Review: Easy Investing For Busy People

Lately I’ve been hearing a lot about a new investing website and brokerage account through

What is Betterment? At it’s very basic it’s another in a long line of online brokerages that allow you to hold stocks and bonds as investments via ETFs, like an account through Etrade or ShareBuilder.

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But it’s more than just that. It’s also a tool that helps automate the investing process to make it simpler for the average user, and for those who are just too busy to stay on top of their investing accounts all of the time. So today I thought I’d do a review of

Betterment Background is a new player as far as brokerages go. was founded by Jon Stein in 2008. launched at TechCrunch Disrupt 2010 NYC. In December 2010 received $3 Million in a series A financing round from Bessemer Venture Partners (lead) and Anthemis Group.

Betterment LLC is a Registered Investment Advisor with the SEC and they’re SIPC insured. You can be assured of the same protections as you would with a larger financial institution. Of course since this is an investing account and not a savings account, there ais no assurance of not losing your money.

Betterment only launched a few months ago, but it is receiving a lot of buzz with writeups in The New York Times, CNNMoney, Investment News, and more.


While the website was only launched at the end of 2010, it is already receiving some recognition for it’s innovative ideas and approach.

  • TechCrunch Disrupt NYC 2010 “Battlefield Finalist”
  • TechCrunch Disrupt NYC 2010 “Best NYC Startup”
  • FinovateFall 2010 “Best of Show”

So they haven’t had a lot of time to get awards, but to have some recognition for their fresh ideas as a startup is a good start.

How Does Betterment Work?

So what exactly is Betterment, and how does it work? The basic idea is this – a lot of people are either just too busy to get too far into the weeds with their investment decisions, or they are too intimidated by the array of choices out there when it comes to investing. Betterment attempts to take the confusion out of the process by making investing simple.

So when you set up an investment account with Betterment, they make the process super simple. After you signup, The only choices you’ll need to make are:

  • How much to invest.
  • How much of your investment you want in equities (Stock Market).
  • How much you want in Treasury bonds (TIPs).

You can also set up automatic investments on a regular basis if you want to.

Within stocks and bonds, they divide up your holdings into a variety of ETFs so that you are diversified. Here is what you get on the stocks side:

  • 10% SPDR Dow Jones Industrial Average ETF (DIA)
  • 20% iShares S&P 500 Value Index ETF (IVE)
  • 20% iShares S&P 1000 Value Index ETF (IWD)
  • 15% iShares Russell 2000 Value Index ETF (IWN)
  • 15% iShares Russell Midcap Value Index ETF (IWS)
  • 20% Vanguard Total Stock Market ETF (VTI)

For Treasury bonds, you get

  • 50% iShares Barclays 1-3 Year Treasury Bond Fund (SHY)
  • 50% iShares Barclays TIPS Bond Fund (TIP).

So the stocks and bonds you get will give you a nice diversified portfolio.

Asset Allocation And Visualization Tools

To me one of the selling points of Betterment are the allocation and visualization tools you can use to set your investment goals. You can update your asset allocation, and investing time horizon and see about what kind of returns you can expect to see given your amount invested, level of risk and historical returns. It’s pretty interesting to play with the tool and see the differences you can expect given different allocations.

Let’s say that you have about $50,000 invested as the demo account does. If you have 80% invested in stocks and 20% in bonds, given a 20 year time horizon it will show you a forecasted range of returns that you could expect to see – anywhere from $100,000-$600,000. Change the percentages and timelines and it can drastically affect your results.

So if you decide you want to change your allocation either to include more stocks or bonds, you just move the slider up or down, and then hit the “change” button, and Betterment will update your account holdings and purchasing decisions going forward. Piece of cake!

Automatic Re-allocation

One of the nice things about an account with Betterment is that it will automatically re-balance your portfolio for you every three months, or if your allocations drift more than 5%. Without re-balancing your account can easily shift over time to have an allocation that is heavier on stocks or bonds than you want it to be. If you start out at say 80/20 stocks to bonds, if you don’t reallocate over time you could one day find that your account has an allocation more like 75/25 or 70/30.

This is one of those things that most investors neglect to do on a regular basis, so it’s nice to have that part of the account be automatic.

