Betterment

[happygirl]

Hi everyone,

I'm trying to get all aspects of my finances under control. One area I trusted to my husband was retirement. We will be splitting his 401k later this year when the divorce is finalized (with a QDRO), but for now I'm thinking about moving my small IRA. It's currently with an investment/financial service and hasn't made much profit. I'll have more questions on that later because honestly I don't understand much of it.

I joined YNAB and I've been reading about Betterment as an investment company. They seem to have good reviews. What I like best is that it seems the easiest way to invest for someone like me, who hasn't been able to grasp many of the concepts. I'm still researching and probably won't make a decision for a few months, but I wanted to get input from this site. Please remember that my understanding of investing is quite limited, so if you could give me your opinion without too much technical jargon, that would be helpful. If it matters, I'm 50 years old and because of the way our financial settlement was written, I will likely need to start withdrawing a little each month in 10 years. I'm planning to max the IRA (6500 year) until then, but probably won't have access to a 401k.

Thank you in advance for any help you can offer.

[Petunia 100]

Pros of Betterment:

- Uses a broadly diversified portfolio of low-cost index ETFs.
- Re-balances for you.
- No account minimums, so very easy to get started.
- Allows you to customize your stock/bond ratio in increments of 10.

Cons of Betterment:

-Charges an additional layer of fees for their services.

In my opinion, you would be better off rolling your IRA to Vanguard. Choose a Target Retirement Fund (minimum 1k) or a LifeStrategy Fund (minimum 3k). You will get a broadly diversified portfolio, rebalanced for you, at a lower cost.

[MonkeyMama]

I agree with Petunia. Just choose a Vanguard Target Retirement date fund if you want something simple. I'd recommend Vanguard because it is low cost, it's simple, and you only need $1,000 to get started.

[autoxer]

I'm a big fan of Vanguard and their mutual funds (that's how I invest), but in your case I think Betterment is a good option, because they make it even simpler than vanguard. You can certainly build your own portfolio of ETF's with less in fees, but you would have to be willing to learn how and why.

One area where betterment has an advantage over vanguard is with their tax loss harvesting service, but that only applies to a taxable brokerage account with over $50k.

[jIM_Ohio]

Live by 3 simple financial rules

1) Research all advice. Asking questions on forums like this is good, reading on your own is better.
Read sites like Vanguard, Fidelity and T Rowe Price, then read Forbes, Bloomberg and Kiplinger, then read a book. If you see common advice from 3-5 sources, you likely are reading the right things.

2) Invest in yourself. Knowledge will lead you out of any situation. Knowledge which helps you earn more money (at work), which saves you money (on investments) and knowledge of life enables objective #1 and helps you.

3) Spend less than you earn and research all information and advice others give you. Whether you pay for the advice or get it for free, always get a second opinion.

[happygirl]

Thank you each for your input. I'm currently reading a book written by the founder of YNAB that is supposed to explain investing in simple terms, and I have another book waiting to be read which makes the same claim. I've been reading (or at least trying to read) finance books for years, but it all sounds like a different language to me.

I only recently heard of Betterment, so I will continue to educate myself before making any decision. I admit this is quite scary for me. I did not expect to be facing the future alone at this age, but life has to move forward and I'm trying to make the best of it.

I really appreciate the input I receive here. No, I won't make decisions about my finances based solely on your advice, but it does help me to narrow my focus, so....thanks!

[happygirl]

With more research, I came across the fact that schwab apparently has a no fee robo investing vehicle recently launched. Again, please consider that the more I read, the more I become confused in some ways. What I like about schwab (and this will probably sound silly to those of you who understand investing) is that they have a local office. I want to think that means I could go in and ask a real person for help without paying an arm and a leg for it. I don't understand even how I will get my money from where it currently is to where I want it to be, so I really, really need basic help.

