Author Topic: Betterment?  (Read 83460 times)

juuustin

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Re: Betterment?
« Reply #200 on: November 12, 2014, 10:29:14 AM »
I think the internet is over the stage of caring about whether a blogger uses an affiliate link or not - it's well within their rights, and if it's a product they genuinely recommend and maybe get the reader a discount too (such as for YNAB) then it passes the "fairness" threshold IMHO.

Milesdividendmd on his site gives a balanced review.

My concern lies with the product itself. All Betterment has to do is beat "buying and rebalancing your own ETFs using an online broker" but I'm not convinced it does. It does, however, beat a lot of the crap out there, crap which MMM readers most likely aren't using in the first place.
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Emanonrog

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Re: Betterment?
« Reply #201 on: November 12, 2014, 01:59:56 PM »
I'm not a big fan of posting on these message boards, though I do read them fairly regularly and appreciate what others have to say, but I feel the need to defend MMM here.  I'm pretty shocked that none of the regular posters have come to his defense.  Are people really concerned that MMM is so corrupt as to endorse a product that he doesn't believe in for a purely financial gain?  The guy is beyond financial secure.  My understanding is that he donates most of the blog's income to charity and plans to donate a sizable portion of his personal wealth to charity.  This is a blog that he writes in his spare time with the goal of educating people about financial security and living a rewarding life.  Endorsing a product that he doesn't believe in or thinks is inferior doesn't seem likely to further that goal.  I also believe that MMM has turned down sponsorship opportunities in the past that would have brought in significant money.

I assume that the regular posters here are those that subscribe to his message of minimalism, saving a sizable portion of your salary, and pursuing the things in life that truly make us happy.  I also assume that most of you would also credit MMM with expanding your perspective on life and significantly improving your financial situation.  We all owe him a huge debt of gratitude. 

I'm not saying you have to agree with everything the guy says, but maybe you should think twice before you question his motives?  I've noticed recently that the comments section of new blog posts have been getting more and more negative, as have the comments in the forum.  I suppose that's just a symptom of him reaching a larger audience.  Hopefully it doesn't dishearten him from continuing to work on this amazing blog that we all benefit immensely from.

Just my 2 cents.  Note that I have no plans of posting any further replies on the subject.

milesdividendmd

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Re: Betterment?
« Reply #202 on: November 12, 2014, 02:07:13 PM »
Ok, I have now dug deeper and I see that Miles is indeed also positioned to profit from recommending Betterment.  Initially I had looked at his blog's tax loss harvesting post (and a few more recent ones), which make no mention of his conflict of interest.  (MMM and Mad Fientish are both pretty upfront about it, with MF's disclaimer being a little better than MMM's.)  I had even remembered reading a post on Miles' blog about his lack of profit motive and conflict of interest.  Now I've gone back and reread it:

http://www.milesdividendmd.com/painting-portfolios/

In it, he debates the pros and con of monetizing the site, and he states that if he does ever choose to, then:

"I will be conflicted. And all that I can vow now,  is that I will announce my conflicts of interest whenever Im aware of them.

And I welcome you  to call me out on any future conflicts in my writing should you become aware of them.

But it strikes me that one thing that I should do prior to accepting any advertisers is to advocate for the products that I truly believe to be excellent.

After all I am still unconflicted. So I thought I would take advantage of my own lack of ulterior motives to talk about a product that I think is quality [Betterment]."

Well, Miles, I am taking you up on your invitation and calling you out.  You failed to disclose your conflict of interest in every subsequent post on your site recommending Betterment, ironically including the above referenced post in which you promised full disclosure.  I consider myself a careful reader yet I still missed the fact that you actually do have a financial motive for pushing Betterment.

(Hopefully I'm not derailing this thread, but in light of the turn this discussion has taken and Miles' zealous advocacy for Betterment in this thread, I thought it would be appropriate to post this here.)

It's tough to answer a "call out" like this without getting defensive, but I'll try.

I have never been paid a cent by Betterment.  And I have no business relationship with them aside from my personal investments with them.
My so called conflict of interest is a "share with friends" link available to anyone who uses betterment.  I believe you now get something like a month free if someone enrolls via your link.  Not exactly lucrative.
Ironically today was the first time anyone clicked on the Betterment link on my site and enrolled  (It must have been in response to you posting the link, Brooklyn.)
I did not disclose my "conflict of interest," in subsequent posts, because I had forgotten that I had included the link in my original post.
If my primary goal was to shill for Betterment, wouldn't I have included a link in subsequent posts?
My honest opinion is that my "zeal" for Betterment has nothing to do with any financial conflict of interest, real or imagined.  It is a great product, and one that I have increased my own stake in recently and recommended to both of my parents.
I am equally "zealous" in my criticism of P2P lending, despite the absence of any conflict of interest or imaginable ulterior motive.  To misquote John Lennon, "I'm just a zealous guy."
You will notice tht my site is still add free, as I remain deeply ambivalent about monetizing my site, despite its increasing readership.
I will happily remove the link from my original post, but this is more symbolic than anything, since it  has lain dormant for all of this time.




dungoofed

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Re: Betterment?
« Reply #203 on: November 12, 2014, 02:54:49 PM »
I think the internet is over the stage of caring about whether a blogger uses an affiliate link or not - it's well within their rights, and if it's a product they genuinely recommend and maybe get the reader a discount too (such as for YNAB) then it passes the "fairness" threshold IMHO.

Milesdividendmd on his site gives a balanced review.

My concern lies with the product itself. All Betterment has to do is beat "buying and rebalancing your own ETFs using an online broker" but I'm not convinced it does. It does, however, beat a lot of the crap out there, crap which MMM readers most likely aren't using in the first place.
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brooklynguy

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Re: Betterment?
« Reply #204 on: November 12, 2014, 03:15:43 PM »
It's tough to answer a "call out" like this without getting defensive, but I'll try.

