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Are you interested in making money while you sleep? Then you need to learn to invest! Sometimes, getting started with investing can seem daunting. That’s where Betterment comes in. Betterment is one of the original roboadvisors, which means you get top-quality investing support without the high fees of traditional investment advisors. That means you’ve got even more money making money while you sleep.
Let’s explore why everyone from beginning to seasoned investors loves Betterment.
Betterment Review Summary
- Betterment is a roboadvisor that makes investing accessible for all with no account minimums
- Betterment offers low-cost ETFs for a low management fee
- Betterment helps you set goals and make investment decisions that are tailored to you
- Betterment provides tax loss harvesting and automatic rebalancing to keep your portfolio in top shape
Betterment Pros & Cons
Betterment has more than half a million users and remains one of the most downloaded investing roboadvisors. Here are the biggest benefits and some of the drawbacks to the popular app.
- Lightning quick account set up allowing you to “set it and forget it”
- Goal setting and progress monitoring features to help keep you on track
- Robust low-fee ETF investing options with low-cost management
- Climate Impact and Social Impact portfolios for individuals interested in socially responsible investing
- Comprehensive planning tools available to all, even if you aren’t a Betterment customer
- Fractional shares allow you to invest in what you want, when you want
- No option to invest in REITs (Real Estate Investment Trusts)
- $100,000 account balance required to access certified financial planners
- Not designed for DIY investors who want direct indexing
- No 529 options for people who want to save for education-specific funds
How Does Betterment Work?
Betterment says that their top priority is to help customers make the most of their money. So how do they do that? By being a smart money manager of course!
As the largest online financial advisor, Betterment is a roboadvisor and so much more. Investing with Betterment gives you access to exchange traded funds (ETFs) so that you can invest like a pro. Betterment ETFs align with your risk level and take care of buying and selling funds in your portfolio for you. And what would a roboadvisor be without advice? Betterment also invites users to set goals and tracks progress so that it can offer advice about how to invest to meet those goals.
In addition to acting as an investment roboadvisor, Betterment also has options for your cash. These Betterment accounts include a Betterment cash account and a checking account. The cash account–called Cash Reserve–is a high-yield cash account. When you open your account, you can set cash aside for particular goals. Additionally, the checking account includes a Visa Debit card. Thanks to their partnership with nbkc bank, your money is FDIC insured up to $250,000.
How Do I Open a Betterment Account?
Opening up a Betterment account is simple. To start, you’ll need to provide basic information. You know the drill: name, address, email, phone number, and Social Security number. When you set up your Betterment account, your account safety will be enhanced with two-factor authentication and then you’re ready to use your roboadvisor.
You will now be prompted to reflect on why you want to invest. Betterment uses all of the different investing motivations that you choose to build the perfect portfolio for you.
Then, you tell Betterment the type of investing you want to do: retirement, education, safety net, general investing, or major purchase. You will also tell it the type of account you want to option. Options include:
- Roth IRA
- Traditional IRA
- SEP IRA
- Individual taxable accounts
- Joint taxable accounts
- Cash reserves
- Checking accounts
After you indicate the type of account you want to open, Betterment recommends a portfolio for you. You can move forward with their recommendation or make modifications to your asset allocation yourself.
Finally, you will connect your bank accounts to your Betterment account, allowing Betterment to share a complete financial picture with you.
Betterment offers low-cost ETFs with a low management fee. The management fee covers all trading, transfer, and management costs and is paid yearly. This fee is how Betterment makes the bulk of its money, and the fee is very competitive with other roboadvisors and significantly lower than traditional financial advisors.
Are you wondering what Betterment costs? To understand Betterment fees, you need to know that there are two different plan options:
- A digital investing plan offering digital investing advice and tools
- A premium investing plan with access to human advice and support
The digital plan comes with a 0.25% annual fee or approximately $2.50 for every $1,000 you have invested. The premium plan is a 0.4% annual fee or approximately $400 for every $100,000 invested.
At the end of each month, Betterment takes the fees from your Betterment investing account. To determine the amount of fees you pay, Betterment calculates the average daily balance of your account.