Fees And Charges

Here is where the rubber meets the road – what kind of fees and charges can you expect for using Betterment?

UPDATE: As of 2/22/2012 Betterment has lowered their fees for all users. You can now expect fees in the range of .15%-.35% depending on your balance. That’s quite a reduction from their previous fees, which you see below. Betterment Fee Reduction Details Here.

There are no minimums to invest, and there are no fees for trades. Betterment charges a pro-rated yearly fee that is in a range of 0.3% to 0.9%, depending on your account balance.

For balances under $25,000 the fee is 0.9% annually. The portion of balances over $25,000 will be charged 0.7% annually, the portion of balances over $100,000 will be charged 0.5% annually, and the portion of balances over $500,000 will be charged at 0.3% annually.

For many folks this is where they’ll probably stop reading as having a 0.9% fee on account balances would be far too high, especially folks who are more versed in the stock market and have confidence that they could buy a target retirement fund, or low fee index fund via Vanguard or similar low cost mutual fund company. That would mean a much lower cost in the range of .20%-.30% in many instances. Depending on the balance that can be quite a bit of money you’d be saving by doing it all yourself.

For others who have a low amount to invest or who don’t want to mess around with buying or reallocating their own investments, this could be a good option and something they’ll want to investigate. It is super simple to use, and the automatic nature of investments and re-allocations make it a winner.

Conclusion launched at the end of 2010 and are receiving a ton of good press and accolades for their innovative investment platform. I have to admit that I am impressed with how they have taken a difficult subject – investing – and made it much more accessible to the average person. The fact that you can make automatic investments, allocations are automatically adjusted, and that it can be a cost effective option for some investors with smaller amounts to invest make it an attractive offering.

All in all – I think Betterment will be a great offering for many folks who are investing smaller dollar amounts, and who don’t want to do all the legwork and regular re-allocation of assets. If they want a set it and forget type account, Betterment should probably be one of the first that they consider. And now that they’ve got a bonus just for signing up, I think there’s really nothing to lose! I’ve signed up now, and I’ll be reporting back once I’ve been using it for a few months.

Signup Bonus When You Open A Betterment Account. Click Here.

Have you used, or are you considering it? Tell us your thoughts on Betterment in the comments!

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Last Edited: 25th September 2014

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  1. says

    “For many folks this is where they’ll probably stop reading as having a 0.9% fee on account balances would be far too high”

    I didn’t stop reading but I lost all interest right then. That seams pretty high for what it offers. The features it offers are pretty basic, IMO. In some cases you can find a full service financial advisor for around 1%. I guess if I am paying that much I would rather have someone I can meet with in person if desired.

    When I was on there website I found it a bit weird that they were comparing themselves to a bank. Saving and investing are drastically different things because of the risk of loss associated with investing.

    Great review, keep up the good work.

    • says

      Hey Chris,

      Jon Stein, Founder and CEO of here. We’re making investing easier and more accessible for busy people.

      Betterment is an investment account. The accessibility we offer makes Betterment more similar to a bank account than other investment accounts are similar to a bank account – other investment accounts that have minimums, lock up your money for a certain amount of time, or charge you for every trade – on the way in and on the way out.

      What more accessible means, to me, is that you can get your money back at any time – without paying a transaction fee – and without a minimum balance requirement. So you never have to worry. And that’s why I think the comparison to online savings accounts is helpful.

      Of course, there’s risk in investing, and your principle is not protected. Betterment is not a bank. It is an investment account. You’re right to point that out, and we do the same.

      On fees, the “full service” advisors you talk about typically don’t do anything more valuable than what Betterment does – they just charge more. And they have minimums of $50,000 to $500,000 – making them less accessible to most Americans. Our fee is quite reasonable considering the the ease of use, accessibility, and automation we provide.

      Thanks for reading,


  2. says


    I appreciate that you’ve developed a platform for investing for the general public with no minimums. I’m sure that a lot of retail investors will be able to take advantage of it.

    Out of curiosity, do you change investment allocations or holdings on a discretionary basis?

  3. says

    Hi Derrik,

    We never change your investment allocation – that is solely up to the consumer. However, we will make allocation recommendations based on each individual’s goals and risk tolerance.

