Author Topic: Betterment or Vangaurd?  (Read 60795 times)

Mr Mark

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Re: Betterment or Vangaurd?
« Reply #100 on: May 05, 2014, 04:00:28 PM »
Miles,

several commenters have specifically disagreed with all your points, listing evidence and/or requesting justifications, when you try to make the case for betterment. Then you just repeated the same arguments over and over again, but did not indeed participate in actually an 'exchange of ideas'.

on top of that, some things don't make sense, or rely on an extreme strawman argument.  To say you said something that we disagree with on fact, or on logic, or that it differs to our opinion, is not an ad hominem attack either, btw.

Getting all pedantic with your English grammar, especially if English is not your first language, is a bit below the belt perhaps.

arebelspy

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Re: Betterment or Vangaurd?
« Reply #101 on: May 05, 2014, 04:02:58 PM »
I just don't care for the negativity, personally, from people on both sides of the discussion.  (I am not immune to this criticism myself, but I have tried to stop posting in this thread due to that.)
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Mr Mark

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Re: Betterment or Vangaurd?
« Reply #102 on: May 05, 2014, 04:11:43 PM »
Arebelspy,

I think it's better thought of as passion,  perhaps?

foobar

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Re: Betterment or Vangaurd?
« Reply #103 on: May 05, 2014, 04:13:22 PM »
If I thought a 2/20 hedge fund manager would get me an extra 1% of return, I would sign up:)  The problem with betterment (and most of their competitors) is that they publish zero data on how their portfolio would have performed over the long term. If your lucky you get some 10 year graph (it is trivial to back optimize a portfolio for a 10 year span). You never see the 40-50 years that you really want to to answer questions like a) how did it perform during a 20 year stock market bull market b) how did it perform during a 30 year bond bull market c) how did it perform when inflation went to 10% d) how did it do when value was in(or out) of value e) small was in/out of favor  f) rest of world outperformed us g) emerging markets crashed, and so on. You get one period of the last 10 years where owning a lot of bonds, real estate, and small caps paid off.  I am guessing the big reason that no one goes back to the 90s is because the S&P 500 pretty much destroyed most other portfolios. All those tilts to small, value, reits, and so were just drags on performance compared to the S&P returning 18% for the decade.

For what it is worth, I am not a huge life strategy fan. It is just too pricey for what you get. But I also have to think that Vanguard has a dozen people thinking about why REITs, Small caps, and so on should or shouldn't be included in that fund. I wouldn't be surprised if they are right over a 30 year period.

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.

milesdividendmd

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Re: Betterment or Vangaurd?
« Reply #104 on: May 05, 2014, 05:18:19 PM »
Miles,

several commenters have specifically disagreed with all your points, listing evidence and/or requesting justifications, when you try to make the case for betterment. Then you just repeated the same arguments over and over again, but did not indeed participate in actually an 'exchange of ideas'.

on top of that, some things don't make sense, or rely on an extreme strawman argument.  To say you said something that we disagree with on fact, or on logic, or that it differs to our opinion, is not an ad hominem attack either, btw.

Getting all pedantic with your English grammar, especially if English is not your first language, is a bit below the belt perhaps.

Mr Mark,

I have no problem with anyone disagreeing with any of my points.  The fact is we probably agree on much more than we disagree on when it comes to saving and investing.  That being said, little is lost if we are able to share our honest opinions about an non-Vangard product without being labelled a "shill."

If I have restated my arguments, it is merely because those specific points weren't addressed, in my view.

I truly dislike ad hominem attacks, and avoid them categorically when I am not provoked first.  On the other hand, when someone comes at me I feel it is best to answer in kind. 

These are what I percieved as ad hominem attacks, that prompted my responses in kind.  Please tell me which of these you do not percieve as personal, and feel represent a mere intellectual disagreement with my points...

1.  "I almost expect you to try to sell me a variable annuity..."
2.  "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."
3.  "That being said your post is adding nothing but butthurt. I hereby label you complainypants."
4.  "This response is poorly written and inane. Quit while you're behind."

I regard these all as personal attacks, not attacks on ideas.  If you disagree with that assessment please share which statement above refuted an idea.

Alexi

 

arebelspy

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Re: Betterment or Vangaurd?
« Reply #105 on: May 05, 2014, 05:53:14 PM »
Please stop, miles.

EDIT: Take it to PM if you still feel the need to keep going back and forth about things irrelevant to Bettermint's products or services.  This is pretty embarrassing.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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Mr Mark

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Re: Betterment or Vangaurd?
« Reply #106 on: May 05, 2014, 06:06:48 PM »
Mr Mark,

I have no problem with anyone disagreeing with any of my points. 
-yes you do. And then instead of addressing them, focus on these imagined ad hominem attacks.

