Betterment Review (2019 Update): Revolutionary Online Investing


Update: This comprehensive review now includes the latest on the revolutionary personal investing service, Betterment.

Betterment is investing for the masses. If online brokers like ETrade were a revolution for the do-it-yourself investor, then Betterment is part two of that revolution. Their goal, get even more people to invest their money (vs parking it in savings accounts) by providing an ultra-simple, passive investing-focused, discount brokerage, wrapped in a Mint dot com like interface.Betterment is investing for the masses. If online brokers like E*Trade were a revolution for the do-it-yourself investor, then Betterment is part two of that revolution.

Betterment’s goal is to get more people to invest their money (vs parking it in savings accounts) by providing an ultra-simple, passive investing-focused, discount brokerage, all wrapped in a interface.

Betterment is offering up to 12 months free to new users who open up an account with at least $250,000 within 45 days of signing up with Betterment.*

They claim to have built an online broker site just as easy to use (and as liquid) as your online savings account.

Betterment is a real game-changer. With over 175,000 customers and more than $5 billion under its management, Betterment is making its revolutionary concept accessible to investors.

Here are the details:

About Betterment

Betterment is a broker from a legal perspective just like any other online broker. They are an SEC Registered Investment Advisor, and their broker company, Betterment Securities, is a broker-dealer regulated by FINRA and the SEC.

The money that you have invested with Betterment is protected by SIPC (up to $500K). Like other investment brokers, SIPC doesn’t mean you can’t lose your money if the market tanks. It simply means you can’t lose it to fraud or failure by Betterment (i.e. SIPC isn’t the same as FDIC).

Betterment opened its virtual doors in May of 2010. It was founded back in 2007 by Jon Stein, former bank industry consultant turned Chartered Financial Analyst and Columbia Business School graduate.

Jon has a “young entrepreneur” beard like yours truly. I like that.

Betterment Betterment is an online financial advisor that uses technology to efficiently manage your money and help increase returns. Get Started Betterment We earn a commission if you click this link and make a purchase at no additional cost to you.

More Betterment Review Information

Fees – Back in the day, Betterment used to charge 0.3% to 0.9%, depending on your account balance. Now they are charging from 0.15% to 0.35% 0.25% to 0.40% (this is on top of investment expenses).

Investors above the $100,000 minimum balance mark also qualify for next-day transfers and a custom portfolio for that flat 0.25% fee. If your balance is too low to receive the services you want, you can choose to pay a monthly fee in lieu of the percentage fee in order to access those services.

A couple of other things to point out:

  • Existing customers can stay put in their old pricing plan if they want to.
  • New investors can qualify for  up to one year free If you click this link and make a purchase, we earn a commission at no additional cost to you. just for signing up with a new account, depending upon your initial deposit level. An account opened with a $15,000 deposit earns you one month free, $100,000 earns you six months free, and $250,000 earns you one year free management.*

New customers with balances greater than $2M will be given a 0.10% marginal discount for the portion of their balance above $2M.

  • For Betterment Digital, customers will pay 0.15% for the portion of the balance above $2M.
  • For Betterment Premium, customers will pay 0.30% for the portion of the balance above $2M.

*Deposits must be made within 45 days of opening a new account with Betterment.

IRAs – Betterment customers can invest in an IRA (both Traditional and Roth), and the company even supports SEP IRAs and SEP 401(k)s. This means you can also rollover your 401K or existing IRA to an IRA with Betterment

In my book, the ability to invest in an IRA through Betterment is huge. As you guys know, I don’t see much use for taxable investing, so it’s definitely something I want to see in my online broker.

Smart Saver – Betterment customers who are tired of seeing their savings account collect dust rather than interest can move their money to a Smart Saver account. Here it will be invested in a low-risk bond portfolio. They will allocate 80% of your Smart Saver assets will be allocated into U.S. Short-Term Treasury Bonds (SHV), and the remaining 20% is allocated into U.S. Short-Term Investment Grade Bonds (NEAR).

This means your Smart Saver money performance generally tracks prevailing federal interest rates, rather than being influenced by your bank’s circumstances. Currently, Betterment’s expected yield for their Smart Saver program is 2.18%, although you will only see 1.93% to 1.78% once you account for your 0.25% to 0.4% fee.

Another benefit of this program is the fact that the underlying funds are mostly U.S. government bonds. This means they are not subject to state taxes. That allows you to take home more of the yield you earn as compared to a bank account offering a comparable interest rate.

There are two important caveats to the Smart Saver program, however. The first and probably least important is the fact that money in a Smart Saver account is not FDIC insured. While this sounds serious, remember that U.S. government bonds are backed by the full faith and credit of the U.S. government, which is about as robust a guarantee as you can get. Even in a case of a huge global financial crash, you are more likely to be able to count on the U.S. Treasury than your bank or even the FDIC.

The other potential issue with Smart Saver is the amount of time it takes to transfer funds from this account to a bank account. You can expect a transfer to take 4-5 business days, which can be a major problem if you use your Smart Saver account as your emergency fund.

