Author Topic: Has anybody done the betterment math to include harvesting benefits?  (Read 1812 times)

tb43

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Hey guys,

I know the betterment vs vanguard topic has been discussed in great detail but I was wondering if anybody has ran the numbers to include TLH. When comparing an expense ratio of .10 to .31, the .31 will obviously cost you thousands of dollars in the long run. Will the harvesting benefits make up for most of this, assuming you eventually get the full 3k in losses harvested?

Basically, I'm trying to justify the cost of betterment because I like the convenience feature (despite the fact that I would be able to do it myself), but I'm not exactly sure how to run this calculation to account for the next 20+years.

Thanks!

forummm

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It's hard to do this math because the savings could be zero. Or it could even cost you (returns that occur after you've sold an asset before you can buy back in due to the wash sale rule). And the savings probably go away after a few years because of rising markets. So in the long run you are definitely paying. And you have built up a lot of capital gains so you might not want to switch to a lower cost provider.

Interest Compound

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Hey guys,

I know the betterment vs vanguard topic has been discussed in great detail but I was wondering if anybody has ran the numbers to include TLH. When comparing an expense ratio of .10 to .31, the .31 will obviously cost you thousands of dollars in the long run. Will the harvesting benefits make up for most of this, assuming you eventually get the full 3k in losses harvested?

Basically, I'm trying to justify the cost of betterment because I like the convenience feature (despite the fact that I would be able to do it myself), but I'm not exactly sure how to run this calculation to account for the next 20+years.

Thanks!

It has been calculated, and the answer is no, it does not make up for their higher fees:

http://forum.mrmoneymustache.com/investor-alley/betterment-$50k-%27safety-net%27/msg487232/#msg487232

If you want something simple, open a Vanguard account, and tell them you want a Target Retirement Fund.  You won't have to make any decisions at all, simply tell them your age, and they will handle the rest.  If you want to take a bit more control, use a Vanguard LifeStrategy Fund instead.  That way you can make a single decision (how much risk you want to take), and Vanguard will handle the rest.

It doesn't get any simpler than that.

kpd905

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You can tax loss harvest with your Vanguard funds and keep their lower fees, so if you get to a point where you are paying hundreds or thousands of dollars a year to have them save you a few minutes you might want to leave Betterment.
« Last Edit: May 12, 2015, 07:01:10 PM by kpd905 »