The fact is we probably agree on much more than we disagree on when it comes to saving and investing. 
- I doubt that. But that is not the issue, or even relevant.

That being said, little is lost if we are able to share our honest opinions about an non-Vangard product without being labelled a "shill."
- If a lot of the people out there who indeed do not know much about investing, and they all end up paying more and being less succussful, that's potentially quite a lot.



If I have restated my arguments, it is merely because those specific points weren't addressed, in my view.

I truly dislike ad hominem attacks, and avoid them categorically when I am not provoked first.  On the other hand, when someone comes at me I feel it is best to answer in kind. 
- well, ok, but no- one's throwing a punch at you, just your argument.

These are what I percieved as ad hominem attacks, that prompted my responses in kind.  Please tell me which of these you do not percieve as personal, and feel represent a mere intellectual disagreement with my points...

1.  "I almost expect you to try to sell me a variable annuity..."
- you persistent endorsement of paying a fee for something illusory, ie the micro rebalancing, etal., reminded me of the fact that peoplecplugging variable and whole life annuities make similar claims in a similar way. It was an insult to your argument,  and your style, not you personally.



2.  "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."
-well, that's what it looked like, when several new members all recommend paying fees, while the best argument is a slick interface. And someone, not you I accept, spoke about being from betterment, and plugged the thing too. This is a popular site. I don't accept this is ad hominem.

3.  "That being said your post is adding nothing but butthurt. I hereby label you complainypants."
- this wasn't me, but he's speaking in code. He means your argument was ineffectual, and now you are focusing on some minutiae.  And then complaining about it, which you were.

4.  "This response is poorly written and inane. Quit while you're behind."
- again, not me, but again, more an opinion, and could do with being a lot more specific, fully agree.

I regard these all as personal attacks, not attacks on ideas. 
- again, it seems people often disagree about things. Telling you so is not ad hominem.

If you disagree with that assessment please share which statement above refuted an idea.
- see above. So, relax, and if you want, relook at the main objections.

Alexi

Alexi,

tried to comment as best above. If you, personally, want to pay betterment 0.25% just to look after your money ( IMHO likely at worse than average performance), thats fine.

Could we come up with scenarios where a certain investment works? Yes.

But I can't,  just can't,  agree that it's a good idea for someone else, based on what youve described are the advantages.

To put it into perspective. For the standard 1mill 30 yr 80/20 balanced 4% withdrawal rate, . For an increase in fees of 0.25%, CFIREcalc shows an increase in failure years from 8 to 10 (25% increase in fail rate) and a loss to average portfolio of 200,000 dollars at year 30, from 1.78 mill to 1.58 mill., a loss of over 11%.

If you think micro rebalancing, etc, are worth that, ok. I don't.  This is just some internet site. You can think betterment is great, ok with me. Just don't ask me to agree with your argument as presented. I'm sure you are a wonderful person.








milesdividendmd

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Re: Betterment or Vangaurd?
« Reply #107 on: May 05, 2014, 07:10:47 PM »
MOD EDIT: Post deleted.

Miles, you were asked multiple times to stop, or to take it to PM.  Please take a one week break from the forums, and when you come back, please directly address people's comments about the service in question if you still feel the need to comment, and refrain from commenting on previous issues whom both sides have been asked to drop.  You can, again, bring it up with them via PM if necessary.

Thank you.
« Last Edit: May 06, 2014, 07:00:17 AM by arebelspy »

Mr Mark

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Re: Betterment or Vangaurd?
« Reply #108 on: May 05, 2014, 07:46:54 PM »
Fair enough Alexi.

sorry Arebelspy. 


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Re: Betterment or Vangaurd?
« Reply #109 on: May 05, 2014, 09:18:24 PM »
If I thought a 2/20 hedge fund manager would get me an extra 1% of return, I would sign up:)  The problem with betterment (and most of their competitors) is that they publish zero data on how their portfolio would have performed over the long term. If your lucky you get some 10 year graph (it is trivial to back optimize a portfolio for a 10 year span). You never see the 40-50 years that you really want to to answer questions like a) how did it perform during a 20 year stock market bull market b) how did it perform during a 30 year bond bull market c) how did it perform when inflation went to 10% d) how did it do when value was in(or out) of value e) small was in/out of favor  f) rest of world outperformed us g) emerging markets crashed, and so on. You get one period of the last 10 years where owning a lot of bonds, real estate, and small caps paid off.  I am guessing the big reason that no one goes back to the 90s is because the S&P 500 pretty much destroyed most other portfolios. All those tilts to small, value, reits, and so were just drags on performance compared to the S&P returning 18% for the decade.

For what it is worth, I am not a huge life strategy fan. It is just too pricey for what you get. But I also have to think that Vanguard has a dozen people thinking about why REITs, Small caps, and so on should or shouldn't be included in that fund. I wouldn't be surprised if they are right over a 30 year period.