I have never been paid a cent by Betterment.  And I have no business relationship with them aside from my personal investments with them.
My so called conflict of interest is a "share with friends" link available to anyone who uses betterment.  I believe you now get something like a month free if someone enrolls via your link.  Not exactly lucrative.
Ironically today was the first time anyone clicked on the Betterment link on my site and enrolled  (It must have been in response to you posting the link, Brooklyn.)
I did not disclose my "conflict of interest," in subsequent posts, because I had forgotten that I had included the link in my original post.
If my primary goal was to shill for Betterment, wouldn't I have included a link in subsequent posts?
My honest opinion is that my "zeal" for Betterment has nothing to do with any financial conflict of interest, real or imagined.  It is a great product, and one that I have increased my own stake in recently and recommended to both of my parents.
I am equally "zealous" in my criticism of P2P lending, despite the absence of any conflict of interest or imaginable ulterior motive.  To misquote John Lennon, "I'm just a zealous guy."
You will notice tht my site is still add free, as I remain deeply ambivalent about monetizing my site, despite its increasing readership.
I will happily remove the link from my original post, but this is more symbolic than anything, since it  has lain dormant for all of this time.

Fair enough.  For what it's worth, I still stand by my first statement that reasonable minds can differ on this topic and that I don't believe referral bonuses are driving you (or MMM or Mad Fientist) to recommend the product, but I am a strong believer in full disclosure and letting the reader make up his or her own mind on a fully informed basis.  But your explanation is plausible and in my mind you've earned the benefit of the doubt.

But again, for anyone reading only the most recent posts, for all the reasons that have been articulated throughout this thread (going back several months), I don't believe Betterment provides value for the typical reader of this forum.

dungoofed

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Re: Betterment?
« Reply #205 on: November 12, 2014, 03:32:20 PM »
I don't believe Betterment provides value for the typical reader of this forum.

So it begs the question, what would a MMM reader/Boglehead's perfect tool look like?

I agree that 0.15% is an expense you want to try and save, and from observation the average MMM reader is fundamentally against a management fee as a percentage of the portfolio no matter how small. Seems like the current tool of choice is a combination of home-made spreadsheets, discount brokers and "feeling," but I'm not convinced that this is the best tool for the job.

I think Betterment could have been a decent tool if it charged a one-off, like YNAB, or a fixed monthly fee instead of a percentage of your portfolio. And it needs something to avoid the concerns highlighted by myself and others in this thread.

Beric01

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Re: Betterment?
« Reply #206 on: November 12, 2014, 03:55:00 PM »
I think Betterment could have been a decent tool if it charged a one-off, like YNAB, or a fixed monthly fee instead of a percentage of your portfolio.

I agree. And yet I would never invest 45 million in a more niche company with a fee-only business model. It's not scalable.

Dodge

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Re: Betterment?
« Reply #207 on: November 12, 2014, 03:59:25 PM »

I don't believe Betterment provides value for the typical reader of this forum.

So it begs the question, what would a MMM reader/Boglehead's perfect tool look like?

I agree that 0.15% is an expense you want to try and save, and from observation the average MMM reader is fundamentally against a management fee as a percentage of the portfolio no matter how small. Seems like the current tool of choice is a combination of home-made spreadsheets, discount brokers and "feeling," but I'm not convinced that this is the best tool for the job.

I think Betterment could have been a decent tool if it charged a one-off, like YNAB, or a fixed monthly fee instead of a percentage of your portfolio. And it needs something to avoid the concerns highlighted by myself and others in this thread.

I'd pay $100 a year to have Betterment login, rebalance, and tax loss harvest my own 3 fund portfolio, across ALL of my and DW's accounts. Like a Mint account on steroids :)

MikeBear

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Re: Betterment?
« Reply #208 on: November 12, 2014, 04:07:29 PM »
I'm not a big fan of posting on these message boards, though I do read them fairly regularly and appreciate what others have to say, but I feel the need to defend MMM here.  I'm pretty shocked that none of the regular posters have come to his defense.  Are people really concerned that MMM is so corrupt as to endorse a product that he doesn't believe in for a purely financial gain?  The guy is beyond financial secure.  My understanding is that he donates most of the blog's income to charity and plans to donate a sizable portion of his personal wealth to charity.  This is a blog that he writes in his spare time with the goal of educating people about financial security and living a rewarding life.  Endorsing a product that he doesn't believe in or thinks is inferior doesn't seem likely to further that goal.  I also believe that MMM has turned down sponsorship opportunities in the past that would have brought in significant money.

I assume that the regular posters here are those that subscribe to his message of minimalism, saving a sizable portion of your salary, and pursuing the things in life that truly make us happy.  I also assume that most of you would also credit MMM with expanding your perspective on life and significantly improving your financial situation.  We all owe him a huge debt of gratitude. 

I'm not saying you have to agree with everything the guy says, but maybe you should think twice before you question his motives?  I've noticed recently that the comments section of new blog posts have been getting more and more negative, as have the comments in the forum.  I suppose that's just a symptom of him reaching a larger audience.  Hopefully it doesn't dishearten him from continuing to work on this amazing blog that we all benefit immensely from.

Just my 2 cents.  Note that I have no plans of posting any further replies on the subject.

I've tried to defend him a bit on this, but certain people here seem bound and determined to demonize MMM lately, and no amount of talking about the good MMM has done convinces them one bit that he hasn't sold out. Since he did a full disclosure up front, I hardly think he has "sold out". Let him risk HIS $100k and find out if Betterment is good or bad for the masses, and we'll go from there.

I'm older, and only found MMM earlier this year, and I have nowhere near the amount of resources that would ever allow me to use Betterment or other services such as this. I use the info from MMM I need applied in my case, and discard the rest as of no worth to me. However I AM extremely grateful in general to MMM for giving me the face punch I needed to get back on track to pull my finances out of the gutter before REAL retirement. The apparent hypocrisy around here lately by certain posters just flabbergasts me.

Once their minds are made up, apparently there's no turning them back. They continue to use the site for the good it can do, so it beats me why they keep pushing it, or perhaps they do have a hidden agenda on the demonization of MMM. He is human like the rest of us, and maybe this is a mistake. How do we know until he tries it? Nobody is FORCING anybody to use Betterment or any referral link, so I just don't get it, why has THIS particular issue set off so many people?