Betterment Features and Benefits
It’s easy to get lost in the sea of investment tools that are available. Yet, Betterment stands out as an essential tool for beginning investors because of its ease of use and robust digital support. Users have a variety of portfolio options to meet their investing goals, including socially responsible investment options, and features like auto rebalancing and fractional shares to make the most of your money.
Let’s explore the Betterment standout features and benefits in more depth.
Betterment portfolio options are made up of exchange traded funds, or ETFs. Depending on your risk tolerance and time horizon, Betterment will mix and match from 13 different asset classes to find the portfolio recommendation to meet your needs.
The equities in Betterment ETFs are made up of developed and emerging markets. Funds include:
- U.S. Total Stock Market
- U.S. Value Stocks – Large Cap
- U.S. Value Stocks – Mid Cap
- U.S. Value Stocks – Small Cap
- International Developed Market Stocks
- International Emerging Market Stocks
The bonds are investments in governments, agencies, and global corporations. Funds include:
- U.S. High Quality Bonds
- U.S. Municipal Bonds
- U.S. Inflation-Protected Bonds
- U.S. Short-Term Treasury Bonds
- U.S. Short-Term Investment-Grade Bonds
- International Developed Market Bonds
- International Emerging Market Bonds
Once you have your portfolio set up, you can forget about it. No, seriously. Thanks to Betterment’s rebalancing and tax loss harvesting, you know your money is in good hands.
The robo part of roboadvisor checks portfolios each day to determine if anything needs to be rebalanced. That means that your money will always stay aligned to your goals and your risk tolerance without you making even a single click.
Tax Optimization Strategies
For users with taxable and tax-advantaged retirement accounts (think IRA), Betterment offers a tax-coordinated portfolio that will optimize the impact of taxes on your investments.
To help you maximize your money, Betterment includes a tax impact preview tool. This way, you can dodge any surprises at tax time. Instead, the tool will allow you to preview the impact of portfolio adjustments.
Betterment also offers users a charitable giving tool. That way, you can donate securities to various charities straight from the Betterment platform in a tax-efficient way.
Another perk of the Betterment investing app is that you have the ability to buy fractional shares. That means that you don’t have to wait to purchase a full share of a company.
Instead, Betterment allows you to invest the cash that you do have on hand in a slice of a company instead. It’s just one more way that Betterment constantly keeps your money working for you.
While Betterment does not offer direct indexing, Betterment does offer flexible portfolio options. That means that Betterment will recommend a portfolio for you, and you can then make modifications to it. The flexible portfolio tool allows you to adjust the percentage of your money that is invested in each ETF.
Unique Portfolio Options
Betterment stands out from other investing apps by offering unique portfolio options based on client’s needs. In addition to their recommended ETF portfolios and flexible portfolio options, Betterment includes even more offerings. Whether you want to focus on generating a consistent income or socially responsible investing, Betterment has an option for that.
Here are some of the unique portfolio options from Betterment:
- Goldman Sachs Smart Beta – Betterment crafted this portfolio to take on additional risks in order to achieve higher-than-average returns.
- Blackrock Target Income – This low-risk bond portfolio generates an income for people like retirees who need to preserve their capital.
- Social Impact – This socially responsible portfolio is composed of US companies that emphasize diversity.
- Climate Impact – The emphasis of this socially responsible investing portfolio is to focus on companies that are working to mitigate climate change.
Betterment Returns (on Average)
Betterment offers users access to view the historical return data of the various portfolio options with a Betterment account. In general, Betterment returns have yielded between 8-9%.
It is worth noting that depending on the portfolio you select, your performance will vary. Additionally, past performance does not determine how your portfolio will perform in the future.
Betterment Cash Reserve
Looking for a place to stash your cash for short term goals? Then consider a Betterment cash account. The Betterment Cash Reserve is a high-yield and no-fee spot to save. Unlike some cash accounts, there are no restrictions on how you move your money. You can also complete withdrawals in 1-2 business days. Rest easy that your money is FDIC insured through Betterment’s partner banks.
When you set up your Cash Reserve account, you have the option to create buckets for individual savings goals. Betterment also offers savings advice, helping you see how much money you should hold to meet your goals.