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.

Thanks for the thoughtful response. I'm definitely considering moving into a Vanguard brokerage and DIY. I agree with you also, not a big fan of Lifestrategy.

One thing, though, I think there have been a lot of studies showing that value tilting outperforms, historically, and probably over all the different contexts you mention. Obviously we don't know if that will hold true for the future.
« Last Edit: May 05, 2014, 09:27:21 PM by jstash »

arebelspy

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Re: Betterment or Vangaurd?
« Reply #110 on: May 06, 2014, 07:03:20 AM »
But I can't,  just can't,  agree that it's a good idea for someone else, based on what youve described are the advantages.

To put it into perspective. For the standard 1mill 30 yr 80/20 balanced 4% withdrawal rate, . For an increase in fees of 0.25%, CFIREcalc shows an increase in failure years from 8 to 10 (25% increase in fail rate) and a loss to average portfolio of 200,000 dollars at year 30, from 1.78 mill to 1.58 mill., a loss of over 11%.

That's some pretty powerful data.  Thanks for sharing Mark.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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foobar

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Re: Betterment or Vangaurd?
« Reply #111 on: May 06, 2014, 07:05:11 AM »
There is a ton of historical evidence for small and value tilting. The problem is figuring out what is going to happen going forward. For example from 1982-2013 (call it the last 30 years), large value returned 11.6% and large blend returned 11.5%. In small caps value returned 15.6% and blend returned 15.9%. Does that mean the value premium is gone or does it mean that we are about to go on a huge run of value outperformance?  There are two mistakes everyone makes in investing: a) History is going to repeat  and B) This time is different :)

For what it is worth, I have about half of my US allocation split between REITs and small/mid caps. I don't expect to out perform total market by much (if I am lucky I hope to get an extra 1%) but the assets have slightly different correlations. Worked great over the past 15 years but there are still another 40 or so before I can tell you if I made the right call. 



Thanks for the thoughtful response. I'm definitely considering moving into a Vanguard brokerage and DIY. I agree with you also, not a big fan of Lifestrategy.

One thing, though, I think there have been a lot of studies showing that value tilting outperforms, historically, and probably over all the different contexts you mention. Obviously we don't know if that will hold true for the future.

arebelspy

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Re: Betterment or Vangaurd?
« Reply #112 on: May 06, 2014, 07:06:02 AM »
Fair enough Alexi.

sorry Arebelspy.

Your post (above the deleted post) was fine - directly addressing the Bettermint service advantages and/or disadvantages is on topic.  Talking about previous straw men, ad hominem, etc. arguments when asked to drop it or take it to PM is not.

I'm more than happy to let either side present their arguments, but the bickering is below us, and crossed the line.

Hope that clears it up!
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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arebelspy

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Re: Betterment or Vangaurd?
« Reply #113 on: May 06, 2014, 07:07:06 AM »
There is a ton of historical evidence for small and value tilting. The problem is figuring out what is going to happen going forward. For example from 1982-2013 (call it the last 30 years), large value returned 11.6% and large blend returned 11.5%. In small caps value returned 15.6% and blend returned 15.9%. Does that mean the value premium is gone or does it mean that we are about to go on a huge run of value outperformance?  There are two mistakes everyone makes in investing: a) History is going to repeat  and B) This time is different :)

For what it is worth, I have about half of my US allocation split between REITs and small/mid caps. I don't expect to out perform total market by much (if I am lucky I hope to get an extra 1%) but the assets have slightly different correlations. Worked great over the past 15 years but there are still another 40 or so before I can tell you if I made the right call. 

And everyone has to make that decision for themselves, which they believe.  But it's not an advantage for BM, that I see, because you can create whatever portfolio you want via something like Vanguard, Fidelity, etc.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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foobar

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Re: Betterment or Vangaurd?
« Reply #114 on: May 06, 2014, 08:34:52 AM »
Yep. If you take 10 mins to google around you will be able to find all sort of lazy portfolios that matched the numbers that Betterment posted.  For example: http://www.bogleheads.org/blog/the-coffeehouse-portfolio/ return 7.5% to 7.4% (slightly different time periods). What did the simple 3 fund solution return over the past 10 years? 7.1%.   

They are not doing anything magical. You are basically giving them money to save you a bit of time. Nothing wrong with that. But it is like paying someone to cut your grass.  Its convenient but not very frugal. On the other hand if you are likely to chop a leg off when mowing the crash, paying someone else to do it makes a lot of sense:)


There is a ton of historical evidence for small and value tilting. The problem is figuring out what is going to happen going forward. For example from 1982-2013 (call it the last 30 years), large value returned 11.6% and large blend returned 11.5%. In small caps value returned 15.6% and blend returned 15.9%. Does that mean the value premium is gone or does it mean that we are about to go on a huge run of value outperformance?  There are two mistakes everyone makes in investing: a) History is going to repeat  and B) This time is different :)

For what it is worth, I have about half of my US allocation split between REITs and small/mid caps. I don't expect to out perform total market by much (if I am lucky I hope to get an extra 1%) but the assets have slightly different correlations. Worked great over the past 15 years but there are still another 40 or so before I can tell you if I made the right call. 