Beric01

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Re: Betterment?
« Reply #209 on: November 12, 2014, 04:09:39 PM »

I don't believe Betterment provides value for the typical reader of this forum.

So it begs the question, what would a MMM reader/Boglehead's perfect tool look like?

I agree that 0.15% is an expense you want to try and save, and from observation the average MMM reader is fundamentally against a management fee as a percentage of the portfolio no matter how small. Seems like the current tool of choice is a combination of home-made spreadsheets, discount brokers and "feeling," but I'm not convinced that this is the best tool for the job.

I think Betterment could have been a decent tool if it charged a one-off, like YNAB, or a fixed monthly fee instead of a percentage of your portfolio. And it needs something to avoid the concerns highlighted by myself and others in this thread.

I'd pay $100 a year to have Betterment login, rebalance, and tax loss harvest my own 3 fund portfolio, across ALL of my and DW's accounts. Like a Mint account on steroids :)

Oh, I agree. That's another big weakness of Betterment - it don't compute asset allocation and rebalancing based on 401(k)'s or other accounts. It's just not a complete product.

rmendpara

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Re: Betterment?
« Reply #210 on: November 12, 2014, 09:21:15 PM »

I don't believe Betterment provides value for the typical reader of this forum.

So it begs the question, what would a MMM reader/Boglehead's perfect tool look like?

I agree that 0.15% is an expense you want to try and save, and from observation the average MMM reader is fundamentally against a management fee as a percentage of the portfolio no matter how small. Seems like the current tool of choice is a combination of home-made spreadsheets, discount brokers and "feeling," but I'm not convinced that this is the best tool for the job.

I think Betterment could have been a decent tool if it charged a one-off, like YNAB, or a fixed monthly fee instead of a percentage of your portfolio. And it needs something to avoid the concerns highlighted by myself and others in this thread.

I'd pay $100 a year to have Betterment login, rebalance, and tax loss harvest my own 3 fund portfolio, across ALL of my and DW's accounts. Like a Mint account on steroids :)

Oh, I agree. That's another big weakness of Betterment - it don't compute asset allocation and rebalancing based on 401(k)'s or other accounts. It's just not a complete product.

A more complete product like Future Advisor? This platform actually allows you to upload data on all your financial accounts, and will only charge a fee on the portion which you give to them to manage.

The kicker is that this platform charges 0.5% of invested assets..

rmendpara

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Re: Betterment?
« Reply #211 on: November 12, 2014, 09:31:39 PM »
Not sure exactly why people are getting all wound up over disclosure on the internet.

Here's a secret: Any website you visit is making someone money.

For those of you whining about 0.35% to 0.15%... how little money do you have that you are totally against paying a fair (debatable, of course) fee for a service? Should they do this for free?

If you prefer to do it yourself, then so be it. Some people would be perfectly happy to pay $150/yr on a sizable chunk of investments to be invested and rebalanced automatically rather than fiddle around with it... some may even prefer that to doing it on their own.

A service like this, or one of the handful of other related services that have popped up in recent years are a result of a continuing desire of many people to be more 'hands off' with their investments. Some of us have better things to do with our time.
« Last Edit: November 12, 2014, 09:35:09 PM by rmendpara »

Dodge

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Re: Betterment?
« Reply #212 on: November 12, 2014, 11:30:54 PM »
Not sure exactly why people are getting all wound up over disclosure on the internet.

Here's a secret: Any website you visit is making someone money.

For those of you whining about 0.35% to 0.15%... how little money do you have that you are totally against paying a fair (debatable, of course) fee for a service? Should they do this for free?

If you prefer to do it yourself, then so be it. Some people would be perfectly happy to pay $150/yr on a sizable chunk of investments to be invested and rebalanced automatically rather than fiddle around with it... some may even prefer that to doing it on their own.

A service like this, or one of the handful of other related services that have popped up in recent years are a result of a continuing desire of many people to be more 'hands off' with their investments. Some of us have better things to do with our time.

I love it when people say $150 a year, regarding a service meant for long-term investing, when the fee is percentage based.  It lets me say things like this:

If my grandparents invested $20,000 sixty years ago in Betterment for my father's retirement, that fund would have $1,000,000 (one million) less dollars today, than if they invested it in a Vanguard Life Strategy automatic rebalancing fund, and $1,800,000 less dollars than if they had the standard 3 fund portfolio.

If my grandparents invested $20,000 sixty years ago, plus $100 a month, in Betterment for my father's retirement, that fund would have $1,500,000 (one point five million) less dollars today, than if they invested it in a Vanguard Life Strategy automatic rebalancing fund, and $2,600,000 less dollars than if they had the standard 3 fund portfolio.

Cfiresim also shows the portfolio would have a 15% increased chance of failure with the standard 4% withdraw rate.

Even if they only kept it for 5 years, and got the average growth rate, going with Betterment would cost about $400 in fees after 5 years. That's the equivalent of a 1.25% Load on your investment.
« Last Edit: November 12, 2014, 11:36:44 PM by Dodge »

milesdividendmd

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Betterment?
« Reply #213 on: November 13, 2014, 12:26:11 AM »
Not sure exactly why people are getting all wound up over disclosure on the internet.

Here's a secret: Any website you visit is making someone money.

For those of you whining about 0.35% to 0.15%... how little money do you have that you are totally against paying a fair (debatable, of course) fee for a service? Should they do this for free?

If you prefer to do it yourself, then so be it. Some people would be perfectly happy to pay $150/yr on a sizable chunk of investments to be invested and rebalanced automatically rather than fiddle around with it... some may even prefer that to doing it on their own.

A service like this, or one of the handful of other related services that have popped up in recent years are a result of a continuing desire of many people to be more 'hands off' with their investments. Some of us have better things to do with our time.

