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BETTERMENT REVIEW 馃搱 Should You Use Robo-Investors? - YouTube
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how's it going today guys I hope you're
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having a fantastic day and in this video
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here we're going to be doing a full
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in-depth review of the investment
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account betterment I've had a lot of
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people reaching out to me asking about
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these Robo advisors whether or not you
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should be investing in them or be
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cautious about them and I'm going to be
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giving you guys my full opinion on the
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investing account betterment and if you
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guys have any other accounts out there
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that you want me to do a review of
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possibly wealthfront down the road some
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of the Robo advisors or different
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investing mechanisms altogether drop me
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a comment down below and I will be sure
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to include them in a future video now I
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do have a link down in the description
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below where you can join betterment and
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start an account with them this is an
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affiliate link you do not have to use it
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but understand that if you do use it it
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does help me out it helped support my
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channel here and allows me to make more
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videos like this so that link is down in
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the description below if you wish to use
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it but let's go ahead and get into this
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video now and talk more about betterment
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and hopefully this will help you decide
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whether or not this investing account is
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for you so to explain it very simply
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betterment is an automated investing
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platform it is 100% passive so what's
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going to happen is when you open an
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account with betterment they're going to
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basically give you a risk tolerance
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survey to understand whether you have a
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large appetite for risk or you're more
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of a conservative side of things and
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they're also going to look at how old
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you are what it is you're saving for and
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based on that they're going to figure
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out your asset allocation or what
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investments you should be putting your
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money into and they're going to figure
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all this out for you via an algorithm
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now traditionally this is what a
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financial adviser would do they would
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take a look at your financial landscape
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and they would figure out a collection
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of assets that would fit your specific
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needs but what these Robo advisors
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figured out is that they could do a
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pretty damn good job doing this with
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robots and doing this with computers
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taking that whole human element out of
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it and passing on a huge savings
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advantage to the customer at the end
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so traditionally financial advisors are
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reserved for wealthier people you have
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to have a certain amount of money just
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to sit in the office of a financial
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adviser and have them be willing to
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manage your money or if this is a
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the only financial advisor you're gonna
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be shelling out a couple hundred bucks
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for that consultation betterment has
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made it so anybody can go out there
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invest their money and get some insight
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onto where they should be putting their
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money using that algorithm with a zero
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dollar account minimum if you go into a
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traditional financial advisors office
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and tell them you have a hundred dollars
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to invest they're gonna laugh you out of
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the office it's just not worth their
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time to sit down with you but if you go
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open an account with betterment and
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you're using the Robo advisory service
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they'll be able to help you manage that
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money even though it's not a substantial
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amount of money because it's all
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automated with their algorithms and
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technology so with betterment you have
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the advantage of getting that expertise
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and that insight on what you should be
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doing with your money without shelling
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out a lot of money for a financial
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adviser and the barriers to entry are
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significantly lower well you don't have
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to have tens of thousands of dollars to
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start investing with a traditional
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financial advisor so that is essentially
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the niche that these Robo advisors are
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operating in is they're trying to serve
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the younger customers or people who
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don't necessarily have tens of thousands
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of dollars to invest or they're looking
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to serve people who want to cut down on
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their fees and they're tired of shelling
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out high commission costs to their in
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person financial advisor now I should
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also mention I broke this review up into
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eight different parts so if you guys
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want to skip ahead I'm going to include
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a pinned comment down below with the
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timestamps so if you want to skip right
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ahead to a certain section of this
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review feel free to do that
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that is down as a pinned comment below
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so second of all let's go ahead and talk
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about what are the investments what are
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you investing in when you put your money
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in a betterment account you're going to
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be investing in ETFs or exchange-traded
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funds and an ETF very simply tracks a
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collection or a pool of different assets
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so there's ETFs out there that tracked
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the S&P 500 the 500 largest companies in
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the United States and if you invested in
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an ETF it would be a fund that
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replicated the performance of the S&P
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500 as closely as possible now the
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reason why people invest in ETFs is
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because most people understand it is
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almost impossible to beat
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market on a consistent basis so they say
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why not just hold the entire market
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invest in the entire stock market rather
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than trying to pick the winners and this
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is a great strategy that works for
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people that don't want to be actively
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picking their investments they just want
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to put their money to work earn a rate
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of return and not have to worry about
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their money or picking stocks or
