allocation and can't rebalance it you are an idiot.

That being said your post is adding nothing but butthurt. I hereby label you complainypants. Have a nice day. :)

matchewed,

Name calling is not very educational but I'll admit it, it can be can be fun...

If AJ Yooper is a "complainy pants" that makes you and your ilk card carrying members of the "mustache police."   

Alexi

For the record I'm not calling AJ a complainypants. I'm calling jstash one. :)

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Re: Betterment or Vangaurd?
« Reply #95 on: May 04, 2014, 07:33:39 PM »
This is getting ridiculous.

Do betterment farm out social media astroturfing?

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Re: Betterment or Vangaurd?
« Reply #96 on: May 05, 2014, 01:13:53 AM »
Rapmaster,

Thank you for giving me an education on the meaning of "complementary/complimentary"based on an iPhone typo.

You've exposed that I'm not good at typing with my thumbs. Bravo.

As to the definition of "fair" , it is of course entirely subjective.

Here are the reasons why I think Betterment is charging a fair price at 0.15 -.25% for their services on amounts greater than 25K.

1.  For investors just want to put their money into a rational evidence based  well diversified passive portfolio, that consistently keeps the same risk profile, and an annual fee of less than 0.5% all in, Betterment checks all the boxes. I believe it to be superior to the target date funds of Vanguard do to better diversification, no risk of style drift. Buying a bunch of ETFs and periodically rebalancing requires some effort and execution. I enjoy it. But others don't.

2.  There is the potential for better risk-adjusted returns with Betterment due to the constant rebalancing. As an example if you rebalance is 70% VTI 30% SHY portfolio once a year in January, then by December of last year you would've been very overweight and Stocks, and very underweight in bonds. For the sake of simplicity let's say you became 80/20 by the end of the year. If the stockmarket crashes 50% in December, then you would lose a significant amount of value in your portfolio, (about 5% of your overall portfolio value) that the Betterment customer would not because he would still be at a 70/30 allocation. This is by no means a guarantee, and it is true that on some years you will make a little more by not rebalancing. The problem is that you're taking on more risk than you originally intended in your investment policy statement. 

3. Betterment has a slick interface that is very transparent. I've never seen another brokerage that tells you exactly the amount of money that was invested and exactly the amount of money you have returned. And exactly how much you have been charged in fees.

Now your response tells me that these factors are not important to you. Fair  enough. I have no problem with that.

But I can think of no better service to recommend to a low knowledge, motivated saver who just wants to save his money in an intelligent way and get on with his life.

Hell, I love investing, and have multiple brokerage accounts, and I keep my sliver of money in Betterment because it has been such a positive experience.

Alexi

This response is poorly written and inane. Quit while you're behind. And again, I invest in three ETFs total: SPY, VIOV, and BND.
--This is not "a bunch of ETFs."
--Again, you keep talking about "target date funds." Not interested...or interesting.
--You talk about a 50% market crash like they are a matter of fact. They are not. They happen, but not very often.

For me to put my Vanguard holdings into Betterment would increase my fees by $3,300 this year. Your rationale has only increased my conviction of the stupid decision I'd be making if I were to follow this course of action.

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Re: Betterment or Vangaurd?
« Reply #97 on: May 05, 2014, 09:50:03 AM »
Uh oh,

The "mustache police" has entered the field of literary criticism.

To any one who disagrees with common wisdom of the board:

Make sure to have your post proof read by a literary expert (like the well published rapmaster***) prior to disagreeing with a senior Mustachian.

Alexi

***if you're an obedient pupil he may teach you how to write  "BUZZ-WORDY" in all caps bold!

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Re: Betterment or Vangaurd?
« Reply #98 on: May 05, 2014, 10:21:00 AM »
Please stop, miles.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

milesdividendmd

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    • Miles Dividend MD
Re: Betterment or Vangaurd?
« Reply #99 on: May 05, 2014, 10:56:15 AM »
I will gladly stop.

Please ask those who initiate conflict to stop as well.

If you reread the thread, I think you'll find that every such comment that I wrote was preceded by an ad hominem attack from the other side.

I honestly prefer a genteel exchange of ideas, but I am no fan of bullying, and can dish it out as well as I can take it.

If a poor writer sees fit to critique my writing style he has declared himself "fair game" in my book.

Alexi