I love it when people say $150 a year, regarding a service meant for long-term investing, when the fee is percentage based.  It lets me say things like this:

If my grandparents invested $20,000 sixty years ago in Betterment for my father's retirement, that fund would have $1,000,000 (one million) less dollars today, than if they invested it in a Vanguard Life Strategy automatic rebalancing fund, and $1,800,000 less dollars than if they had the standard 3 fund portfolio.

If my grandparents invested $20,000 sixty years ago, plus $100 a month, in Betterment for my father's retirement, that fund would have $1,500,000 (one point five million) less dollars today, than if they invested it in a Vanguard Life Strategy automatic rebalancing fund, and $2,600,000 less dollars than if they had the standard 3 fund portfolio.

Cfiresim also shows the portfolio would have a 15% increased chance of failure with the standard 4% withdraw rate.

Even if they only kept it for 5 years, and got the average growth rate, going with Betterment would cost about $400 in fees after 5 years. That's the equivalent of a 1.25% Load on your investment.

Calling BS on this one.

Please share your backtesting strategy that allows you compare Betterment's specific collection of ETFs with a life strategy fund over 60 years.

You are aware that index mutual funds (let alone ETFs) were not around 60 years ago, right?

Even before TLH is taken into account I would bet that Betterments portfolio would beat a vanguard life strategy fund over the past 60 years because of its tilt towards the small and value factors (even after the highest possible 0.35% fee levels are included. )

Whether or not small and value tilting will outperform over the next 60 years is debatable. That the small and value factors have outperformed over the past 60 years is not debatable.

BEN_BANNED

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Re: Betterment?
« Reply #214 on: November 13, 2014, 06:32:09 AM »

Even before TLH is taken into account I would bet that Betterments portfolio would beat a vanguard life strategy fund over the past 60 years because of its tilt towards the small and value factors (even after the highest possible 0.35% fee levels are included. )



Betterment's portfolio is tilted toward overseas developed markets as well as the developing markets.

My overall return from when I opened the account in March was negative on a 90/10 stock/bond ratio. Any gains on Wall Street were negated by the Euro-Asian economies being in such a state of uncertainty.

I recently closed my account at Betterment put the money into WiseBanyan whose portfolio is tilted more towards North America.

Dodge

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Re: Betterment?
« Reply #215 on: November 13, 2014, 07:46:28 AM »

Not sure exactly why people are getting all wound up over disclosure on the internet.

Here's a secret: Any website you visit is making someone money.

For those of you whining about 0.35% to 0.15%... how little money do you have that you are totally against paying a fair (debatable, of course) fee for a service? Should they do this for free?

If you prefer to do it yourself, then so be it. Some people would be perfectly happy to pay $150/yr on a sizable chunk of investments to be invested and rebalanced automatically rather than fiddle around with it... some may even prefer that to doing it on their own.

A service like this, or one of the handful of other related services that have popped up in recent years are a result of a continuing desire of many people to be more 'hands off' with their investments. Some of us have better things to do with our time.

I love it when people say $150 a year, regarding a service meant for long-term investing, when the fee is percentage based.  It lets me say things like this:

If my grandparents invested $20,000 sixty years ago in Betterment for my father's retirement, that fund would have $1,000,000 (one million) less dollars today, than if they invested it in a Vanguard Life Strategy automatic rebalancing fund, and $1,800,000 less dollars than if they had the standard 3 fund portfolio.

If my grandparents invested $20,000 sixty years ago, plus $100 a month, in Betterment for my father's retirement, that fund would have $1,500,000 (one point five million) less dollars today, than if they invested it in a Vanguard Life Strategy automatic rebalancing fund, and $2,600,000 less dollars than if they had the standard 3 fund portfolio.

Cfiresim also shows the portfolio would have a 15% increased chance of failure with the standard 4% withdraw rate.

Even if they only kept it for 5 years, and got the average growth rate, going with Betterment would cost about $400 in fees after 5 years. That's the equivalent of a 1.25% Load on your investment.

Calling BS on this one.

Please share your backtesting strategy that allows you compare Betterment's specific collection of ETFs with a life strategy fund over 60 years.

You are aware that index mutual funds (let alone ETFs) were not around 60 years ago, right?

Even before TLH is taken into account I would bet that Betterments portfolio would beat a vanguard life strategy fund over the past 60 years because of its tilt towards the small and value factors (even after the highest possible 0.35% fee levels are included. )

Whether or not small and value tilting will outperform over the next 60 years is debatable. That the small and value factors have outperformed over the past 60 years is not debatable.

I understand your viewpoint Miles. I was mostly responding to his assertion that paying a company $150 a year so your money is "invested and rebalanced automatically", because "Some of us have better things to do with our time" is a much bigger price than it seems.

Dodge

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Re: Betterment?
« Reply #216 on: November 13, 2014, 07:54:40 AM »


Even before TLH is taken into account I would bet that Betterments portfolio would beat a vanguard life strategy fund over the past 60 years because of its tilt towards the small and value factors (even after the highest possible 0.35% fee levels are included. )



Betterment's portfolio is tilted toward overseas developed markets as well as the developing markets.

My overall return from when I opened the account in March was negative on a 90/10 stock/bond ratio. Any gains on Wall Street were negated by the Euro-Asian economies being in such a state of uncertainty.

I recently closed my account at Betterment put the money into WiseBanyan whose portfolio is tilted more towards North America.

Do you see Miles? This is why this type of thinking is dangerous. I mentioned this on one of the first pages of the thread, it adds more variables for people to doubt, leading to more behavioral errors.

Ben, you would be much better off if you stopped trying to beat the market, or optimizing your tilt based on 8 months of performance. If you don't want to rebalance, get a Vanguard LifeStrategy fund and call it a day. Either way, if you can't stay the course, you will almost certainly underperform.

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Re: Betterment?
« Reply #217 on: November 13, 2014, 08:32:09 AM »



Ben, you would be much better off if you stopped trying to beat the market, or optimizing your tilt based on 8 months of performance. If you don't want to rebalance, get a Vanguard LifeStrategy fund and call it a day. Either way, if you can't stay the course, you will almost certainly underperform.