Does anyone have basic information on schwab and this investing tool? I came across a heated three on MMM re: vanguard vs betterment which made me lean toward betterment because it's better geared toward people with no knowledge, which is me, but I want to be sure betterment is still better for me than schwab.

[autoxer]

What I like about schwab (and this will probably sound silly to those of you who understand investing) is that they have a local office. I want to think that means I could go in and ask a real person for help without paying an arm and a leg for it.

It's fine to go talk to them, but always consider the source with whatever information they provide. If they can sell products that are more profitable for themselves, then that is likely the first thing they will recommend. If you go walk into their office, then they may not be likely to recommend the Schwab Intelligent Portfolios, but if you just want to go talk to them about how to move money from one account to another, then go ahead and talk to them.

Does anyone have basic information on schwab and this investing tool? I came across a heated three on MMM re: vanguard vs betterment which made me lean toward betterment because it's better geared toward people with no knowledge, which is me, but I want to be sure betterment is still better for me than schwab.

From what I can tell, schwab's automatic investment tool isn't even available yet, but it certainly sounds similar to betterment or wealthfront. The biggest decision for you should be whether you want to manage the investments or have a robo advisor do it for you. The choice between which robo advisor is probably not as critical a decision, because the ones you are considering are reputable.

One thing that attracts me to Vanguard over all of the other mutual fund companies, is that Vanguard is owned by the funds themselves. This is what drives down their expense ratios. Other investment banks that have to answer to shareholders are profit driven, so they are motivated to sell funds with higher expense ratios. That certainly offer some similar low expense funds, but they are probably loss leaders to attract more customers.

[happygirl]

After doing more research, I'm leaning towards putting part of my EF into Betterment now (I have about 9 months worth in a savings account, so might pull out 3 months or so initially). This will give me a chance to get more accustomed to taking control of my own finances, then ideally as I grow in comfort and knowledge I can consider transferring my IRA. I still haven't ruled out the Vanguard site, but will start with Betterment because from everything I've seen, they are more user friendly for those of us who have very limited knowledge of investment.

I'm sure I'll have more questions as I make this transition. I truly appreciate the helpful comments I receive on this site, as it makes it easier to understand and connect things I read on other sites and in books. Thanks!

[greatm31]

I'd just add - IMHO Betterment puts a lot of stuff on their site to confuse, bewilder, and maybe even bully people into using their services. They advertise how they invest your money in like 10+ different index funds as though this were the optimal strategy devised by brilliant mathematicians. It's just a lot of bluster. The previous posters are saying that you can invest and get similar or better performance, with less complexity and lower fees, using super simple strategies at Vanguard.

[jbjr12]

Agreed. I find Betterment to be a bit more confusing with more added layers that Wealthfront. They both offer a similar service and may be worth the small fee if you aren't comfortable (or cant be bothered) with investing/re-balancing on your own. Be sure you check both sites out fully.

FYI - As you mentioned above Schwab does offer a similar robo-investing platform with no fees but they keep a large portion of your portfolio in cash (up to 30%) which can make a big difference in your returns.

[FLA]

Books that helped me when I was starting out, I read up again when I got divorced and I read some sort financial planning book yearly in case I could be doing better
:

Financial Planning for Dummies by Eric Tyson, he does a really good job of explaining things in a manner that is easily understandable but surprisingly not dumbed down.

the giant brick of a book by Jane Bryant Quinn is incredibly helpful, she covers all the bases of financial planning for yourself.

I am very happy with Vanguard, I read books by John Bogle and the Bogleheads. You couldn't pry me away from Vanguard now.

I read Suze Ormond, not my type and Dave Ramsey, good advice if you have credit card debt but I don't

HTH. BTW, congrats on doing a QDRO, so many women leave that on the table. Most of my divorced friends chose to take his equity in the house, which was not much, because they were afraid they would not be able to refinance to take into account that they now owed more or they did not want to have to move. In my case, I moved and took the QDRO, it was basic math to figure out which made more sense.