Author Topic: Should I use Betterment Investments?  (Read 4844 times)

RationalReasoner

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Should I use Betterment Investments?
« on: March 05, 2015, 05:53:48 PM »
I'm rather new to investing. Having recently read MMM's post on Betterment has made me think it's a good option for me. However, some of the people commenting seem to think that a person in a lower tax bracket would not benefit from investing with Betterment because of Tax Loss Harvesting. How can I determine whether this is a good option for me?

My income last year was about 32K and I would like to open a Betterment account with a few thousand to start. Would this be an advantage to me? Thanks.

tj

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Re: Should I use Betterment Investments?
« Reply #1 on: March 05, 2015, 08:42:04 PM »
Not necessary in a low bracket. Just put it in Vanguard LifeStrategy Growth and let Vanguard take care of managing it for you.

Dodge

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Re: Should I use Betterment Investments?
« Reply #2 on: March 05, 2015, 09:11:54 PM »
Agreed.  Vanguard's LifeStrategy funds are the way to go.  Either way you're with Vanguard, because Betterment will take your money and invest it in Vanguard for you (after adding their own fee).  Skip the middle man.

https://investor.vanguard.com/mutual-funds/lifestrategy/#/

innerscorecard

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Re: Should I use Betterment Investments?
« Reply #3 on: March 06, 2015, 01:19:13 AM »
Giving money to Betterment is like paying someone to go to Costco to buy groceries for you. The exact same groceries you would have bought yourself. Sure, there are benefits to such an approach. But it doesn't make much economic sense for most people.

RationalReasoner

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Re: Should I use Betterment Investments?
« Reply #4 on: March 06, 2015, 06:03:01 AM »
The thing is I don't really want to start with 3k in one fund like I will have to do if I go with Vanguard directly. It's my understanding that there is no minimum amount with Betterment. If only Vanguard allowed you to begin with a smaller sum.

Thanks for the advice so far.


Another Reader

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Re: Should I use Betterment Investments?
« Reply #5 on: March 06, 2015, 06:47:40 AM »
Read what Miles Dividend and MMM have written about Betterment.  It has features that for some folks that make sense.  In addition, I think that watching a small account grow on their website illustrates investment principles better than any book or article.

If you want to start with only Vanguard products, you can open a brokerage account at TD Ameritrade with no minimum investment and buy some of the Vanguard ETF's with no commission.  VTSAX maps to the ETF, VTI.  You have to buy whole shares, but you can buy one share at a time.  Vanguard also has a brokerage account where you can buy their ETF's with no commission.  Can't recall the account minimum, but it's less than the fund minimum.

tj

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Re: Should I use Betterment Investments?
« Reply #6 on: March 06, 2015, 07:48:23 AM »
The thing is I don't really want to start with 3k in one fund like I will have to do if I go with Vanguard directly. It's my understanding that there is no minimum amount with Betterment. If only Vanguard allowed you to begin with a smaller sum.

Thanks for the advice so far.

Open Vanguard STAR Fund. Minimum is 1,0000 and it invests in like 8 funds.

GGNoob

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Re: Should I use Betterment Investments?
« Reply #7 on: March 06, 2015, 09:22:58 AM »
The thing is I don't really want to start with 3k in one fund like I will have to do if I go with Vanguard directly. It's my understanding that there is no minimum amount with Betterment. If only Vanguard allowed you to begin with a smaller sum.

Thanks for the advice so far.

Open Vanguard STAR Fund. Minimum is 1,0000 and it invests in like 8 funds.

Or a Target Retirement Date Fund. They also have a $1,000 minimum with $1 min for future purchases.

skyrefuge

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Re: Should I use Betterment Investments?
« Reply #8 on: March 06, 2015, 10:05:12 AM »
Or a Target Retirement Date Fund. They also have a $1,000 minimum with $1 min for future purchases.

Yep, this.

Even if such things didn't exist, having $3k in a single asset class should not be a concern. Yes, asset allocation is important, but when you're just starting out, it's fairly irrelevant. Start out in a stock fund, and then adjust towards your final desired allocation over time as you invest more money.

Speaking of minimums, you need a minimum of $50k at Betterment to use their tax-loss harvesting service, so there would really be no point for you to use Betterment.