WiseBanyan also has auto-re-balancing plus ZERO fees.

I merely opened the Betterment account with a small amount of play money to get a feel on how Betterment's robo-investing algorithm worked.

I've had/have no intention of trying to time the markets nor trying to beat them. My issue was the overweight tilt on foreign equities in light of Japans and the EU plan to inflate stocks by flooding the markets with funny money ala The Fed's Quantitative Easing smoke and mirrors scheme.

Betterment's returns were lagging far behind my other investments so I decided to look elsewhere to stash my money.
« Last Edit: November 13, 2014, 08:34:14 AM by BEN_BANNED »

milesdividendmd

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Re: Betterment?
« Reply #218 on: November 13, 2014, 09:50:34 AM »



Even before TLH is taken into account I would bet that Betterments portfolio would beat a vanguard life strategy fund over the past 60 years because of its tilt towards the small and value factors (even after the highest possible 0.35% fee levels are included. )



Betterment's portfolio is tilted toward overseas developed markets as well as the developing markets.

My overall return from when I opened the account in March was negative on a 90/10 stock/bond ratio. Any gains on Wall Street were negated by the Euro-Asian economies being in such a state of uncertainty.

I recently closed my account at Betterment put the money into WiseBanyan whose portfolio is tilted more towards North America.

Do you see Miles? This is why this type of thinking is dangerous. I mentioned this on one of the first pages of the thread, it adds more variables for people to doubt, leading to more behavioral errors.

Ben, you would be much better off if you stopped trying to beat the market, or optimizing your tilt based on 8 months of performance. If you don't want to rebalance, get a Vanguard LifeStrategy fund and call it a day. Either way, if you can't stay the course, you will almost certainly underperform.

Dodge,

This is an example of performance chasing, the most basic of investment errors. Complexity has nothing to do with it.

If he had compared VTI to an active 3X leverage etf/option/ package that happened to perform better over the past 9 months, by similar logic he would have determined that passive investing was a bad bet.

AZ

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Re: Betterment?
« Reply #219 on: November 13, 2014, 10:07:40 AM »
Not sure exactly why people are getting all wound up over disclosure on the internet.

Here's a secret: Any website you visit is making someone money.

Nobody is upset about websites making money.  People are upset about perceived conflicts of interest.  If a financial blogger is being paid by Procter & Gamble to place advertisements for toothpaste on their site, there is no need for disclosure.  If a financial blogger is being paid commissions for recommending a financial product, there is a need for disclosure.

milesdividendmd

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Re: Betterment?
« Reply #220 on: November 13, 2014, 11:01:50 AM »




Ben, you would be much better off if you stopped trying to beat the market, or optimizing your tilt based on 8 months of performance. If you don't want to rebalance, get a Vanguard LifeStrategy fund and call it a day. Either way, if you can't stay the course, you will almost certainly underperform.

WiseBanyan also has auto-re-balancing plus ZERO fees.

I merely opened the Betterment account with a small amount of play money to get a feel on how Betterment's robo-investing algorithm worked.

I've had/have no intention of trying to time the markets nor trying to beat them. My issue was the overweight tilt on foreign equities in light of Japans and the EU plan to inflate stocks by flooding the markets with funny money ala The Fed's Quantitative Easing smoke and mirrors scheme.

Betterment's returns were lagging far behind my other investments so I decided to look elsewhere to stash my money.

Based on your comments, at this point, what brokerage platform you choose is largely irrelevant.

Your next investment should be in a basic investment book.

I like this one for those starting out...

http://www.amazon.com/Think-Invest-Like-Warren-Buffett/dp/0071809953

Good luck.

Dodge

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Betterment?
« Reply #221 on: November 13, 2014, 11:03:42 AM »



Even before TLH is taken into account I would bet that Betterments portfolio would beat a vanguard life strategy fund over the past 60 years because of its tilt towards the small and value factors (even after the highest possible 0.35% fee levels are included. )



Betterment's portfolio is tilted toward overseas developed markets as well as the developing markets.

My overall return from when I opened the account in March was negative on a 90/10 stock/bond ratio. Any gains on Wall Street were negated by the Euro-Asian economies being in such a state of uncertainty.

I recently closed my account at Betterment put the money into WiseBanyan whose portfolio is tilted more towards North America.

Do you see Miles? This is why this type of thinking is dangerous. I mentioned this on one of the first pages of the thread, it adds more variables for people to doubt, leading to more behavioral errors.

Ben, you would be much better off if you stopped trying to beat the market, or optimizing your tilt based on 8 months of performance. If you don't want to rebalance, get a Vanguard LifeStrategy fund and call it a day. Either way, if you can't stay the course, you will almost certainly underperform.

Dodge,

This is an example of performance chasing, the most basic of investment errors. Complexity has nothing to do with it.

If he had compared VTI to an active 3X leverage etf/option/ package that happened to perform better over the past 9 months, by similar logic he would have determined that passive investing was a bad bet.

AZ

When I'm talking to my Dad, or someone who doesn't know about investing (happens often), it's important to watch my words. If I recommend he move to Betterment, because the tilts have beaten the market in the past, and I believe it will beat the market in the future, that's a dangerous seed to plant. He might, as Ben did above, feel the need to bail out because, "The tilts aren't beating the market anymore, I'm DOWN this year!!!"

Or he might feel the need to bail out, because "I've done some research, and if I put all my money into the Healthcare fund (or your 3X leverage fund), I would have DESTROYED the market over the last 5 years! I'm putting my money there!"

I don't believe the general public, or people who don't know much about the market, will do well with that information. If we recommend they tilt a certain way based on past performance, and the results aren't what they expect ("the TV says the market is up today, but I checked online and my portfolio is DOWN 5%!"), it's natural for them to start thinking about ways to tinker with the formula, which can lead to bailing out at a market low.

Recommending total market index funds, or Vanguard LifeStrategy funds, doesn't have that problem. When recommending this to a friend, I stress this is the best way forward, not because of past performance, but because math. Since you can't know what the future will bring, going with an index (the average) mathematically ensures you will either beat, or match, at least half of all dollars invested in the market.

