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BETTERMENT REVIEW 2022: Best Robo-Advisor Tool? - YouTube
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so in this video today we're going to be
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doing a review of the robo advisor
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known as betterment which is essentially
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an
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automated solution for passively
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investing your money
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into the market so we're going to cover
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basically what betterment is
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what they're offering what they charge
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in fees
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and then what may make them unique when
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it comes to investing through a robo
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advisor
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versus just going out there and picking
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stocks and bonds
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or different funds to invest in yourself
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now before we get into that i just want
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to mention
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two things here number one if you do
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decide at the end of the video that you
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want to sign up for betterment
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i do have an affiliate link down below
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if you would like to support the channel
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and second of all i've actually put
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together a completely free
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robo advisor comparison table that
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essentially takes the top five robo
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advisors
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out there and makes it very easy to
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compare the different features
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fees minimums and things like that all
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in one place
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so if you want that guide completely
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free that's also going to be down
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in the description below for your
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convenience at the end of this video
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so in a nutshell betterment is a robo
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advisor which essentially means
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rather than having a financial advisor
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managing your money and determining what
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we call your asset allocation
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this is instead handled by a robot or an
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algorithm and so essentially in the past
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if you were looking to invest
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money with a financial advisor you would
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have a meeting with them
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you would go over you know what are your
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goals what is your income and basically
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what your whole financial situation is
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and then that financial advisor would
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figure out this asset mix for you
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based on the information provided well
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there's two main problems with that
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number one in order to work with a
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financial advisor
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you would generally need to have
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thousands if not tens of thousands of
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dollars
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to make it worth their while and second
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of all when you have this level of human
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involvement
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in the process it leads to higher fees
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paid
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to again make it worth their while so
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what these
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robo advisors did instead is figure out
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how to do this with an algorithm
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where you basically sign up and fill out
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a questionnaire
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and they will create the portfolio based
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on the answers that you provide
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and by doing this they pretty much solve
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the two biggest problems
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number one they can work with much
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smaller accounts because
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basically all human involvement has been
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taken out of the equation
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and number two they were able to
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drastically lower the fees
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compared to what you might pay to a
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traditional financial advisor
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again because there is no real human
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involvement
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now when you invest with betterment your
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money is going to be invested in
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index funds or exchange traded funds
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so essentially they're going to be
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buying funds of
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u.s companies as well as international
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companies
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and mixtures of different bond funds as
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well
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and based on your goals and risk
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tolerance
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they're going to determine what
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percentage of your money
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is going to go into each fund so for
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example a young person
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just getting started has more risk
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tolerance and so
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more of their money would be in stocks
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and less would be in bonds
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on the other hand if you're nearing
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retirement you're going to want to have
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more of your money in bonds
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and less of your money in stocks so when
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you start out with betterment
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they figure out your target allocations
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and they get you set up
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however then as you get older and closer
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to your goal
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they're going to rebalance this
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portfolio automatically
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and change your target allocations to
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make sure that you stay
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on track so now let's go ahead and talk
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about the pricing because there's
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actually two different plans offered by
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betterment
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first of all you have betterment digital
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which is the basic plan
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where there is no human involvement and
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it's all handled by the algorithm
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and because of that the minimum amount
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to get started is
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literally zero dollars you can open up
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an account with them
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with any amount of money that you have
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and their annual asset management fee
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is 0.25 percent so to put that into
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perspective guys
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that is two dollars and fifty cents per
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every one thousand dollars that they
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manage for you
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so we're really not talking about a heck
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of a lot of money here
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and in exchange for paying that fee
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they're going to basically
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manage your portfolio for you rebalance
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it as those
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numbers change and then as you get
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closer to your goals
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they're going to change your target
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allocations and there's also a number of
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different features
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offered as well one of which is tax loss
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harvesting
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which we will talk about in a second now
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recently betterment rolled out another
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plan
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which is called betterment premium which
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solves the problem
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of not having access to a financial
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advisor
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essentially with betterment premium you
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have unlimited access to a team of cfp
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professionals
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which can give you advice about
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investments within your betterment
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account
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as well as investments outside of
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betterment so for those who are looking
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to
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still reduce what they are paying in
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fees but they
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also want to be able to call someone up
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on the phone to ask questions
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that is what betterment premium is
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designed to do
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now for that reason because of that
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human involvement the minimum investment
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is one hundred thousand dollars and the
