Betterment Review | $25 Sign Up Bonus

Betterment Review | $25 Sign Up Bonus October 14, 2011

Throughout this past year, I’ve been hearing about an investment company called Betterment, so I decided to take a look to see what they’re all about.  If you’re not familiar with Betterment, they’re a brokerage firm with one goal: make investing better.  How?  By simplifying the process.

There are a lot of people who want to invest, but they just don’t know where to start, what type of account to open, and how to manage their investments.

If you have put off investing because of these reasons, you should definitely consider Betterment.

How Does Betterment Work?

Betterment simplifies investing with its goal-based investment strategy.  Here’s how it works.

1. Open an Account

When you open a Betterment account, they ask you what your goals are.  Are you saving for retirement, vacation, new car, or college?  Since Betterment is a Registered Investment Advisor, they use your age, investing time frame, starting balance, and monthly contributions to suggest a strategy for each goal that you have.

betterment review

2. Fund Your Account

Funding your investment with Betterment really is simple.  After you create a goal, they show you how much you need to save each month and give you the option to draw it monthly, weekly, or every other week from your bank account.  Yes, that means you need to sync up your bank account but that’s simple too – they walk you through each step.

3. Select Your Investment

This is where Betterment shines.  Their interactive asset allocation tool gives you a visual picture of how aggressive or conservative you can invest your money.  They even have an interactive demo that you can use to see how easy it is to use Betterment.

betterment review

How Your Money Is Invested

I mentioned that Betterment gives you an easy way to visualize how aggressive or conservative your investments are.  They use stocks via ETF (exchange traded funds) and bonds via U.S. Treasury Bonds as investments.  Instead of choosing individual companies and risking your entire savings on the performance of one stock, you’re well diversified among 3500+ companies that are represented in the ETFs.

Here’s a breakdown of the actual ETFs and bonds that Betterment uses.

For Stocks:

25% VTI: Vanguard Total Stock Market

25% IVE: iShares S&P 500 Value Index

25% VEA: Vanguard Europe Pacific

10% VWO: Vanguard Emerging Markets

8% IWS: iShares Russell Midcap Value Index

7% IWN: iShares Russell 2000 Value Index

For Bonds

50% TIP: iShares Barclays TIPS Bond Fund

50% SHY: iShares Barclays 1-3 Year Treasury Bond Fund

It’s important to know that, like any investment in the stock market, nothing is guaranteed.  Investments in the market can lose value, which is true with the investments used with Betterment.

Are There Fees, Minimum Balances, or Transaction Costs?

Fees: You’re always going to pay a fee to invest somewhere.  Some places try to hide the fees, but Betterment is up front about it.  Their fees range from 0.3% to 0.9% per year.

Minimum Balance:  The nice part about Betterment is that they don’t have a minimum balance rule. You can set up an account with $25, $100, or $1,000+ and add money as you go based on Betterment’s recommendations.

Transaction Costs:  Nope.  You won’t find $7 trades here because Betterment doesn’t charge you a transaction cost to invest your dollars.

My Thoughts on Betterment

I had the chance to meet the CEO, Jon Stein, and personally talk with him about Betterment, how it works, and the investment philosophy of the company.  Betterment has turned a once-intimidating practice of investing into an accessible tool that is customer focused 100% of the time.

Jon called it smart, intuitive, and accessible, and I agree.  I had to try it myself, so I opened my account in about 5 minutes and created my first goal.  It seriously couldn’t have been any easier.  Plus, I got a $25 bonus just for signing up with just $250 – an awesome return right away :).  Here’s a look at my account (before the $250 cleared):

betterment review

I really am excited to use Betterment because it’s simple and automatic.  You don’t have to be an investment guru to save and invest your money.  You just have to have the right tools, and I’d encourage you to explore Betterment to see if it helps you reach your goals easier.

F&F Readers: Open an account with Betterment and get $25 sign up bonus! Click Here!

The Betterment IRA

Betterment just announced the addition of IRAs to the mix of investing tools available for you to use.

Opening a Betterment IRA

Betterment has just announced (as of December 21, 2011) that IRAs are now up and running.  If you’ve been putting of opening an IRA, now’s the time to start.  Betterment makes it really easy to visualize your savings and gives you the tools to automate your IRA contributions.

 Why You Should Have an IRA

I’m a firm believer in planning ahead for your own retirement.  We can’t rely on anyone else to build our nest egg for us, which is why investing in your company 401(k) or opening an IRA is so important.

If you’re not familiar with how an IRA works, check out this article from a while back.  Here are some of the highlights of how an IRA works:

The two most common types of IRAs are Traditional and Roth.

Traditional IRAs allow you to contribute to the account with pre-tax dollars, meaning that your taxable income this year will be lower.  Your money grows tax-deferred and when you’re ready to draw the funds at retirement (or after age 59 ½*) you will pay taxes at that time.

Roth IRAs allow you to contribute money after it has been taxed.  The money in your Roth IRA will grow and both the principal and interest will be available for tax free withdrawal at your retirement (or after 59 ½*).

*Generally, withdrawals made before age 59 ½ will be subject to a 10% early withdrawal penalty, so it isn’t wise to draw funds before you’re eligible.

2012 IRA Contribution Limits

The most you can contribute to an IRA in 2012 is $5,000 ($6,000 if you’re over age 50).  Remember, you can still make a contribution into an account for your spouse even if they don’t earn an income.  Plus, your 2011 contribution can be made until April 15, 2012.

Be sure to check back with us for updates on how the Betterment IRA can make investing more simplified for you.

F&F Readers: Open an account with Betterment and get $25 sign up bonus! Click Here!

Do you already have an IRA or 401(k)?  What do you like about the account you have now?  Is it easy to make contributions?  Easy to change investments? 

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