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Betterment is a powerful robo-advisor with a proven algorithm that’ll assist you with investment and savings goals both big and small.
Betterment has helped people build a down payment for a house or start a college fund in a beginner-friendly way.
- Low management fees
- $0 minimum balance
- Options for all investor types
- All-in-one investing platform
- Higher fees for customized advice
- Too many options
- Charges an annual fee
Do you feel like you’re missing out on the chance to grow your money? Betterment can help you harness what you already have to make more.
This article will cover everything you need to know to get started with Betterment, such as how it works and some of its features. Keep reading to learn more.
What is Betterment?
Betterment was one of the original robo-advisors to come on the market. A robo-advisor is an automatic algorithm that has the methodology to help you make smart choices for your investments.
Through their suite of tools, you can input your comfort level with risk and other factors, and Betterment gives you suggestions on investing your money.
If you prefer not to rely solely on a robot, you also have access to a Certified Financial Planner (CFP) financial advisor.
Betterment has an all-in-one approach, handling everything from mega investment to everyday banking.
In 2010, Betterment had its public launch at the TechCrunch Disrupt New York conference and won the award for “Biggest New York Disruptor.”
That achievement boosted them in the public eye, won them 400 customers in just 24 hours and attracted early investors.
How Betterment Works
Betterment covers several areas of expertise for its customers, including investments and retirement planning. It also offers checking and high-yield Cash Reserve accounts.
You start with a goal, such as saving for retirement or just having a little extra spending money. Betterment’s algorithm crafts a tailored plan based on your information.
This could include simply starting a checking account or getting ready for something big, like a house.
After the initial setup, Betterment’s algorithms give ongoing advice as the global financial climate shifts.
You start to realize profits from dividends, interest, or sales (depending on your choice of instrument).
Betterment’s algorithm automatically automates much of this system, so you don’t need to be a professional investor to still make money.
In the meantime, Betterment makes its money through your account’s annual fee, a small percentage of your investment (typical for this service): 0.25% for Digital Plan holders, and 0.4% for the Premium Plan.
To put that in perspective, that’s $2.50 a year for every $1,000 you invest.
Betterment has several enticing features that make investing with them simple, including:
Betterment Investing Options
Let’s talk about Betterment’s main investing tracks through its brokerage accounts. Options include stocks, bonds, exchange-traded funds (ETFs), fractional shares, and capital gains.
Betterment Automated Investing
Betterment automated investing allows you to set up an automatic investment on your budget and timeframe. You might put in $100 every two weeks, or $1,000 every month.
Betterment will ask questions about your goals and walk you through setting up your account.
During each cycle, money automatically transfers from your bank account into an investment portfolio of your choosing (see portfolios below).
Betterment will automatically diversify your money with appropriate asset classes to yield the best return and provide portfolio rebalancing.
Betterment IRAs and 401(k) Plans
You can set up personal savings goals for retirement, and Betterment will give you the plan to make that future happen.
Betterment also has 401(k) plans that you can set up for your employees if you’re an employer.
If you have an old 401(k) account that barely makes any money thanks to high fees, Betterment can help with that.
It can roll over your current 401(k) into one of their IRA accounts so that you save on those fees.
Betterment has a long list of portfolio options that tailor your investments to something that you believe in.
It has portfolios targeting social impact, the environment, and crypto. Its portfolios offer smart diversification in exchange-traded funds.
The Core portfolio was Betterment’s original. This portfolio offers a low-cost, highly diversified selection of stocks and bonds worldwide.
It is designed for long-term investing, where you will experience healthy growth with relative stability.
Innovative Technology Portfolio
Innovative Technology targets stocks and bonds in companies that focus on the future, such as clean energy, robotics, virtual reality, and nanotechnology.
This portfolio has the potential for high growth, but it also has high exposure to risk.
Broad Impact Portfolio
This is a great option if you want a portfolio that supports worthwhile causes. This socially responsible portfolio targets a selection of companies known for being socially and environmentally responsible with good corporate governance.
Perfect for those with low risk tolerance.
Climate Impact Portfolio
The Climate Impact Portfolio focuses on stocks, bonds, and ETFs with companies that have low carbon emissions.
It also focuses on green projects. This is a great option for long-term growth while still investing in a great cause.
Social Impact Portfolio
For socially responsible investing, the Social Impact Portfolio focuses on empowering minorities and gender equality. It is a collection of stocks, bonds, and ETFs suitable for long-term growth.
Goldman Sachs Smart Beta Portfolio
This beta portfolio focuses on stocks and bonds theorized to outperform the market over long-term investment.
This portfolio does put you at a slightly higher risk than the average portfolio, but it does offer the potential for greater returns.
