Betterment Review – Online Investing Made Easy

When it comes to investing, one of the most important factors is cost. That’s why it is important to invest in low cost mutual funds and ETFs, and to use a low cost broker if you buy individuals stocks and bonds. And that brings me to this review of Betterment, an online tool that makes investing in stocks and bonds simple and easy.

Initially, I was going to title this review–Are you Better Without Betterment? And the reason was the fees that Betterment initially charged. Having signed up for Betterment, however, I’ve come to a slightly different view. In addition, Betterment has significantly lowered the fees it once charged.

So let’s get to the review.

What is Betterment?

Betterment is a website that enables investors to invest in stock and bond exchange traded funds (ETFs). But rather than picking the individual ETFs, Betterment picks them for you based on an asset allocation that you select. As an investor, all you have to do is decide how much of your investment you want in stocks and how much in bonds. And if you need some help with that decision, Betterment has several tools that can offer you some guidance.

Betterment is a registered investment advisor, and securities in customer accounts are protected up to $500,000 by the SIPC.

How Betterment Works

After you signup, you link your checking account to Betterment. Linking your checking account enables you to make online contributions and withdrawals from your Betterment account. You can then either make individual contributions whenever you’d like, or set up a recurring contribution. This makes monthly investments and dollar-cost averaging very easy.

Betterment Add Withdraw Money

As you can see from the above image, setting up a one-time transfer or a recurring transfer takes just a few clicks of the mouse.

Once you’ve funded your account, the next and final step is to select your asset allocation. Here Betterment offers what it calls the RetireGuide. The guide walks you through a series of questions, such as marital status, pre-tax income, and age at which you want to retire.

One feature of the RetireGuide is that you can link external accounts. Many people have multiple retirement accounts, and they may not all be with Betterment. By linking other 401k, IRA, and other retirement accounts, Betterment’s RetireGuide can offer a more complete assessment of retirement readiness. The result is an analysis of whether you are on track to retire and how much more, if any, you should be saving.

Betterment RetireGuide

You can then change your allocation (limit one change per day) anytime you want. Using your age and income range, you can compare your asset allocation to others similarly situated. Betterment also shows you the potential upside and downside of your allocation over one and ten years. and it offers a handy sliding scale to show you the likely outcomes of different allocation decisions (see image below):

Betterment Asset Allocation

Investment Options

Betterment invests your funds in you money in 8 different ETFs. Six of the ETFs invest in stocks, and two invest in bonds. Here are the eight ETFs, along with the percentage of your money invested in each:

Stock ETFs

The portion of your total investment allocated to stocks is invested in the following six ETFs:

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

Bond ETFs

The portion of your total investment allocated to bonds is invested in the following two ETFs:

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

(Note that the specific ETFs Betterment uses do change from time to time, so be sure to confirm directly with Betterment what investments it currently uses.)


When Betterment first launched, the big negative was its fees.  I even spoke with Betterment’s CEO about the fees and a conference we both attended.  Since then, Betterment has lowered its fees significantly.

Its current fee structure depends on how much you have invested.  Note for the “Builder” fees listed below, you must have a minimum of $100 auto-deposited into Betterment each month, which is what I do.

Betterment Fees

Investing costs may not seem like a big deal at first.  The problem is that over a lifetime of investing, these fees make a huge dent in your retirement savings. Ron Lieber of the NY times recently published a must-read article on why 401(k) plans should offer index funds. The article included the following chart depicting the effect fees can have on a retirement nest egg:

Investment Costs

With Betterment’s current fee structure, it’s an ideal option for those that don’t want to actively manage their investments. Because Betterment automatically reinvests dividends and rebalances the portfolio, there’s really little for you to do.  Some like it that way.

If you’d like to checkout Betterment, they are offering a bonus worth up to 6 months of no fee investing.  The number of months you get for free depends on the amount of your initial deposit:

  • $5,000 first deposit: 3 months free
  • $25,000 first deposit: 4 months free
  • $100,000 first deposit: 6 months free

You can check out the deal and get more information from the Betterment website.