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changing their money around or
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reallocated now betterment is going to
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be putting you into both stock ETFs and
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bond ETFs and I'm going to give you two
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examples of funds that they work with
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first of all there's the u.s. total
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stock market exposure vti it is a
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vanguard ETF and Vanguard has some
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wonderful financial products and they're
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known for having a very low expense
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ratio and then second of all for bonds
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there is the u.s. municipal bond fund
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emuebie and that is an ice shares ETF so
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they work with these different ETFs out
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there through different companies but
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what they are offering to you is that
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management service for a low expense
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ratio for most people at 0.25% but we're
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going to get into that later on when we
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talk about the fee structure of
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betterment okay moving on here number
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three what are the requirements to open
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a betterment account very simple you
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have to be 18 years or older it is only
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for US residents and if you want to open
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a betterment digital account which is
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their basic account it is a zero dollar
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minimum account balance and if you're
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interested in betterment premium that is
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their higher end account offering where
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you have unlimited access to a financial
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advisor you have to have at least
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$100,000 invested in the account so that
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is for the larger investors who want to
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have someone they can call up on the
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phone on a regular basis and talk to
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about their investments but for most
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people they're going to use betterment
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digital and there is a zero dollar
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minimum account balance to get started
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with that okay moving on here number
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four what are the investment plans that
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betterment offers first of all we have
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betterment digital that is their
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traditional service it's a 0.25 percent
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annual fee and that is a fully automated
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service where you're not going to be
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talking to anyone in person they're
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going to use their technology and their
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algorithms to figure out what assets you
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should be invested in now if you're
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somebody who wants to have someone you
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can call up on the phone
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you would be interested in betterment
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premium they have a 0.4% annual fee and
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you need to have a hundred thousand
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dollars minimum in the account to have
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betterment premium available to you but
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with betterment premium you get
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unlimited access to a team of certified
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financial planners and the good thing
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about that is that these people are a
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fiduciary which means they are not
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earning a commission on the products
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they are recommending to you they're
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going to be giving you unbiased advice
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because there is no sales commission
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involved so if you are interested in
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that service you have to have a one
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hundred thousand dollar minimum in that
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account and you're going to pay that
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0.4% annual fee as opposed to the 0.25
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percent with betterment digital moving
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on now what are the pros of investing in
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betterment first of all diversification
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there are twelve different asset classes
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that they will invest you in based on
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their ETFs in what they want to put you
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in based on your goals or objectives and
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your timeline for investing but there
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are twelve different asset classes they
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could potentially put you in so you can
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be diversified across many different
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assets
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second of all betterment does offer
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retirement accounts so if you want to
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take advantage of the tax savings of
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being involved in a retirement account
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you can do that right through betterment
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with accounts like the traditional IRA
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the Roth IRA they offer SEPs and they
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offer some different retirement accounts
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as well that you might be interested in
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the third Pro for betterment is that
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this is 100% passive investing you put
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your money in there and you forget that
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it's even in there maybe you're going to
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continue to contribute every single
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month or every single year and they're
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gonna take that money that you put in
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they're going to rebalance your
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portfolio and down the road as you get
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closer to your goal or your objective
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they're going to change that blend of
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assets to suit your needs
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but you don't have to do anything you
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don't have to do any rebalancing you
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don't even have to think about your
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investments with betterment because it
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is 100% passive but again that is where
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some people might say this is a con
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because they have no involvement in
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their investments and they want to have
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a little bit more say in what they are
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doing with their money so for some
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people that is a pro and for others that
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might be a con almost too passive if you
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will
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the fourth proper investing environment
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is that they have automated rebalancing
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as you continue to add money and at set
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intervals and they also have automated
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contributions so if you want to invest a
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hundred dollars a week you can set it up
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so betterment goes in the ducks that
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money from your account moves it to your
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betterment account and then get you
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invested that way you can automate your
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savings and your investing and then the
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fifth Pro for investing in betterment is
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that they have daily tax loss harvesting
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if you're a beginner to investing in the
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stock market this is not going to make
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sense to you but basically what they're
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doing is they are selling certain
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investments at a loss and buying back
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similar investments that way they can
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take advantage of recognizing a capital
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loss and cut down on your exposure to