How to Invest with Betterment

This is where Betterment is very different from a traditional brokerage. After you  open a Betterment account If you click this link and make a purchase, we earn a commission at no additional cost to you. and connect a bank account, you choose your investing goal and timeline. Then you choose your asset allocation.

Betterment Mobile - PortfolioAt that point, Betterment basically takes over and handles the rest. You are free to move on and let Betterment do their work. They invest your money in a mix of stock Exchange Traded Funds (ETFs) and/or treasury bond ETFs. If you set up an automatic investing transfer (highly recommended) then Betterment will pull the money each month and invest it using the original asset allocation.

They also periodically re-balance your investments so that you maintain the proper asset allocation.

The complete list of Betterment funds:

VTI: Vanguard Total Stock Market
IVE: iShares S&P 500 Value Index
VEA: Vanguard Europe Pacific (EAFE)
VWO: Vanguard Emerging Markets
IWS: iShares Russell Midcap Value Index
IWN: iShares Russell 2000 Value Index

TIP: iShares Barclays TIPS Bond Fund
SHY: iShares Barclays 1-3 Year Treasury Bond Fund

My Thoughts on Betterment’s Offer

  • Betterment is too simple according to some – Active, sophisticated traders will say that Betterment dumbs down investing and does nothing to educate investors. I don’t have an issue with their simplicity, nor do I think that their website is lacking in financial education.

They lay out their philosophy very clearly on the site. They also provide details about each of the ETFs that they use to build your portfolio. I’m a firm believer that you can’t consistently beat the stock market. I certainly don’t give a rip about active trading. It’s like gambling to me.

Simple, passive investing is my friend, and not enough people use it to help grow their investments. Too many people are trying to day trade, or worse, not investing at all. Betterment helps to bring more people on-board to the passive investing style that I’ve come to understand and respect.

  • Betterment used to be considered pricey – At their old price point, it was easy to beat Betterment by going to a low cost ETF provider like Vanguard. But now that the fee structure has been lowered, they are very competitive. I personally go to Vanguard and invest in their target-date funds (which also re-balance – but which force you into one of a few five-year increment plans) and I pay less than I would pay with Betterment.

What Betterment is counting on though is that the Vanguard account and choice of funds are too complex for some investors. Which it is, I guess. The statistics show that not enough people are investing in their future.

I see that as evidence that the investing services industry has not provided an effective solution for all potential investors. I’ll be the first to tell you to avoid fees in investing–but it’s better to have people invest with a simple solution to investing (even if it costs a bit more) rather than avoid investing because the complexity makes them nervous.

Read Next: See my full comparison of Betterment vs Vanguard

What’s to Love About Betterment

Betterment Promo

  • They are built for the 21st century – slick interface with little complexity in their setup.
  • They limit their fund choices to arguably the best choices for the passive investor: broad index-based ETFs.
  • They highly encourage automated investing, the best way to ensure you keep investing.
  • They offer retirement investing through IRAs.
  • They promote the idea of passive, long-term investing.
  • They are transparent about their fees, and they keep fees simple.
  • They are highly liquid. You can move your money in and out of the brokerage without fees.

Who Should Use Betterment

If you aren’t investing at all, consider Betterment. If you don’t have an IRA, consider Betterment. If you’re looking for a place to roll over your 401K or existing IRA, consider Betterment. If you’re already doing passive investing with ETFs, compare your expenses with the fees Betterment has. Give them a try today If you click this link and make a purchase, we earn a commission at no additional cost to you. .


Investing Fee %: 0.25




  • easy to use
  • inexpensive funds
  • retirement investing


  • marketing focus
  • fees vs DIY investing


  1. Kayla @ Shoeaholicnomore says:

    Excellent post. I plan to use betterment after I finish paying off my debt.

  2. You don’t lose money in a traditional savings account? 
    One reason I invest with Betterment is because I am one of those people that just can’t get it or figure out investing.  I am above average in some areas but finance is not one of them.
    That said, I have figured out that if you put your money in a savings account that pays less than the rate of inflation, you lose money from day one.  Unfortunately, all the savings accounts I qualify for do not pay more than the rate of inflation.  Maybe someone can explain to me how losing money in that fashion is OK?
    I am guessing there is something I am missing because, apparently,  most people don’t see it that way?

  3. what don’t you like about betterment?

  4. I was in the “savings in a mattress” account category.  We are good savers and max out the tax-preferential accounts. Have the nest egg covered (6 months). But after a kick in the pants from Mr.Money Mustache I decided I needed to move to actual investing and get the rest of the money working. Went to Betterment for the ease of use. Feet wet now trying find some advice for passive, don’t know a whole lot “investor” — What is advantage over date specific Vanguard fund? I do have several betterment “pots” (vacation, car fund, and such) and those were really easy to put together and auto fund.

  5. 2coppercoins says:

    I think that Betterment is great for someone who doesn’t have an idea of the specific investments they want to put their money toward. I love that they focus on Index ETF’s but I prefer to have a little bit more control over my specific investments. This is a great review, and for people who aren’t investing at all Betterment is a great place to start. Thanks for the post.