Automated Investment Services


Automated investment services promise to make investing easy, inexpensive, and even fun. Called robo-advisors, these companies can take the pain and uncertainty out of investing by constructing a diversified portfolio, investing in low cost ETFs, rebalancing, reinvesting dividends, and even harvesting tax losses.

And, there is no minimum deposit to open an account. You can deposit as little as $10. And, no, you will never be charged for an account with a $0 balance.

What are Robo-Advisors anyway?

From Wikipedia:
Robo-advisors are a class of financial adviser that provides portfolio robo-advisor investing - betterment provides portfolio management and geographic diversificationmanagement online with minimal human intervention. While their recommendations may vary, they all employ algorithms such as Modern portfolio theory that originally served the traditional advisory community, which has relied on algorithmic templates to conduct portfolio management since at least 2005.

Robo Investing Procedure

Robo-advisors offer fully automated investment services that handle virtually every aspect of investing. Once money is transferred to a new account and a stock/bond allocation chosen by the investor, the service handles everything else from rebalancing to dividend reinvestment to even tax loss harvesting. Robo-advisors provide easy to use tools to help even the most novice of investors make the stock/bond allocation decision. Just select how much you want invested in stock ETFs and how much in bond ETFs. Once made, the robo- advisors allocate the investments across several low cost ETFs. The asset allocation usually favors value ETFs and do not include REITs or Commodity ETFs on the theory that total market ETFs provide exposure to these asset classes. In addition, taxable accounts can take advantage of automated tax loss harvesting tools.

The fees charged range from 0.15% to 0.35% based on the account balance. This is all good news for investors. Robo-advisors are bringing down costs and introducing some incredible tools that will change the investing landscape in profound ways.

Just who are these Robo-Advisors?

Building on decades of Nobel-prize winning research, Betterment is the largest independent robo-advisor helping people to better manage, protect, and grow wealth through smarter technology and aims to achieve the best investor returns possible. The portfolio is maximally diversified, and comprises low-cost, liquid, index-tracking, exchange-traded funds, or ETFs. Tax-efficient algorithms are used to automate optimal behavior to maximize your ability to grow your money. When you deposit money with Betterment, every dollar isrobo-advisor investing - betterment invests in 12 exchange traded funds seamlessly invested in up to 12 different asset classes, optimized for your selected asset allocation. Stock and bond ETFs are optimally weighted to provide a progressively increasing amount of risk and potential return. Lower risk portfolios have more short-term government-backed bonds and less volatile stocks. Short-term government bonds exit the portfolio above 42% stocks. As you move up the allocation spectrum, bonds and stocks with higher risk are introduced but with higher potential returns. Betterment distinguishes between taxable and retirement accounts when allocating bonds for additional optimization. Taxable accounts hold federally tax-exempt municipal bonds, providing portfolios favorable after-tax return. Retirement accounts maintain holdings in U.S. investment-grade bonds.

Betterment is a registered investment and securities advisor managing over $10 billion dollars for approximately 270,000 clients. All securities in each customer account is protected up to $500,000 by the SIPC.

Betterment is a CNBC Disruptor 50 and Webby award winner, and has been featured in the New York Times, Forbes, and the Wall Street Journal. Betterment helps clients achieve a smarter financial future with minimal effort and for a fraction of the cost of traditional financial services.


What are the Robo-Advisor Fees?


Betterment charges a management fee of 0.15% to 0.35%, depending on your balance and What are Robo-Advisor Feesauto-deposit, and is prorated across the entire year and charged at the end of each calendar quarter (every three months). For accounts under $10,000 there are 2 pricing options. For those who have automated deposits turned on for at least $100/month, the rate is just 0.35%. If you choose not to automate your savings, the fee is a low flat rate of just $3/month. This is either/or and never combined. After your account reaches $10,000 there are no longer deposit requirements and your fee is adjusted down to just 0.25% per year, and then further reduced to 0.15% when your account reaches $100,000. In other words, for those clients with pricing of 0.15% to 0.35%, every three months Betterment charges 0.0375% to 0.0875% based on your average balance for the period. If you withdraw all of your money before the end of the quarter you are charged a prorated fee only for the days your money was managed by Betterment. Betterment's single management fee covers everything including transactions, trades, transfers, rebalancing, advice, account administration, etc. Unlike other companies, Betterment does not charge transaction fees to buy and sell securities.

How about those Expense Ratio Fees?

Your money is invested in a fully diversified index-fund portfolio made up of up to 12 exchange traded funds or ETFs. Each of these ETFs has an expense ratio (they range from .09%-.17% depending on your allocation - this is about 15 cents for every $100 you invest), which you would pay no matter where you purchased these funds. The cost charged by the funds is a little harder to see because the fund companies get their money by slightly reducing the dividends they pay out. Rest assured, Betterment works hard to offer funds with some of the lowest fees available.



 

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