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capital gains you really don't need to
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worry about this unless you're an
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investing junkie but understand it's
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going to save you when it comes to the
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taxes that you are paying on your
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investments okay moving on now what are
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the cons of investing in betterment
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first of all the main one is the fact
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that this is just too passive for some
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people they want to have more say in
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what they are investing in now
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betterment does have a flexible
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portfolio option where you can decide
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what funds you're investing in but you
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have to have a minimum of $100,000 in
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your account to have that option
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available to you and for most people
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that is just out of reach most people
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don't have $100,000 to be investing and
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so if you are looking to have more say
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in what you're investing in you're going
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to want to be exploring different
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options and if you want to pick
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individual stocks you are not going to
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be able to do that with your betterment
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account the second con is that there are
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no REITs real estate investment trusts
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or commodities now in the modeling that
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betterment has done they have said that
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these asset classes do not add value to
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your account but some people like to
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have exposure to REITs and commodities
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you do not have that option with
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betterment you are only investing in
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stock ETFs and bond ETFs and then the
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third con the only other con I have here
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for betterment is the fact that you are
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100% invested so there's no cash held
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within that account so if you are
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looking to have a separate savings
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account or an emergency fund that is
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going to have to stay outside of your
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betterment account any money you put
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into the
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is going to be fully invested 100%
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invested at all times but the good thing
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is if you want to redeem at any point in
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time there are no penalties you can take
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your money out at any time and you
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should have no problems with Redemption
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because these are publicly traded ETFs
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on a major exchange so there's always
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going to be a buyer on the other end
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when you're looking to sell
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so moving on who would I recommend
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betterment to first of all I would say
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long-term investors betterment is a
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long-term investment this is not
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something where you're saying oh I'm
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gonna be buying a car in six months I
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don't want to leave my money in my
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checking account I'll put it in
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betterment that is not what you want to
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do if you're investing this money you
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should be ready to put it in there for
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five or more years because this is a
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long-term approach to investing
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betterment is for passive investors this
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is for people who do not want to worry
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about rebalancing their portfolio or
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asset allocations in the first place or
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tax-loss harvesting things like that
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they want someone to do it all for them
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maybe they can't afford a financial
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advisor or they don't want to pay those
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fees so they're gonna take advantage of
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having a robo advisor instead betterment
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is great for beginner investors it's
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great for intermediate investors and
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it's great for people at any age group
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you could be 18 years old or you could
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be 65 years old and because when you
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open an account you tell them what your
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goals are you tell them what you're
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saving for you tell them how old you are
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they're going to give you an asset
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collection based on your age group and
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your goals so a young person is going to
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have a more aggressive portfolio and
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older person is going to have a more
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conservative portfolio so any age group
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betterment is a suitable choice and then
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finally who is betterment not for it is
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not for short term investors
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it is not for traders it's not for
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people who want to hold individual
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stocks you cannot do that within your
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betterment account so how I say this is
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it's not for the DIY investor or the
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active investor if you want to be active
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in your selection of funds or you want
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to buy individual stocks betterment is
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not the account for you but I do want to
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run one idea by you it's something that
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might be interesting what I know some
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people do is they have their betterment
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account as the core of their investments
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that's going to be their more
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conservative long
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investments and then they have a slush
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account where they have an individual
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brokerage account where they're buying
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the individual stocks and they're being
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more active with their investments so
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some people are taking higher risk
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investments by picking individual stocks
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they're taking some of the profits and
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moving it over to a more conservative
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long-term investing approach and so that
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again is a great strategy that you might
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want to follow but anyways guys that's
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gonna wrap up this video thank you so
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much for watching again like I said if
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you are interested in signing up for
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betterment there is a link down in the
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description below this is an affiliate
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link and you do not have to use it but
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it certainly does help me out and help
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to support my channel but thank you guys
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so much for watching I will see you in
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the next video and I hope you have a
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great rest of your day if you are
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interested in learning more about
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investing in the stock market I've
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created a free course just for you the
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link is in the description below here
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are a few other videos you might enjoy
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as well
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[Music]
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you
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