And everyone has to make that decision for themselves, which they believe.  But it's not an advantage for BM, that I see, because you can create whatever portfolio you want via something like Vanguard, Fidelity, etc.

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Re: Betterment or Vangaurd?
« Reply #115 on: May 06, 2014, 05:10:37 PM »
Ok I'll add my 2 cents before this thread gets locked.

Both Vanguard and Betterment are good brokerages for different kinds of people.  For finance geeks like myself and most of the people on this forum who are capable of managing their own investments, Betterment provides no value-add.  However our types are only a tiny minority of the general population.  Betterment's target audience though is the average Joe that's clueless about how the market works and vulnerable to making bad investment decisions.  It's a godsend for people that might otherwise fall prey to professional money managers.  I think Betterment can be a starting point for the neophyte investor.  For those that are inclined, they can later graduate to Vanguard and manage their own money.  For others who don't want to get their hands dirty, the convenience may be well worth it. 

I personally use Vanguard for my Roth and taxable investments and have no plans to invest elsewhere.  However you have to admit their site isn't exactly intuitive to the lay person.  You still need to be have some know-how to find your way around their site and understand even supposedly simple things like the 3-fund portfolio.


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Re: Betterment or Vangaurd?
« Reply #116 on: May 06, 2014, 05:55:07 PM »
Ok I'll add my 2 cents before this thread gets locked.

Both Vanguard and Betterment are good brokerages for different kinds of people.  For finance geeks like myself and most of the people on this forum who are capable of managing their own investments, Betterment provides no value-add.  However our types are only a tiny minority of the general population.  Betterment's target audience though is the average Joe that's clueless about how the market works and vulnerable to making bad investment decisions.  It's a godsend for people that might otherwise fall prey to professional money managers.  I think Betterment can be a starting point for the neophyte investor.  For those that are inclined, they can later graduate to Vanguard and manage their own money.  For others who don't want to get their hands dirty, the convenience may be well worth it. 

I personally use Vanguard for my Roth and taxable investments and have no plans to invest elsewhere.  However you have to admit their site isn't exactly intuitive to the lay person.  You still need to be have some know-how to find your way around their site and understand even supposedly simple things like the 3-fund portfolio.

exactly.

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Re: Betterment or Vangaurd?
« Reply #117 on: May 07, 2014, 06:05:46 AM »
I disagree. Putting up a false dichotomy that Vanguard is for veteran and truly knowledgeable investors who understand a great deal of nuance in the market while Betterment is for people just beginning and don't understand investing is wrong. Vanguard can be and is easy for the neophyte just as much as Betterment is. We've stated it repeatedly in this thread. There are target date funds for people who don't know what the hell they want or don't understand investing and need to buy time but don't want to waste their soldiers.

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Re: Betterment or Vangaurd?
« Reply #118 on: May 07, 2014, 07:31:28 AM »
I think LuckyMe offers an interesting perspective. And with that, let's really say bon voyage to this thread. Peace and happiness, people. And stay classy, Longmont!

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Re: Betterment or Vangaurd?
« Reply #119 on: November 05, 2014, 01:05:46 PM »
Thanks, sheepstache.

Plus, I can't help experimenting, I'm a scientist, after all.  I turn all kinds of comparisons into 'experiments'.....

n will be equal to 1, so my results will be "anecdata" (to use a non-word I love), but I'll still share hoping it might help someone to make their choice.

MONARDA - Care to give us an update of your experiment?

monarda

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Re: Betterment or Vangaurd?
« Reply #120 on: November 05, 2014, 02:59:36 PM »
Well...

With regard to my personal web site usage, it's turned out that I visit the Capital One Sharebuilder site the most often, Betterment second,  Vanguard a distant third. And Charles Schwab, an even more distant fourth.

This is not necessarily my preference for the products, but rather just how often it's turned out that I logged in to each of the sites over the past 10 months.

This could be for several reasons, which I'll expand upon next week when I'll have time to write a more complete response. 

Topics I've been thinking about to help me (or others) decide which to settle on include-
    -how much of a beginner investor you are,
    -how hands-off you are or want to be,
    -how much you care about learning about the markets,
    -how often you plan to make contributions (whether automatically or manually)
    -tax consequences (if any) of all the rebalancing (which I won't know until the spring when it's tax time, because I'm too lazy to go dig and figure it out now)

All of these places have products designed for the gamut of customers, ranging from the hands-off beginner to the true market nerd.

more later...
cheers!