    Ease of Use





        • - Relatively low fees
        • - Automated rebalancing
        • - Tax loss harvesting
        • - Beautiful website


        • - Limited control of portfolio
        Published or Updated: April 15, 2016
        About Rob Berger

        Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.


        1. Jon Stein says:

          Jon Stein, CEO of here. We’re making smart investing easy and accessible for hundreds of millions of people. I want to thank you for your great review of Betterment and for helping to spread the word about our rapidly-growing service. I also want to address your concerns.

          First, international exposure. You’re exactly right – it should be part of our portfolio. We’re adding international exposure to our portfolio very soon.

          Second, our fees. Our fees are 0.3% to 0.9% per year, based on customer balance. This is remarkably low. For higher-balance customers, we are lower than other asset management fees (which range from 1-2%). And there are no transaction fees. In good conscience, you suggest, as others do, “Just buy an index ETF from Vanguard, it only costs xx%.” But, it’s not so easy, because the vast majority of people don’t (or can’t?) follow this advice. Perhaps they don’t know where to begin with Vanguard’s hundreds of funds (even when told to stick to one), perhaps they don’t know which numbers to trust, perhaps they get bogged down in the wrong data. Maybe they don’t rebalance, or they don’t allocate assets correctly, or they try to time the market instead of contributing regularly. What seems easy in theory, in practice is not. Investing turns out to be so difficult, in fact, that the average self-directed investor underperforms the S&P 500 index by as much as 5% per year, according to Dalbar and Morningstar. There are powerful psychological forces at work that make investing very hard for many people – and the market is unforgiving.

          We are transparent about our fees and proud that they’re lower than the competition. For lower balance customers, consider that there’s no minimum balance on the account, and we have thousands of accounts with $1000 or less invested. All those customers are paying less than $10/year in fees for smart investments. Truly revolutionary.

          I share your desire to see even lower fees – and I think some day we will be able to drop them further. For now, we’re focused on the real problem, which is too many people not investing, or not investing in smart, sensible ways. We both want the same thing for people – better outcomes, and to help them reach their goals in life. We’ve built a platform that we think will do just that, for millions of folks – without taking a lot of time or effort to get started. There’s more we can do to make the platform even better, but we’re on the right track, and I appreciate everything you’re doing to help us spread the word. If you have any questions for me, please don’t hesitate to be in touch: [email protected].

          • DR says:

            Jon, thanks so much for the thoughtful response. I’m a hawk when it comes to fees, but I do understand that some folks want more assistance than others. When all is said and done, if Betterment can turn non-investors into investors, it will have succeeded.

        2. maria says:

          Hi. I just came across your review and was intrigued. You claim that Betterment ONLY charges 0.3% to 0.9%. But, when I clicked on your actual site it states “0.15% to 0.35%. So, which one is correct?

          • Rob Berger says:

            Maria, the lower expense ratios are correct. As I noted above, Betterment lowered its expenses since I wrote the above post. I updated my review here–

        3. Chris Dowling says:

          I have 401K to rollover in to something, soon. The 401k account could stay within the current brokerage, and they do have low cost options, but I’ve also been considering Personal Capital and Betterment, as well as SigFig. Personal Capital’s approach is attractive, but their fees seem steep, relatively.

          • Rob Berger says:

            The fees are critical. I’ve always rolled by 401ks into Vanguard.

        4. DB says:

          I’m a retiree and I’m quite intrigued. But why, when every $40 piece of software that I’m considering buying gives me a trial version that I can evaluate, would I take the major step of moving large sums of money to a place like Betterment without having had an opportunity to see what it really looks like and how it really operates?

          How many times has a software package looked like it was going to be just the ticket, but when you actually got your hands on it turned out not to meet your needs?

          Let me set up a test account with pretend money and play with it for a while, get all my questions answered, compare it to competing products and make an informed decision, and I might move a few hundred thousand dollars over. But with nothing but sales material and screen snapshots to go on? No way. Who would do that?

        5. marcel leveque says:

          all i have read about is your fees. all well and good. my concern is returns on investment. i plan to invest 20k to start and see how you do. what should i expect. i am already retired and looking for additional income. if all goes well after a year i plan to incest 200k. being retired i must be cautious.

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