This is a very different mindset.
« Last Edit: November 13, 2014, 11:05:24 AM by Dodge »

milesdividendmd

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Re: Betterment?
« Reply #222 on: November 13, 2014, 11:47:13 AM »




Even before TLH is taken into account I would bet that Betterments portfolio would beat a vanguard life strategy fund over the past 60 years because of its tilt towards the small and value factors (even after the highest possible 0.35% fee levels are included. )



Betterment's portfolio is tilted toward overseas developed markets as well as the developing markets.

My overall return from when I opened the account in March was negative on a 90/10 stock/bond ratio. Any gains on Wall Street were negated by the Euro-Asian economies being in such a state of uncertainty.

I recently closed my account at Betterment put the money into WiseBanyan whose portfolio is tilted more towards North America.

Do you see Miles? This is why this type of thinking is dangerous. I mentioned this on one of the first pages of the thread, it adds more variables for people to doubt, leading to more behavioral errors.

Ben, you would be much better off if you stopped trying to beat the market, or optimizing your tilt based on 8 months of performance. If you don't want to rebalance, get a Vanguard LifeStrategy fund and call it a day. Either way, if you can't stay the course, you will almost certainly underperform.

Dodge,

This is an example of performance chasing, the most basic of investment errors. Complexity has nothing to do with it.

If he had compared VTI to an active 3X leverage etf/option/ package that happened to perform better over the past 9 months, by similar logic he would have determined that passive investing was a bad bet.

AZ

When I'm talking to my Dad, or someone who doesn't know about investing (happens often), it's important to watch my words. If I recommend he move to Betterment, because the tilts have beaten the market in the past, and I believe it will beat the market in the future, that's a dangerous seed to plant. He might, as Ben did above, feel the need to bail out because, "The tilts aren't beating the market anymore, I'm DOWN this year!!!"

Or he might feel the need to bail out, because "I've done some research, and if I put all my money into the Healthcare fund (or your 3X leverage fund), I would have DESTROYED the market over the last 5 years! I'm putting my money there!"

I don't believe the general public, or people who don't know much about the market, will do well with that information. If we recommend they tilt a certain way based on past performance, and the results aren't what they expect ("the TV says the market is up today, but I checked online and my portfolio is DOWN 5%!"), it's natural for them to start thinking about ways to tinker with the formula, which can lead to bailing out at a market low.

Recommending total market index funds, or Vanguard LifeStrategy funds, doesn't have that problem. When recommending this to a friend, I stress this is the best way forward, not because of past performance, but because math. Since you can't know what the future will bring, going with an index (the average) mathematically ensures you will either beat, or match, at least half of all dollars invested in the market.

This is a very different mindset.

I see your point But a life strategy fund will underperform the market most days too, since stocks outperform bonds more often than not.

If tracking error is your prime concern then you should only recommend investing in single index funds which track the DJIA.

In the end there are no universals.  All One can reasonably report is their own experience. And based on my own psychology and biases, Betterment is the easiest product for me to avoid behavioral errors. Since I never have to rebalance or lift a finger, I am never tempted to fiddle.

This behavioral aspect is not so different from a life strategy fund, it's just that based on my own investing philosophy, I feel that Betterments asset allocation (with its tilt towards value, small size, and EM) is far superior to the life strategy funds'.

And when I add in TLH, it is also better than free for Betterment to manage my taxable accounts, as opposed to life strategy funds which have expense ratios of 0.17%.

As you pointed out above 0.17% compounded over long time periods is not trivial.

So in my particular instance betterment is an absolute no brainer.


Dodge

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Re: Betterment?
« Reply #223 on: November 13, 2014, 12:47:27 PM »





Even before TLH is taken into account I would bet that Betterments portfolio would beat a vanguard life strategy fund over the past 60 years because of its tilt towards the small and value factors (even after the highest possible 0.35% fee levels are included. )



Betterment's portfolio is tilted toward overseas developed markets as well as the developing markets.

My overall return from when I opened the account in March was negative on a 90/10 stock/bond ratio. Any gains on Wall Street were negated by the Euro-Asian economies being in such a state of uncertainty.

I recently closed my account at Betterment put the money into WiseBanyan whose portfolio is tilted more towards North America.

Do you see Miles? This is why this type of thinking is dangerous. I mentioned this on one of the first pages of the thread, it adds more variables for people to doubt, leading to more behavioral errors.

Ben, you would be much better off if you stopped trying to beat the market, or optimizing your tilt based on 8 months of performance. If you don't want to rebalance, get a Vanguard LifeStrategy fund and call it a day. Either way, if you can't stay the course, you will almost certainly underperform.

Dodge,

This is an example of performance chasing, the most basic of investment errors. Complexity has nothing to do with it.

If he had compared VTI to an active 3X leverage etf/option/ package that happened to perform better over the past 9 months, by similar logic he would have determined that passive investing was a bad bet.

AZ

When I'm talking to my Dad, or someone who doesn't know about investing (happens often), it's important to watch my words. If I recommend he move to Betterment, because the tilts have beaten the market in the past, and I believe it will beat the market in the future, that's a dangerous seed to plant. He might, as Ben did above, feel the need to bail out because, "The tilts aren't beating the market anymore, I'm DOWN this year!!!"

Or he might feel the need to bail out, because "I've done some research, and if I put all my money into the Healthcare fund (or your 3X leverage fund), I would have DESTROYED the market over the last 5 years! I'm putting my money there!"

I don't believe the general public, or people who don't know much about the market, will do well with that information. If we recommend they tilt a certain way based on past performance, and the results aren't what they expect ("the TV says the market is up today, but I checked online and my portfolio is DOWN 5%!"), it's natural for them to start thinking about ways to tinker with the formula, which can lead to bailing out at a market low.

Recommending total market index funds, or Vanguard LifeStrategy funds, doesn't have that problem. When recommending this to a friend, I stress this is the best way forward, not because of past performance, but because math. Since you can't know what the future will bring, going with an index (the average) mathematically ensures you will either beat, or match, at least half of all dollars invested in the market.