BlackRock Target Income Portfolio
This portfolio is 100% bonds. Bonds are extremely secure and can even survive swings in the stock market.
This is not a portfolio for large amounts of growth, but rather a good place to put your money if you want it to be secure over the long term.
Cash Reserve Portfolio
Cash Reserve is a full cash portfolio, perfect for those who don’t want to go fully into stocks or bonds. Cash reserve offers an annual return of 3.20%.
For joint accounts, your cash is also insured up to $2 million.
The universe is a new portfolio option that is 100% cryptocurrency. Betterment is a rare brokerage starting to step into the crypto universe.
Investors often avoid crypto as it is extremely volatile. This makes for a relatively high risk with a potentially high return.
The Universe portfolio is a broad offering of cryptocurrency based on current markets, including non-fungible tokens (NFTs), blockchain, and decentralized finances.
As another cryptocurrency-based portfolio, the sustainable portfolio focuses on crypto projects investing in sustainable development.
This can include currencies that fund green projects or use less energy in their minting processes.
Metaverse focuses on crypto projects that are helping to build the digital experience. This includes a focus on virtual reality, NFTs, and digital commerce.
This portfolio has a diverse selection of cryptocurrencies and some weightings in U.S. dollar investments.
The final Betterment portfolio offering is the Decentralized Finance portfolio. This Crypto portfolio focuses on Crypto projects that intend to become the new wave of finance, away from centralized institutions.
This includes Crypto projects that plan to become the new place to obtain mortgages, loans, and general banking services in the future.
Betterment Retirement Income
If you are planning on retiring at some point in the future (who doesn’t) and you’re wondering what money you will have to live on when that time comes, look no further than Betterment.
When you set up a retirement account with Betterment, it will walk you through how to make your retirement savings last and help you with your future financial planning.
Before you retire, you can save your earnings with Betterment and set yourself up in advance. Once you retire, you can set up auto-withdrawals that will pay you directly to your bank account on a set schedule.
You’ll never have to wonder where your money will be coming from.
Betterment Crypto Investing
As shown briefly in the portfolio section, Betterment has a firm foot in cryptocurrency. Crypto is very popular as an investment option thanks to its rocket-high returns, yet it exposes you to many risks.
For those interested in investing in crypto, Betterment has four portfolio options to make it as easy and relatively safe as possible.
As a refresher, these portfolios are called Universe, Sustainable, Metaverse, and Decentralized Finance.
As Crypto is such a new investment sphere, many traditional firms will not touch it. Investing on your own can also lead to terrible losses.
Betterment’s algorithms make it as safe as reasonably possible. Betterment also offers a library of crypto articles so that you can educate yourself on whether crypto investing is right for you.
Every step of investing with Betterment has the option of optimizing your tax returns. Traditional investors often focus on long-term tax breaks rather than short-term options.
Betterment offers optional smart features that focus on the short term. You can find tax-smart features in your:
- Account type
- Deposits and dividends
- When a fund gains value
- When a fund loses value
If you want to make a difference and give to charity, Betterment has options that allow you to do this while also making the most of your money.
For example, if you donate stocks that have been in your portfolio for over a year, Betterment can advise you on tax breaks.
Betterment has several partner charities as well that make donating easy, including UNICEF, Feeding America, World Wildlife Fund, Breast Cancer Research Foundation, Boys & Girls Club of America, and Against Malaria Foundation.
You, as the donor, always get to choose what organization will receive your donation, so you can always be sure that your money is going to a cause close to your heart.
Betterment Banking Options
Now, let’s go over your options if you use Betterment as your personal finance bank or just as a bank for investment or asset allocation.
We’ll talk about types of accounts, fees, and which type of account works best depending on who you are.
Betterment Cash Reserve
Betterment Cash Reserve is primarily a savings and cash management account. The Cash Reserve has a 3.75% annual percentage yield (APY) , which is 15 times the national average for savings returns (0.24%).
It is FDIC-insured ($1 million for individual accounts, $2 million for joint accounts).
This is a great option for those who want to keep their money available, perhaps for a short-term savings goal, while still enjoying high-interest yields.
Betterment Checking Account
Betterment’s standard checking account (FDIC insured up to $250,000) is perfect for your everyday spending.
Track and monitor your account balances and expense ratios on the app and use a fee-free Visa Debit Card for your daily purchases.
You can even change your PIN number on the app. Enjoy up to 5% cash back with purchases with no minimum deposit requirements.
The Betterment Rewards checking account has all the same features as the standard Checking account but with more rewards.
Betterment partners with many brands and retail establishments to obtain rewards when you shop with Costco, TOMS, Aeropostale and Sam’s Club.