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Re: Betterment or Vangaurd?
« Reply #121 on: November 05, 2014, 06:01:10 PM »
I would like to use Betterment as a specific savings bucket for me and my wife. Picture a joint savings situation with buckets earmarked for different goals: house downpayment, vacation, emergecy, home improvement, wealth building, etc.  Betterment would be perfect for this except they don't offer joint accounts. I'd really like them to offer this so we can switch from CapitalOne 360/Sharebuilder to Betterment.

madmax

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Re: Betterment or Vangaurd?
« Reply #122 on: November 15, 2014, 12:06:29 AM »
Wait until next year, Schwab is launching their own robo investment service with no fees and Tax Loss Harvesting.

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Re: Betterment or Vangaurd?
« Reply #123 on: November 15, 2014, 11:02:29 PM »
Forgive me if this is a newB investor comment...

But it seems like frequent balancing of your portfolio has the same chance of negatively impacting your portfolio as positively impacting your portfolio. If the stock market fluctuates its possible your 83/17 portfolio would of out performed your 80/20 portfolio and vice versa Because of the unpredictable nature of the stock market it seems kind of silly to feel like your consistently perfectly balanced portfolio is going to outperform a portfolio that will be similarly but not perfectly balanced.

Risk management seems like the best argument for betterment. I wonder if betterment might be worth its fees for some of the older investors that are looking for relatively cheap risk management. I am relatively young and would not pay 0.25 for peace of mind. I do not care if my risk goes up by 10 percent and chances are I wouldn't even know if it did. An old person who wants to maintain 40% bonds might feel differently.

I can also see betterment being beneficial for the investor that has trouble meeting the minimum buy ins for vanguard. I myself am considering Vanguard and cannot afford the minimum for the small cap fund that I want for my IRA. Instead I will need to start with either the STAR fund or one of the set date retirement funds with a buy in of $1,000 or $3,000. That means up to $3,000 can be sitting around for a while not earning interest. My guess is investing in IRAs with lower minimums might result in overall lower fees, but I have not done research. That brings me to the question:

What does Betterment charge to move my theoretical account from Betterment to Vanguard once I meet my minimum?

Since I am neither a boglehead or a person considering betterment I thought I would share my thoughts.
« Last Edit: November 15, 2014, 11:06:09 PM by Druid »

Bbqmustache

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Re: Betterment or Vangaurd?
« Reply #124 on: November 16, 2014, 04:22:08 AM »
I am a Schwab fan because of their fee structure.  For at least IRAs, no account fee, annual or otherwise.  I bought Schwab ETFs (index or otherwise) with super low management fees and NO COMMISSIONS.  Dollar cost average my investments, and buy buy buy.  Rebalance every (3-6-12) months.

Unfortunately, wife's new job forced us to leave Schwab and move to Merrill Edge.  It's ok, but boy do I miss Schwab.

Oh, and low starups.  $100 opens you a Schwab IRA and you can start buying EFTs.  No $2K to $5K minimum investments.

monarda

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Re: Betterment or Vangaurd?
« Reply #125 on: November 19, 2014, 08:58:19 PM »
I am a Schwab fan because of their fee structure.  For at least IRAs, no account fee, annual or otherwise.  I bought Schwab ETFs (index or otherwise) with super low management fees and NO COMMISSIONS. 

I have my Roth IRA at Schwab.  But I quit their brokerage accts because of their fee structure. I haven't gone back to compare their fees to Betterment.

As promised:
Betterment fees so far for three quarters of 2014:  total $23.25 on a total portfolio of $14,150  (invested $13,550, gain 4.6%) allocation 62% stocks, 38% bonds.  I have that divided into three goals with varying allocation, based on when I expect to use the money.  Tax loss harvesting can't be applied until I get up to a $50K minimum balance.  I like Betterment because it's easy to make contributions without transaction fees.

My Vanguard life strategy conservative fund (VSCGX 40-60 bonds-stocks), has made 5.6%. No fees, I could add to it just as easily. I have this same fund in Sharebuilder, and also the moderate lifestrat VSMGX. I bought on different dates, so that's the only reason why the yield varies from 4.3% to 5.7%.  Just noise. Everything (Vanguard/Sharebuilder/Betterment) has made ~5% since January 1.  I'll take another look later on, maybe in another year.

I guess I would sum up my feeling at this point as follows:
I like Betterment. Even though I don't have specific plans to use $, I have different pools of funds for varying target dates.  I'd rather think about savings goals than choose what fund is most aligned with my goals.  I know it amounts to the same thing.  I do not want to spend time to learn about the market.

I keep my cash savings account at CapOne360 because it earns more interest (0.75%) than at my credit union- which earns next to nothing. I only keep enough in my checking account at my credit union to pay bills all else makes a first stop at CapOne360.  Maybe there are other places for cash I don't know about. 