Dodge

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Re: Should I use Betterment Investments?
« Reply #9 on: March 06, 2015, 12:00:43 PM »

The thing is I don't really want to start with 3k in one fund like I will have to do if I go with Vanguard directly. It's my understanding that there is no minimum amount with Betterment. If only Vanguard allowed you to begin with a smaller sum.

Thanks for the advice so far.

The Lifestrategy funds are "funds of funds". They each hold:

Total US Stock Market
Total US Bond Market
Total International Stock Market
Total International Bond Market

About 20,000 unique assets in total, all over the world. You aren't going to find a more diversified place to put your money.

Doulos

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Re: Should I use Betterment Investments?
« Reply #10 on: March 06, 2015, 12:12:36 PM »
What I am hearing here is basically.
If you have a full stash, still making money, AND have an extra $50k to add into Taxable investments (instead of withdrawing).
Then yes.

If you are pre-Financial Independence then you are not ready for something like Betterment.

Is that accurate?

RapmasterD

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Re: Should I use Betterment Investments?
« Reply #11 on: March 06, 2015, 12:17:58 PM »
I'm 100% convinced that every few weeks, someone comes on here and asks a Betterment-related ("Should I") question on purpose, almost like an updated focus group designed to gather the latest inputs from a cross section of the MMM populace.

It just seems incredible that the exact same query would be reposted so many times.

Another Reader

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Re: Should I use Betterment Investments?
« Reply #12 on: March 06, 2015, 01:15:20 PM »
There is some evidence that value outperforms the broader indices.  Betterment offers a value tilt and automatic rebalancing.  As someone that has invested for over 40 years, I can see some value in Betterment for the novice investor.  If I were starting out as a tentative newbie, I would be inclined to use Betterment.  Rebalancing is not intuitive, and a lot of people end up not rebalancing as a result.  With Betterment, you can watch the investing and rebalancing process and learn at the same time. 

The internet investing fee police will tell you that you should minimize fees at all costs.  I think like any expense you need to evaluate if there are benefits for the fees.  My suggestion is you read the MMM post and the Betterment posts on Miles Dividend's blog and decide for your self. 

skyrefuge

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Re: Should I use Betterment Investments?
« Reply #13 on: March 06, 2015, 01:37:55 PM »
What I am hearing here is basically.
If you have a full stash, still making money, AND have an extra $50k to add into Taxable investments (instead of withdrawing).
Then yes.

If you are pre-Financial Independence then you are not ready for something like Betterment.

Is that accurate?

Maybe half-accurate. Your financial independence, or whether you're in the accumulation or withdrawal stage is not really relevant (having $50k in taxable investments is not really connected to being financially independent). So I would modify your statement:

"If you have a full stash, still making money, AND have an extra $50k to add into Taxable investments (instead of withdrawing).
Then maybe. (if you believe the value tilt premium combined with TLH will outweigh the increased expenses over a direct Vanguard all-in-one-fund).

If you are have less than $50k to invest then you are not ready for something like Betterment."

It just seems incredible that the exact same query would be reposted so many times.

Nah, people post the exact same "what's wrong with 100% stocks?" and "how do I get money from my 401(k) without penalty?" queries even more frequently. Betterment is just good at marketing to Internet-connected financial novices, so that's why they come with questions.

I get the feeling that a lot of people ask specifically about Betterment simply because they've heard about it but have not (yet) heard about Vanguard.

I can see some value in Betterment for the novice investor.  If I were starting out as a tentative newbie, I would be inclined to use Betterment.
...
My suggestion is you read the MMM post and the Betterment posts on Miles Dividend's blog and decide for your self. 

I think those things are a bit of a contradiction, and part of why there is a conflict over Betterment on the MMM forums. MMM's endorsement of Betterment comes largely because he is *not* a newbie investor, and thus, can take advantage of their TLH service. Without the TLH, I doubt MMM would have endorsed them. So we get a lot of newbie investors seeing "ooh, MMM likes Betterment!", but he wasn't really talking to them.

RapmasterD

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Re: Should I use Betterment Investments?
« Reply #14 on: March 06, 2015, 03:38:57 PM »
<<I get the feeling that a lot of people ask specifically about Betterment simply because they've heard about it but have not (yet) heard about Vanguard.>>

...which is shocking given that Betterment has 50,000 investors (source: Betterment.com) and Vanguard has 20 million investors (source: Vanguard.com).
« Last Edit: March 06, 2015, 03:45:10 PM by RapmasterD »