This is a very different mindset.

I see your point But a life strategy fund will underperform the market most days too, since stocks outperform bonds more often than not.

If tracking error is your prime concern then you should only recommend investing in single index funds which track the DJIA.

In the end there are no universals.  All One can reasonably report is their own experience. And based on my own psychology and biases, Betterment is the easiest product for me to avoid behavioral errors. Since I never have to rebalance or lift a finger, I am never tempted to fiddle.

This behavioral aspect is not so different from a life strategy fund, it's just that based on my own investing philosophy, I feel that Betterments asset allocation (with its tilt towards value, small size, and EM) is far superior to the life strategy funds'.

And when I add in TLH, it is also better than free for Betterment to manage my taxable accounts, as opposed to life strategy funds which have expense ratios of 0.17%.

As you pointed out above 0.17% compounded over long time periods is not trivial.

So in my particular instance betterment is an absolute no brainer.

Indeed, the inclusion of bonds will likely have that tracking effect, but if you have the right mindset, you won't care. I'm 100% sure you have the right mindset, but I think it's harder for the average person to get there, and in my opinion recommending a tilt is a step away from that.

I sincerely hope TLH works for you. Unfortunately, I fear you might be getting an imbalanced view of its effectiveness. I understand you made a lump sum investment, and have already seen some impressive tax loss harvesting. It's easy to tax loss harvest right after investing a large lump sum, but after a few years of gains I don't think you'll be seeing much TLH going on in your account unless there's a huge crash, or you keep investing large amounts.

Indeed, their own chart referenced above shows this. After the first few years, tax loss harvesting dropped to almost 0, until the 2008 crash, then dropped to almost 0 again.

And if you keep investing those large amounts, after a few years you'll reach the break-even point where even the maximum amount of tax loss harvesting won't overcome the additional fee Betterment charges.


milesdividendmd

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Re: Betterment?
« Reply #224 on: November 13, 2014, 01:00:45 PM »
Actually not a large lump sum at all. I have >60K invested in Betterment, of which 15k was new this year.

I will continue to invest at similar or higher levels for the next 10-15 years.

7% corrections are far from rare, even during secular bull markets.

One of the nice things about Betterments slice and dice portfolio is that it offers exposure to a wide array of markets of varying correlations. (and it is always a bear market somewhere.)

Compare this to a life strategy fund, where if the international market crashes by less than the domestic gains, there is no opportunity to harvest losses.

tj

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Re: Betterment?
« Reply #225 on: November 13, 2014, 07:26:06 PM »
Actually not a large lump sum at all. I have >60K invested in Betterment, of which 15k was new this year.

I will continue to invest at similar or higher levels for the next 10-15 years.

7% corrections are far from rare, even during secular bull markets.

One of the nice things about Betterments slice and dice portfolio is that it offers exposure to a wide array of markets of varying correlations. (and it is always a bear market somewhere.)

Compare this to a life strategy fund, where if the international market crashes by less than the domestic gains, there is no opportunity to harvest losses.

TLH is not wihtout its risks. See http://www.etf.com/sections/blog/23212-inside-robo-advisor-tax-loss-harvesting.html?fullart=1&start=5


seattlecyclone

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Re: Betterment?
« Reply #226 on: November 13, 2014, 08:50:47 PM »
Actually not a large lump sum at all. I have >60K invested in Betterment, of which 15k was new this year.

I will continue to invest at similar or higher levels for the next 10-15 years.

7% corrections are far from rare, even during secular bull markets.

One of the nice things about Betterments slice and dice portfolio is that it offers exposure to a wide array of markets of varying correlations. (and it is always a bear market somewhere.)

Compare this to a life strategy fund, where if the international market crashes by less than the domestic gains, there is no opportunity to harvest losses.

TLH is not wihtout its risks. See http://www.etf.com/sections/blog/23212-inside-robo-advisor-tax-loss-harvesting.html?fullart=1&start=5



That article is full of so much fail. Yes, of course if your eventual capital gains tax rate is the same as your current capital loss tax rate, you'll see little to no benefit from harvesting your losses. The whole point is to have calendar years where you have a net loss (which counts against your income up to $3k and saves you tax at your marginal rate) in order to defer the eventual gains to a year when you have a low to nonexistent capital gains tax rate.

And they were flat-out wrong with this passage:

Quote
At the extreme, if Joe were in the 15 percent federal tax bracket, he would pay zero percent on capital gains. In that case, Joe should harvest gains, and reset his basis, lowering future tax bills. He should never harvest losses.

Harvesting gains is fine if you're in a low bracket. Even better: harvest $3,000 of losses this year at a -15% tax rate and harvest a bunch of long-term gains next year. Harvest losses the year after that, and gains the year after that. Repeat indefinitely.

milesdividendmd

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Re: Betterment?
« Reply #227 on: November 14, 2014, 12:31:42 AM »

Actually not a large lump sum at all. I have >60K invested in Betterment, of which 15k was new this year.

I will continue to invest at similar or higher levels for the next 10-15 years.

7% corrections are far from rare, even during secular bull markets.

One of the nice things about Betterments slice and dice portfolio is that it offers exposure to a wide array of markets of varying correlations. (and it is always a bear market somewhere.)

Compare this to a life strategy fund, where if the international market crashes by less than the domestic gains, there is no opportunity to harvest losses.

TLH is not wihtout its risks. See http://www.etf.com/sections/blog/23212-inside-robo-advisor-tax-loss-harvesting.html?fullart=1&start=5



That article is full of so much fail. Yes, of course if your eventual capital gains tax rate is the same as your current capital loss tax rate, you'll see little to no benefit from harvesting your losses. The whole point is to have calendar years where you have a net loss (which counts against your income up to $3k and saves you tax at your marginal rate) in order to defer the eventual gains to a year when you have a low to nonexistent capital gains tax rate.