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annual asset management fee
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is slightly higher at zero point four
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percent
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so just for example sake here if you had
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a hundred thousand dollars invested
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with the betterment premium account
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you're paying about four hundred dollars
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per year
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in asset management fees now the good
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news is even if you don't have a hundred
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thousand dollars to
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invest and you're in the digital plan
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and you still want to talk to
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a financial planner or financial advisor
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they offer one-time advice packages that
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you can purchase
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which will allow you to call somebody up
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on the phone and have a discussion about
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your finances
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you do have to pay for those advice
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packages but it is a one-time
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payment but if you're just looking to
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call someone up and ask a couple of
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questions
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that is a service that they provide as
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well now another thing you should know
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about betterment is that they offer a
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wide variety of different account
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types which serve a number of different
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needs so first of all we have the basic
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taxable account which is the one that
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most of us are familiar with and then
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they have a number of different
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retirement accounts
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so with betterment they have both the
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roth ira
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as well as the traditional ira and the
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sep ira
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for those who are self-employed they
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also offer
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joint accounts as well as trust accounts
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that being said they do not offer the
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529s and they do not offer custodial
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accounts
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either and one other feature i want to
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talk about here quick with betterment
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is something called tax loss harvesting
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and this is one of those things that
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makes robo advisors unique
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and this is an added value that you
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won't get on your own if you just go out
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there and purchase
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individual stocks and funds unless you
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are consciously doing this on your own
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so tax loss harvesting is essentially
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where a robo advisor is going to
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sell a given asset for a loss
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and buy a near identical investment
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in order to recognize a loss for tax
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purposes
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now i know that might be a bit confusing
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so i drew a quick diagram here
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let's say both of these right here are
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index funds that track the s
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p 500 offered by different fund
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companies
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maybe one is from vanguard and one is
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from blackrock or ishares
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well earlier this year the s p 500
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tanked
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during the global pandemic and what tax
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loss harvesting allows betterment to do
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is they could sell one of these funds
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for a loss
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and buy back the near identical fund or
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completely identical fund
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being offered by a different company and
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this allows them to capture
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what's kind of an artificial loss and
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basically
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offset your capital gains or even have a
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capital loss
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to lower your taxes now the exciting
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part about this is that
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over the long run betterment from the
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research they have done
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has found that with this tax loss
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harvesting it has boosted returns
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in taxable accounts by point seven seven
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percent
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annually so if you're investing with
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betterment through a taxable account
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you're actually pretty much paying for
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that fee
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when you account for the added benefit
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of tax loss
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harvesting now beyond the investment
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side of the business
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betterment also offers an online savings
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account
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and an online checking account
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essentially they're looking to become
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a well-rounded financial service company
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offering
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all kinds of different tools for you to
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utilize
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and manage your money as far as that
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betterment checking account goes
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they offer full reimbursement of all atm
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fees and foreign transaction fees
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and in the future they're also going to
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be rolling out joint
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checking accounts for those who want to
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save together the online savings account
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is called betterment
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cash reserve the apy of that account
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changes quite a bit based on the federal
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funds rate
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so i'd recommend using the link below to
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check the apy
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but it is six times higher than the
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national average apy
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as far as what is paid with an online
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savings account
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another thing you should be aware of is
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that there are unlimited
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transfers in and out of that online
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savings account whereas many of their
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competitors have a limit
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on how many transfers you can have per
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month so anyways guys
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that is the gist of betterment in a
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nutshell on the investment side
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it is 100 passive long-term investing
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for those who want a set it and forget
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it type approach
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to investing in the stock market and the
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bond market
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you're not going to find individual
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stocks you're not going to find real
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estate or reits
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within betterment they just stick to the
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stocks and bonds
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and they pretty much do it all for you
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if you want to have somebody where you
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can
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call them up on the phone if you have
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the assets available you could
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opt in to betterment premium or simply
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pay for the one-time advice packages
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and if you want to take advantage of the
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checking and savings accounts
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that's an option as well and you also
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don't have to use all these things
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together
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you can pick and choose what components
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you want to use
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so if you just wanted to have a savings
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account through cash reserve
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you can do that without having to do the
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investing either
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so there you have it guys like i said if
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you want to check out that free robo
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advisor comparison chart
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that's going to be down below as well as
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a link to sign up for betterment if you
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want to support the channel but thanks
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so much for watching this video guys i
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hope you enjoyed it
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and if you have any questions drop them
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down in the comment section below
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and i hope to see you in the next video
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