Betterment Trust Accounts
A trust is a legal, financial agreement that allows one party to hold and use money on behalf of another.
It is often used in the case of minors, such as setting up a trust fund for your child to save for their future education so that they will have full control of the account once they come of age.
It is also often used for distributing inheritances. Betterment makes setting up a trust account very easy and provides plenty of tools to make the account as visible and easy as possible for all involved parties.
Some of the top features of their trust accounts include diversified investing with ETFs that help to grow the trust over time, re-investing of dividends and rebalancing investments.
Betterment Fees & Minimums
|Investing accounts||$4/month or 0.25%1 annual fee|
|Crypto||1% of trading expenses2|
|Cash Reserve||No fee|
Who Should Use Betterment?
Everyone and anyone can use Betterment. It has plenty of tools that service a wide range of services and needs. This includes acting as a bank for your everyday spending, saving for retirement, investing in your future, or setting up a trust on behalf of another.
Everyone from beginners to seasoned investors can use their automated tools and all-in-one dashboard. Not only do they have a great algorithm, but they also have certified human advisors and flexible portfolios.
The only people who Betterment may not be the best for are those who are truly seasoned investors who prefer to have full control over what stocks they want to invest in, with the full flexibility of buying and selling individual stocks.
This level of flexibility is very different from Betterment’s smart, automated investment offerings.
For those looking for other options, you could try out other smart investment brokerages, such as Vanguard and Wealthfront.
How Does Betterment Compare?
| || || |
$4/month or 0.25% annual fee
Up to 1 year of free management for new clients. Terms apply.
Up to $10,000 or $75 to $500 Bonus
Free career counseling plus loan discounts with qualifying deposit
Getting Started with Betterment
With no minimum balance and no set fees, there’s no risk to getting started with Betterment. All you need to do is choose from four options.
Do want to open a checking account, grow your savings, invest, or plan for retirement?
Getting started with Betterment is simple, just follow the steps below:
- Let them know what you are interested in
- Create an investor account
- Fund your account
- Start investing with Betterment
Betterment has been an outstanding fintech solution for me, an excellent place to set up my Roth IRA and other accounts, including Individual Investing, Checking, and more. The fees are reasonable, the website clear and the iOS app also very useful (including face recognition). I couldn’t be more pleased with the ETF choices made by Betterment; ESG is prioritized, for those who care about putting their money into responsible places.Daniel P., Verified Trustpilot review
Solid app with a visually appealing and easy-to-use interface. Highly effective as your base of operations for your investments and future financial goals. Easy to find all the info you need on your investments, historical returns, etc. I especially like to potential expected outcome graphs. Highly recommended.Niels P., Verified Google Play review
Is It Worth It to Invest with Betterment?
Betterment is a great robo-advisor option that lets you feel secure in your investments while still having the option to talk to a traditional CFP® financial advisor for investment advice or general investing.
It has plenty of options for retirement, saving and investing with a wide range of smart portfolios. We particularly liked their crypto offerings, an uncommon sight in a brokerage.
Betterment is an excellent banking option, and with no fees, there is nothing to lose in making an account and trying them out.
Finally, we’ll review a few common questions about Betterment.
Is Betterment a legit company?
How does Betterment make money?
Betterment makes its money as a percentage of your investment returns; 0.25% annually on Digital Plans and 0.4% annually on Premium Plans.
Does Betterment have good customer service?
According to Trustpilot, Betterment has very good to average customer support.
How would I delete my Betterment account?
If you decide Betterment isn’t for you, you can close your account by logging in on a web browser and going to Settings and Accounts.
From there, click the three dots next to the accounts you wish to close.
If you still have money in the account, you will be prompted to withdraw the money during the closing process.
†Betterment Cash Reserve (“Cash Reserve”) is offered by Betterment LLC. Clients of Betterment LLC participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients’ funds are deposited into one or more banks (“Program Banks”) where the funds earn a variable interest rate and are eligible for FDIC insurance. Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities through Betterment LLC and Betterment Securities. Cash Reserve should not be viewed as a long-term investment option.
**The annual percentage yield (“APY”) on the deposit balances in Betterment Cash Reserve (“Cash Reserve”) is 1.60% and represents the weighted average of the APY on deposit balances at the banks participating in Cash Reserve (the “Program Banks”) and is current as of August 01, 2022. This APY is variable and subject to change daily. Deposit balances are not allocated equally among the participating Program Banks. A minimum deposit of $10 is required, but there is no minimum balance required to be maintained. The APY available to a customer may be lower if that customer designates a bank or banks as ineligible to receive deposits. APY applies only to Cash Reserve and does not apply to checking accounts held through Betterment Checking. Cash Reserve and Betterment Checking are separate offerings and are not linked accounts.
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