And they were flat-out wrong with this passage:

Quote
At the extreme, if Joe were in the 15 percent federal tax bracket, he would pay zero percent on capital gains. In that case, Joe should harvest gains, and reset his basis, lowering future tax bills. He should never harvest losses.

Harvesting gains is fine if you're in a low bracket. Even better: harvest $3,000 of losses this year at a -15% tax rate and harvest a bunch of long-term gains next year. Harvest losses the year after that, and gains the year after that. Repeat indefinitely.

Well said.

Plus if you can harvest losses when your marginal rate is high (at peak earned income) and take your gains in retirement (when your capital gains rate may very well be zero) then you can...

1. Avoid ever paying capital gains taxes.

And

2. Compound wealth on the unpaid taxes for years and years.

Both of these effects are financially powerful, and realistic for many Mustachians. 

ltruitt

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Re: Betterment?
« Reply #228 on: March 06, 2017, 02:24:54 PM »
I really questioned Betterment, as well -- how could it be as simple as it says it is. But the technology and psychology are what attracted me to this company. At the core, Betterment is just a fancy frontend for Vanguard funds when you invest with Betterment, you end up owning Vanguard funds just like a wise person would already do. But they add value by automating two things that actually allow you to earn and keep more money: automatic portfolio rebalancing, and tax loss harvesting.

One article that helped me out a lot with understanding Betterment and what they can offer is, [MOD EDIT: Spam link removed.]
« Last Edit: March 07, 2017, 11:52:16 AM by arebelspy »

wscott

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Re: Betterment?
« Reply #229 on: March 07, 2017, 04:43:24 AM »
Betterment pretty much lost me this year when they raised the fees 30% for people with larger accounts.  I originally did a rollover of 401k from an old job because it was just so easy, but TLH doesn't help at all in an IRA. So everything is moving to Vanguard.

My struggle now is about if I should recommend betterment to young people who are new to investing. All the graphs and encouraging emails really help some people to stay the course and keep contributing. And the cost of the service isn't too bad when your balance is small.

BTW, you will find lots of blogs recommending Betterment, but they are kinda like the Casper mattress and provide lots of kickbacks.

Indexer

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Re: Betterment?
« Reply #230 on: March 07, 2017, 06:19:31 AM »
Betterment is just a collection of tools, most of which can be found for free elsewhere, and they charge you for the convenience of having them in one place.

Automatic rebalancing:
1. you can use a Vanguard Lifestrategy or Target Retirement fund to do the same thing. Downside, great for IRAs, not for taxable.
2. this isn't a time intensive activity. Look at it once a quarter or even twice a year. Is everything close? Yes, leave it alone. No, then fix it.

Tax Loss harvesting:
If anything has ever been overhyped in the investing world it is this. Yes, it works, not disputing that. If you harvest your losses and then reinvest the tax savings(make sure you do that part!) then you have more money working for you. The problem is the results are normally inflated with rosy assumptions to make it look more appealing. Betterment for instance assumes you are a California resident(high state tax), in the 28% Federal tax bracket, and they assume you NEVER liquidate the account. That last assumption significantly inflates the results. When you harvest losses you are really harvesting your own cost basis. That means when you sell the holding in the future at a gain your capital gain is actually larger than it would have been if you hadn't used TLH.

Example. Buy at $100,000, after a 20% down market harvest at $80,000, reinvest the $3,000(20k*0.15%) you saved on taxes so you have $83,000 working for you, and 20 years later sell for $500,000. You pay taxes on $420,000 in gains instead of $400,000 in gains, which means you pay $3,000(20k*.15%) more in taxes upon sale.

If you eventually liquidate the account you still end up paying taxes on the gains. The real perk of TLH was that extra $3,000 working for you during that 20 years, but you paid Betterment 0.25% which on $100,000 is $250/year. At 8% growth $3,000 would generate an extra $240 a year in growth.

If you avoid the rosy assumptions like high state taxes, high personal taxes, and if you actually plan on spending the taxable account(which you should since you spend it in FIRE before IRAs) then TLH isn't as great as it appears. It is still good if you want to do it yourself(you can do this yourself!), but I don't think it alone is worth paying Betterment.

My other concern with TLH is what the IRS does with it long term. If you read the tax code on wash sales it uses the verbiage, "substantially identical," for determining if you get to realize losses. The spirit of the law it to prevent exactly what TLH does, realizing losses without changing the composition of the portfolio. This has traditionally been used to say you can't trade Apple stock for Apple stock and take the loss, but you could trade it for Microsoft stock. You also can't trade VTI for VTI and realize the loss. Betterment is basically taking the Vanguard 500 index and switching it for Schwab's 500 index. These securities aren't identical because they have different names and ticker symbols, but if the IRS decided to enforce "substantially identical" I wouldn't want to have to justify in court how two 500 index funds issued by different companies aren't "substantially identical." Conclusion: IMO the IRS could make this go away at any time based on their existing rules.
« Last Edit: March 07, 2017, 06:24:50 AM by Indexer »

drio

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Re: Betterment?
« Reply #231 on: March 07, 2017, 06:24:26 AM »
One thing I didn't like about BM is that the fees did not include the underlying cost of the transactions.
I believe now the fees include them also (they increased the fees), but a few months back they did not.
I don't think they explained that clearly on their website. I am wondering if wealthfront explained
those "hidden" costs in up front or not.

tj

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Re: Betterment?
« Reply #232 on: March 07, 2017, 07:30:39 AM »
One thing I didn't like about BM is that the fees did not include the underlying cost of the transactions.
I believe now the fees include them also (they increased the fees), but a few months back they did not.
I don't think they explained that clearly on their website. I am wondering if wealthfront explained
those "hidden" costs in up front or not.

Neither betterment nor wealthfront havr charged transaction costs. Betterment did not charge any a few months ago either.

drio

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Re: Betterment?
« Reply #233 on: March 09, 2017, 11:36:01 AM »
> fees did not include the underlying cost of the transactions.

I apologize if that was not the case. I should have looked better.

I guess then you paying a 0.25% fee on the assets your have with them (unless
you have > 2M; at that point, there are no fees).