It's quite convenient to have the Sharebuilder account information on the same web page as my savings account information, but I haven't fed the Sharebuilder account at all since January. I've ended up feeding the Betterment Account with some regularity.  Although I monitor Sharebuilder most frequently, the Sharebuilder transaction fees  keep me from making regular contributions there.   If Vanguard has some kind of interest bearing savings account, I probably would use their site more, and make contributions to my Vanguard fund there. But I haven't been attracted by the Vanguard web site enough to try and find it if such a thing exists.

This 'experiment' has shown me that my goal is not necessarily to maximize returns, just rather to know that my funds are doing better than just sitting in savings.  I like that contributing to Betterment is as easy as putting money in a savings account.  No research to do, there's no large list of funds to decide which mixture matches my goals.  For me, the answer to Betterment or Vanguard is, it doesn't matter. Whichever web interface you like better, and whichever links to your checking/savings account better. That's my take.


on edit:  I just read your blog, Bbq, on Roth IRAs. I knew about the 59 1/2, but I didn't know about the 5 years.  I should change ALL my funds in longer term Betterment goals to Roth IRAs immediately.  With the funds in Sharebuilder and Vanguard, too.  In 5 years, I'll be 59 1/2.  huh.  When I opened my Roth IRA at Schwab, 59.5 seemed so far away...
« Last Edit: November 19, 2014, 09:20:36 PM by monarda »

Bbqmustache

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Re: Betterment or Vangaurd?
« Reply #126 on: November 20, 2014, 01:11:28 AM »
Be super careful if you are changing funds from a traditional IRA to a Roth IRA.  That is a taxable event, and every penny of your growth may be taxed at your regular income tax rate PLUS a 10% penalty!  And look this up at the IRS website:  The five year rule starts when you open the Roth IRA account, you can continue contributing and remove funds that you put in just last year (once you are both 59 1/2" and the account is at least 5 years old).

I have heard of this extreme Roth IRA conversion:  Wait until you retire,  your income sinks, and then convert your IRAs into Roth IRAs a bit every year, never converting enough to trigger income taxes!  (Might require a significant drop in income and the help of an accountant).

Schwab fees for trading non-Schwab investments can be beaten, that is true.  I choose non-managed index funds and ETFs, so buying commission free Schwab branded investments fits my investment goals nicely.

monarda

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Re: Betterment or Vangaurd?
« Reply #127 on: November 20, 2014, 08:19:39 AM »
Thanks, bbq. Sorry I wasn't clear.
I did the conversion from my traditional IRA to Roth in the 1990s when Roths were pretty new. I spread the tax over three years. I now have both Roth and traditional IRAs. The funds in the traditional IRA haven't been there more than 15 years or so- since the conversion.

What I meant to say above is that I now realize that I should be maxing my Roth IRA contribution (I hadn't, I'd been taking the tax deduction with traditional IRA contributions lately, also not max) for as many long-term investments currently in brokerage accounts as possible ... that's $6500 per year- pretty much my whole Betterment 'experiment' in 2 years worth of contributions...  For me it makes no sense to have ANY taxable 'long-term' (> 5 years) goal at Betterment (or anywhere) because 5 years/59.5 is not that far away.  If I start a new Roth acct at Betterment that might be the simplest.  I'll ask my tax person about the extreme conversion you mention, but my income isn't that high before retirement, so it won't actually sink much.

The only money I need to keep liquid is what I think I'll spend between now and 2019. I should have plenty left even if I contribute 6500 every year.

59.5 seemed so far away when I last thought a lot about Roth IRAs. (doh- maybe it's denial. I feel much younger than 55. where's the "get a clue bat"- whomp)

snoggish

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Re: Betterment or Vangaurd?
« Reply #128 on: December 24, 2014, 12:12:54 AM »
Thanks monarda for the awesome followup!

I'm a new investor (just graduated college, finished paying off debt, annnd I'm contributing enough to my 401k to get the match). After (painfully) reading through all of the negativity in this thread, I wanted to add my two cents. I have $8,000 in savings. That's it. No investments, no piles of gold in my basement that I can swim in. I figured I'd add my perspective since there didn't seem to be many people with very little money commenting.

When I can only put away a couple hundred dollars a month, saving up $1,000 and putting it all in an account (12.5%) is a pretty big hit. Not to mention the $3,000 or $10,000 minimums for other funds at Vanguard. Yes, I know that after that you can add in increments $100+. Betterment lets me put in as little as $100 a month to invest, without the large upfront deposit.

Betterment is not going to be an investment account for me. I'm planning on using this as a "hopefully higher than 1% APY savings account", in the long run. Which it better be @ 35/65 stocks/bonds, haha. There are no fees with Betterment and withdrawing (also free) only takes 4-5 business days.