    We passively manage the portfolio like an index fund, but we actively monitor it to ensure that we are always bringing our customers the best ETFs possible. Our goal is to grow with the market, not to try and beat the market – we believe this is the healthiest way to invest.

    VP Marketing |

    • says

      Thanks, Alan.

      So would it be fair to say that once the client has chosen their desired equity allocation percentage that your role is allocate that equity choice into the right percentage of equity asset classes (large, medium, small, value, growth, international) within the best ETFs that are available?


  4. says

    Hi Derrik,

    If I am understanding your description correctly, I think how you have framed it is a pretty good way to look at us. One note: we currently are not invested in international, but will be soon.

    I hope this was clear, but everyone reading this should also feel free to email directly at any time questions arise – I will do my best to be as responsive as possible.

    I hope this was helpful

    • says

      Peter, welcome to Betterment! We’re so glad you’re giving us a try. Let us know if you’ve got any questions or suggestions to make the product better.

      – Jon.

  5. Dave says

    WHy not just buy each month into the allocation yourself using a regular brokerage account. IF your allocation on the stock side isn’t what you want, then just add your new money to that side each monmth.( No selling tax trouble either) For example: if you have 5000 in your account and you buy each month $500, you could just buy $500 of IWS at Sharebuilder for $4.00 and be done with it. THen next month your could buy $500 SHY and be done for that month.(you won’t have to worry about the year end cost of .9% either) If Betterment rebalances your account, you will have to pay taxes on that cost basis if there was capital gains. (unless in a IRA) I have studied this and I have decide to stay with my own brokerage account and just buy in my low allocation area each month and just pay my $4 a trade. That adds up to only $48 dollars a year cost. (and it is a fixed cost, not like betterment will be. Betterment will be hitting me each year whether I trade or not). IF I decide to not trade any time in the next 6 years, my regular brokerage account transaction cost will be $0. I decided to pass..

    • john says

      unrelaistic that you will no trade for 6 years– and reallocation is inevitable at least once or more a year– that requires monitoring and selling– your asset allocation will be off for at least 10 months— and that requires commitment and discipline
      in all, what you have described as simple is not that simple— thats why betterment can be a real good choice for most…
      consider betterment as an allocation in and of itself– and you can still trade on your own with another percantage of your funds..
      keeping some cash is also good..

  6. Kelly Ju says

    As a person who is interested in investing and yet overwhelmed by the enormity of the research and time required to properly invest, I have found Betterment to be an excellent beginners product! I love the ease and simplicity the site and can’t wait to see where this all goes (hopefully up up up).

  7. Mark says

    I know most discount brokers charge a fee for transferring out (typically $50 to $100), and I can’t seem to find this anywhere on the Betterment website. Thinking of signing up but worried that I could get slapped with a steep transfer out fee later on.

    Does anyone have this information?

  8. Frustrated @ Bettermnet says

    I want to bring this to the attention of clients of betterment that betterment charges a fee up to $400 if you want to do a direct (in-kind) transfer from betterment to another brokerage. I have been trying to do a direct transfer of Roth IRA from betterment to another brokerage firm and was quoted this amount.

    This fee is also listed in their customer agreement in section 23. Please be aware that your only option could be an indirect roll over if you don’t want to pay $400 in transfer fees.

    Betterment does not openly advertise this fee, which I think they must do when they list any or all fees on their website.

    • says

      Katherine from Betterment commented on another site about this:

      Thanks for the comment. As I posted in response to you a few other blogs, you are correct, there is a fee that would be assessed should a 3rd party direct transfer be requested. This is because it would involve a 3rd party to complete the action – it is not a feature provided with your account. Betterment will NOT charge any transaction fees to allow you to complete an indirect transfer of your account, and is our recommended method.

      While we apologize that the new brokerage may charge fees for the trades of moving funds into your account as cash, we do our best to provide an option that does not cost anything extra.

      So there you go.. Sounds like there is a fee for a direct, but not indirect, rollover.

  9. BongoMan says

    I keep putting $100 or so in Betterment with frequency. Then I just forget all about it which seems to be the big advantage. You just contribute and ignore it once you have your allocation right. Best formula- subtract your age from 100– that is the percentage that you should be in stocks

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