Betterment checking is the perfect option for people who want to streamline their accounts. Betterment connects your checking account to a Visa debit card for daily spending. Earn cash back when you swipe at thousands of stores, such as Dunkin’ and Walmart.
Another standout feature of Betterment checking is that there are no fees. Why? Betterment believes that you shouldn’t have to pay to use your money. Say goodbye to overdraft fees and minimum balances. Plus, ATM fees and foreign fees are automatically reimbursed.
Since Betterment partners with NBKC bank, your deposits are also FDIC insured up to $250,000.
Are you contemplating opening an account with Betterment? Let’s make sure you know all you need to know about this investing tool. To help, we combed the internet for the most frequently asked questions about Betterment and rounded up answers for all the FAQs.
Is Betterment Safe?
You work hard for your money and you want to keep it safe. That’s completely understandable. Thankfully, safety and security are Betterment’s priorities. To keep your money safe, their site is encrypted and the app features two-factor authentication.
Moreso, Betterment operates under a federal fiduciary standard. That means that the company is obligated to act in your best interest.
How Much Do I Need To Invest With Betterment?
One of the many reasons that Betterment is perfect for beginners is because there is no account balance necessary to invest. The $0 account balance gives you access to their Digital Investing plan.
To access their Premium Investing plan, you need a $100,000 balance. Under the Premium Investing plan, you get unlimited access to their team of certified financial planners. Plus, you can add the Betterment Checking and Cash Reserve accounts without worrying about any additional fees.
Does Betterment Have a Roth IRA?
Are you looking to find the right retirement account for you? Roth IRAs are becoming increasingly popular as a way to save for retirement and lower your tax burden in your golden years. Given the usefulness of this retirement vehicle, it shouldn’t come as a surprise that you can open a Betterment Roth IRA.
With this Roth IRA, Betterment gives you portfolio options tailored to your specific goals and personalized retirement advice on how to save. Betterment does all the heavy lifting for your Roth IRA as well. You get automatic rebalancing and dividend reinvesting to keep your money growing. There are even socially responsible investment options.
Does Betterment Have a Savings Account?
Sort of! Cash Reserve is a Betterment cash account that functions similarly to a savings account. This high-yield cash account lets clients earn 0.10% interest and offers FDIC insurance through partner banks. There is no minimum balance required and no limit on the withdrawals that you can make. The icing on the cake is that there is never a fee on your balance.
Who is Betterment Best For?
Betterment is best for beginning investors who are looking to take a set it and forget it approach to their future goals. Of course, other Betterment reviews are often remiss, overlooking the benefits that Betterment offers to seasoned investors, including fractional shares and tax optimization strategies.
All investors can also appreciate the simplicity of opening an account and the low management fees. With the Betterment cash account and checking account, clients also have the option to streamline their finances by housing all of their accounts in one place.
Not sold on Betterment? Good news! There are plenty of other options for you to explore. Whether you want a roboadvisor that is similar to Betterment or you’d like to try a different approach to investing, we’ve got you covered.
These are our favorite Betterment alternatives:
Wealthfront shines for making investing painless and offering excellent advice. It’s true that many money apps offer guidance. Wealthfront stands out based on the type of advice it gives. For instance, their Time Off to Travel feature helps users calculate how much time you can take off of work without impacting your future financial goals.
Check out our full Wealthfront review for more details.
Personal Capital is a darling of the financial independence movement. FIRE seekers have access to a roboadvisor or a human advisor, depending on the account balance. As an added benefit, their retirement planning tools are incredibly robust and free to all, even if you aren’t a Personal Capital client. These tools, such as the Retirement Fee Analyzer, can help you chart your course to early retirement or any other financial goal.
Check out our full Personal Capital review for more details.
Acorns allows users to invest in two ways. You can make traditional recurring deposits into your investment accounts. Additionally, you can also microinvest by rounding up various transactions and investing your spare change. That feature distinguishes Acorns from other investing tools because anyone can get started microinvesting with just a few coins.
Check out our full Acorns review for more details.
 Betterment “Returns Calculation.” Accessed October 9, 2021