One poster was complaining that their $2,800,000 would have outrageous fees with Betterment. It must be nice to have that much money, and I think it's important to recognize that not everyone has that luxury. I TOTALLY agree with them that, if I were in their situation, I would DEFINITELY put all (or most) of my money in Vanguard using a three fund portfolio, coffee house portfolio, whatever. It's a no brainer. (I'm ignoring Tax Loss Harvesting. I don't qualify and don't know what it is... and probably won't have to figure it out until after I max out my HSA, IRA, and 401k contributions.)

For me, starting out, Vanguard is pretty hard to navigate. I bit the bullet a few days ago and dropped $1,000 to open a Vanguard IRA. It might not sound like a lot to you older folks. For me, it's a lot to invest. (12.5% of my total savings) In order to invest in larger stocks/more popular stocks (VTSAX, VFIAX, VBTLX) I'd need $10k a piece... and that's before balancing. I'm sure there are others in my situation reading this, this was one of the top searches in Google for "Betterment vs Vanguard".

The only way Betterment makes sense, at least to me, is to use it as a type of savings account/emergency fund with returns that will hopefully keep up with inflation. Comparing Betterment to getting left in the dust like you would in many (all?) other savings/checking/money market accounts, makes it look a little more appealing... in the long run. There's a chance it will underperform in the short run (as you all know). As I've mentioned, I also believe that the liquidity is greater than it would be at Vanguard. I click a button and get however much money I designate within the next week. I don't have to worry about minimums.

I fully plan on having my IRAs (and maybe investment accounts, if I'm lucky) at Vanguard once I start getting settled in the "real world". I've looked at a TON of other funds with my friend's Scottrade account, and, well, I guess the Bogleheads have gotten to me. While I'm still building up emergency savings and rainy day funds, I think Betterment trumps Vanguard. I might be missing something, I'm new at this.

If anyone disagrees or has a comment, please let me know.

Since it seems like some people here might think this since I'm new, I'll clear it up: I am in no way affiliated with Betterment or Vanguard.
« Last Edit: December 24, 2014, 12:34:36 AM by snoggish »

matchewed

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Re: Betterment or Vangaurd?
« Reply #129 on: December 24, 2014, 05:40:58 AM »
If you're just starting out having an emergency fund in a taxable account is a terrible idea, you have to pay taxes on it. This is regardless of Betterment or Vanguard. When you're starting leave your emergency fund in a savings account where it is liquid. Inflation is not high enough right now to warrant a short term position in a taxable account for fear of inflation. If this is other money that is not emergency fund related but for long term investing/goals then anything outside of a savings account is fine.

monarda

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Re: Betterment or Vangaurd?
« Reply #130 on: December 24, 2014, 09:47:38 AM »
snoggish,

Following up on matchewed's post,  here's an important note about Roth IRAs you might not realize... 

Once your Roth IRA account has been opened for five years,  you can withdraw your contributions without penalty if you need them for funding an emergency or whatever. You'd just have to leave your gains behind in the Roth account.
So, after 5 years your contributions are essentially liquid.

(and... you can set up a Roth IRA at Betterment if you want) 

neo von retorch

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Re: Betterment or Vangaurd?
« Reply #131 on: December 24, 2014, 10:22:12 AM »
monarda,

Quote
An investor can withdraw his or her contributions to a Roth IRA at any time without tax or penalty. But, that is not the same case for any earnings or interest that you have earned on your Roth IRA investment. In order to withdraw your earnings from a Roth IRA tax and penalty free, not only must you be over 59 years-old but your initial contributions must also have been made to your Roth IRA five years before the date when you start withdrawing funds.

wuj818

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Re: Betterment or Vangaurd?
« Reply #132 on: December 24, 2014, 10:58:04 AM »
For me, starting out, Vanguard is pretty hard to navigate. I bit the bullet a few days ago and dropped $1,000 to open a Vanguard IRA. It might not sound like a lot to you older folks. For me, it's a lot to invest. (12.5% of my total savings) In order to invest in larger stocks/more popular stocks (VTSAX, VFIAX, VBTLX) I'd need $10k a piece... and that's before balancing. I'm sure there are others in my situation reading this, this was one of the top searches in Google for "Betterment vs Vanguard".

Why would you need 10k per fund unless you're talking about the admiral share versions? You can get the investor share versions which have a 3k minimum.

Also, since you opened a Roth IRA with 1k then I'm assuming you went with a target retirement fund. If you're already invested in that then why not continue contributing to it? You could easily add $100 a month to it.

One poster was complaining that their $2,800,000 would have outrageous fees with Betterment. It must be nice to have that much money, and I think it's important to recognize that not everyone has that luxury. I TOTALLY agree with them that, if I were in their situation, I would DEFINITELY put all (or most) of my money in Vanguard using a three fund portfolio, coffee house portfolio, whatever. It's a no brainer.

