You guys are really getting off topic - we're talking about Betterment here. Here's the point:
- Betterment offers no better returns that just buying standard Vanguard Funds, and also charges an extra fee on top.
- Betterment offers less flexibility in choosing one's investments, and Betterment could change their allocation, even if undesired by the participant.
- Betterment carries the additional risk of Betterment itself, and not just the risk of the Vanguard funds. What if the company goes under?
- Betterment's entire business model is to make it easier to invest. This might save someone 1 hour when setting up their initial investments. However, simply investing in Betterment requires one to do due diligence to make certain the company is not a scam, negating any time saved.
I can't see the value, and thus I can't recommend it to anyone.
Not to mention the fact that you can't choose your own individual investments. You have to trust they do the right thing with your money. Apparently their 100% stock portfolio is flat in the last few months (or so I've heard), whereas the S&P500 and VTSAX are up 2.5%, and an 80/20 stock/bond 3-Fund portfolio is up 1.5%
Of course a few months worth of data is meaningless, but that's the point. These startups (Wealthfront and Betterment) are new, and there's no telling if their back testing of the Tax Loss Harvesting robot will perform well into the future. There's no telling if their portfolio decisions and asset allocation will backfire, or change. There's no telling if these companies will even still be around in 5-10 years. Would you be forced to take your money out, incurring a huge tax bill, if the company goes under?
There has already been one case of these companies completely changing their investment strategy. What happens if 10 years from now they need more profit and switch to active funds? Will you take all your money out and incur 10 years of capital gains taxes, or trust their active traders know what they're doing? It doesn't seem to be possible to transfer your VTI holdings to another company if you want to leave, but correct me if I'm wrong.
While I'm glad there are choices out there, I personally feel more comfortable putting my money in a company like Vanguard, where the company is owned by us, and there are no stock owners or investors (who want to maximize profit) to please. If a company like Betterment sees their tax loss harvesting robot actually offers no gain, but is important in bringing in customers, they will be more likely to keep it around vs a company like Vanguard.
My life savings, and ability to retire, simply isn't worth it.