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I've been looking at different investment options for ourselves and Couple Money readers.

After hearing some great things about Betterment, I decided to check them out and do a review. 

While getting this review up, I had the pleasure of talking with Betterment VP Alan Cohen on the phone to get some questions answered and points clarified. 

Not sure if Betterment is the right option for you? Hopefully, my review will help you make the decision!

What's Betterment?

For their clean cut approach to investing, Betterment received recognition as “Best in Show” at Finovate 2010.

Since this is a fairly new company, you're probably wondering if it's safe to put your money in their accounts.

Rest assured that Betterment is registered with the Securities and Exchange Commission.  As they explain on their site:

Securities in your account are protected up to $500,000 by the Securities Investor Protection Corporation (SIPC). SIPC helps people whose money, stocks and other securities are stolen or put at risk if a brokerage fails.

The focus of the company is to help people invest their money in a system that is as easy as depositing money into a savings account.

It's to encourage more people to start investing and reduce some for the hassle associated with the process. How do they do it?

Investment Options at Betterment

selecting portfolio

The method for investing is fairly straight forward.

The company uses exchange-traded funds (ETFs) for their portfolios and users choose how much of their portfolios they want invested in stocks and portfolios.

ETFs track a particular index (like a index fund), but they're traded like stocks.


Here are's stock ETFs:

  • 20% Vanguard Total Stock Market (VTI)
  • 20% iShares S&P 500 Value Index (IVE)
  • 20% iShares S&P 1000 Value Index (IWD)
  • 15% iShares Russell 2000 Value Index (IWN)
  • 15% iShares Russell Midcap Value Index (IWS)
  • 10% DIAMONDS Trust Series 1 (DIA)


There are only two ETFs for bonds:

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

Investing Made Simple

Investing with Betterment does have a huge advantage in that it's simple to use and track. 

Keeping investment options simple also helps to keep their fees low. There's a small annual fee based on your account's balance.

Betterment’s fee is a straightforward 0.3% to 0.9%, depending on your balance. For balances under $25,000 the fee is just 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 just 0.5% annually, and the portion of balances over $500,000 will be charged at 0.3% annually.

Portion of BalanceFee charged
$0 – $25,0000.9%
$25,000 – $100,0000.7%
$100,000 – $500,0000.5%

Source: Betterment

What they don't have is also impressive:

  • No Transaction Fees
  • No Deposit/Withdrawal Fees
  • No Rebalance Fees

Sometimes what you don't charge is a big plus for customers. Less fees means you can keep more of your money.

Automatic Rebalancing

Why is it important to keep your asset allocation in check? Asset allocation is about maximizing your portfolio’s return while minimizing your risk.

While maximizing returns seems fairly clear and measurable, risk is subjective and differs person to person.

Betterment will make sure that your portfolio stays within your guidelines.

That's one less thing to stress about and a helpful way to help you maintain your personal investing goals.

Who Betterment is For

If you believe in passive investing, this could be the model for you. If you're an investor looking for a simple, no hassle option, then I think Betterment could be a good fit for you. 

Get a$25 account bonus when you sign up for Betterment.

One concern for new and would be investors is how risky it seems. They see the news and wonder if putting their money into the stock market is the right move for them.  

How can tell when they should buy low and sell high? What metrics can they use to find out how to time the market?

There are definitely people who find it easier and more successful to work with index funds.

Schultheis, author of  The New Coffeehouse Investor, provides plenty of data on the historical returns of the stock market from 1926-2008. persuasively argues that by comparing different investment vehicles, long term investing is not as risky as some imagine.

If you're interested, you can sign up for a new account at Betterment here.

Who Betterment is Not For

Betterment is not designed for those interested in active investing. Active investing is focused on trying to beat the market.

If you also want to add individual stocks into your portfolio, you'll have to use someone else.

You also need to consider your timetable before you decide to invest.

If you need your money in the next couple of years, then investing is probably not the best bet for you. Instead you should focus on other options, like savings accounts or CDs.

  • Easy access to it in case of emergency – It does you no good to have a high interest rate if you can’t get to it quickly when it’s most needed.
  • Safe place to store you money – Whatever you choose, make sure it’s either covered by the FDIC (banks) or NCUA (credit unions).

My personal suggestions are Ally Bank or Capital 360- we've been very happy with both of them and their rates are better than the local banks and credit unions here.

Thoughts on Investing and Betterment

If you’re handling your own investments, I’d love to hear your thoughts on the topic.

How did you determine your asset allocation? What resources do you recommend on learning more?

Are there any hurdles people should look out for when investing? How many of you have signed up for Betterment? What are your goals for your accounts?

About Elle Martinez

Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..

14 comments add your comment

    • I think there isn’t an investing solution for everyone. Betterment definitely has a segment of investors that could benefit from their product though.

  1. I think it seems like a great investment tool – but as with many cool investment tools, it seems like the only people who end up learning about them are people who are sophisticated enough to invest on their own – without paying the 0.3 – 0.9% fees.

    And in the same time it would take for me to explain to my friends/family about this concept, I could just write down an ETF portfolio to meet their needs and tell them to call Fidelity and save on fees…

    I FIRMLY believe that there is a huge gap out their to help folks with <$100k to invest and Betterment makes it easier than most – but if we really want to help 'small' investors, we should just charge a one-time fee for advice and send them to a low-to-no-cost brokerage (Fidelity, etc.).

    • I think there is definitely a niche market of people that would find Betterment convenient. Some people are comfortable asking their friends for investing advice and they want something easy to use and easy to track.

      I think personal finance blogs can be helpful in connecting people who would be interested with some services and products. I do hope that the review gets out there to others who are looking for such an option.

  2. Hi Elle,

    I’m a certified financial planner who works mainly with middle-class couples approaching retirement. I’m in favor of anything that encourages folks to save for retirement in a cost-effective way. Betterment does offer funds that have low annual expenses. However, there are some important holes in its list of choices. There are no international equity funds, and this is a serious omission. The only bond choices are US government bond funds. There are many other types of bonds, and a mix of bond types provides essential diversification in different market conditions.

    It’s also important for people to realize that money invested with Betterment is after-tax money. People with a qualified retirement plan such as a 401(K) at work are generally going to better off contributing to it first, at least enough to capture any employer match, followed by any IRA contributions for which they’re eligible, before contributing to a taxable account like this.

    Also, although the investment options themselves have low expense ratios, the management fee of up to 0.9% annually is not cheap. Paying this every year over time would really eat into returns. As another reader noted, paying a one-time advisory fee to a professional who can advise you on the best asset allocation and inexpensive investment choices would likely be cheaper in the long run.

    • Thanks Celia, do you have any recommendations for investors that can help them invest their money that also offers low management fees?