If you're invested in a target retirement fund then you already have a well diversified 4 fund portfolio.

snoggish

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Re: Betterment or Vangaurd?
« Reply #133 on: December 24, 2014, 08:13:02 PM »
Oh wow, thanks for the responses! I looked into Roth IRAs right away, and they look like a great option.

If you're just starting out having an emergency fund in a taxable account is a terrible idea, you have to pay taxes on it. This is regardless of Betterment or Vanguard. When you're starting leave your emergency fund in a savings account where it is liquid. Inflation is not high enough right now to warrant a short term position in a taxable account for fear of inflation. If this is other money that is not emergency fund related but for long term investing/goals then anything outside of a savings account is fine.
Ok, that makes sense. It seems like the consensus is that I should be contributing fully to a Roth IRA before doing this type of investment. Especially because I can withdraw from it (thanks monarda and neogodless!), and it looks like I can put that money back in as a current year contribution as long as it's within the window for the same year in which I withdrew it.

Now, if we assume that if Person X is maxing his employer's 401k match and is maxing out IRA contributions of $5,500 and still has some left over cash that they want to use to beef up their existing savings (in a bank account)... Wouldn't they only have to pay short/long term capital gains when/if they withdraw from the Betterment account?  They are planning on having ~$2k in here for the time being, and $8k in a regular bank account.

Do you think it would be better to keep the $2,000 in a regular bank account, instead of in Betterment? Even with taxes, the Betterment account would, on average, easily beat a savings account with 1% return (My understanding is that the 1% of interest in a bank account would have to be reported to the IRS as interest income anyway). Even an additional 1% return (2% total) is better than nothing at all. The only issue I can see is a risk that you could lose money in the short term?

Why would you need 10k per fund unless you're talking about the admiral share versions? You can get the investor share versions which have a 3k minimum.

Also, since you opened a Roth IRA with 1k then I'm assuming you went with a target retirement fund. If you're already invested in that then why not continue contributing to it? You could easily add $100 a month to it.
Yup, your assumption is correct. The 10k per fund was regarding the admiral shares version for the lower expense ratios they offer. It is a VERY long term goal, and right now I'm planning on contributing ~$100 a month to the Vanguard IRA (hopefully more, shortly) in the target date retirement fund, like you suggest.
« Last Edit: December 24, 2014, 09:33:17 PM by snoggish »

neo von retorch

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Re: Betterment or Vangaurd?
« Reply #134 on: December 26, 2014, 08:06:46 AM »
Do you think it would be better to keep the $2,000 in a regular bank account, instead of in Betterment? Even with taxes, the Betterment account would, on average, easily beat a savings account with 1% return (My understanding is that the 1% of interest in a bank account would have to be reported to the IRS as interest income anyway). Even an additional 1% return (2% total) is better than nothing at all. The only issue I can see is a risk that you could lose money in the short term?

That is the "only issue" but it's a big one. When will you need the $2000? At any moment, the market could start a three year downward slide losing 5, 10, 15% - just as an example. This happens and no one is good at predicting when it happens. Will you be OK with your $2000 quickly becoming $1400? Of course, if you're going to put it in Betterment, but know you'll need it soon, it might be a very cautious blend of mostly bonds, which should be a lot better (as far as risk goes.)

misterhorsey

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Re: Betterment or Vangaurd?
« Reply #135 on: February 26, 2015, 06:54:46 PM »
Had a bit of a scan through this older thread and couldn't help but chuckle (at least, from an Australian perspective)

Reason being, Vanguard charges 0.37 MER on its Lifestyle Strategy fund in Australia.  So Vanguard in Australia is already higher than whatever Betterment is charging in the US.  Also, any interest earned on savings in Australia that you keep in a bank account is taxed - so you are being doubly punished if you are complacent or tend towards procrastination.

Of course, many other factors to consider. Australia supposedly has a higher median wage, and also Universal Health care is priceless (i had my appendix out when I was 20 - it cost me $90 which was the specialist's fee for taking my stitches out). So maybe it balances out.

Anyway, I would kill for a 0.17% MER on a Vanguard diversified life strategy fund!

At the moment I'm tossing up paying the 0.37% of a lifestrategy fund, or going it alone and cheaper by buying ETFs and rebalancing manually.  As was mentioned above however, I may need to be protected from myself in not having the discipline, resolve etc to actually do it when the time comes.

I think I'm being guilty of a bit of moustachian over optimising tho, as can happen.  I mean, the hard yards are in saving a stash to invest.  Whether you pay a fee of 0.17  or 0.37 does make a difference in the long term, but the biggest difference is saving the money in the first place to invest, no?

Didn't want to derail what seems to be a spent thread - but thought a bit of outside perspective would be interesting a swell.

Cheers