:-). Every dollar of stocks you own will generate dividends and growth over your lifetime, which is the way you become wealthy. …and thanks MMM for sharing your experience, it is only through that we can all learn and grow! I have no problem taking some of that for myself, just as I have no problem using coupons or discounts at other businesses. Hi Kyle –You are smart to focus on fees right from the start. Ravi, I agree with you. Interesting article about just that point here: http://www.vox.com/2016/5/24/11721298/charles-schwab-intelligent-portfolio. 27% Vanguard Ttl Int Stock Ind ADM (fees 0.14%) Not to say that investing in a Vanguard index fund isn’t great, it clearly is, but I believe, like you stated, that Betterment offers more than enough to compensate for their very low added fee rate. You’ll find the links at the bottom of my article above. More time than that, then read a book from your library. Our secondary ETF, BND, is similar to AGG but has a slightly higher bid-ask spread. The expense ratio for this fund is 0.58%. ETFs eligible for commission-free trading must be held at least 30 days. You also have the TLH feature that can more than pay those fees (~0.77%). It’s so automatic, that after you create your account, and tell Vanguard how much you want to contribute monthly from your bank account, *you never have to login again until you need the money*. I don’t want to get screwed with management fees that will add up over the next 40+ years. This is very very helpful. First of all, everyone has different tax situations. This has been the case for every single year that the ETFs in Betterment’s portfolio have been around. – T. Rowe Price Mid Cap Value I wonder… has anyone compared the performance of VTI to VT? If they charges a flat fee, I would totally go for it…but they have NO RIGHT to claim a % of my assets each year. It all depends on how how automatic you want it to be: 1. The LifeStrategy Growth Fund (VASGX) has 0.17% as expense ratio. ), visual representations of what’s happening in an easily digestible format, and ease of use. Wondering if direct indexing will make up for, or exceed, the .10 extra I’d pay if I went with Wealthfront. For everyone else (99.99% of the population) MMM’s recommendation of indexing/robo-advisor is better. Keep it simple, simple. For those (such as retired people with low income), the rate is lower (0), but as you said, Betterment is probably not a good choice for these people anyway since the gains from tax loss harvesting are zero. Betterment require you to be US Tax Resident though you can probably open an account with a US address and so on. They also diversify the bond portion of a portfolio, resulting in higher expected risk-adjusted returns. Using Betterment is a poor solution to not wanting to be bothered to learn the basics of investing, for obvious reasons– soon as the market swoons the noobs will be confused and panicked. Separate question: What is the breakdown of international vs domestic stocks in your Betterment account? I see that WiseBanyan has free tax-loss harvesting now, which, when combined with the no-fees structure, makes it a bit more attractive than Betterment for me. They are all Fidelity “Spartan” Advantage Class with super low expenses. Is there any other info I need to consider in my decision making process besides these two factors? I personally prefer Vanguard for tax-advantaged accounts (IRA) because of their super-low fees. Open an account at Vanguard, and invest your money in: 56% Total Stock Market Index Admiral Shares – VTSAX (3804 stocks across the USA) Jon and I had exchanged a few emails when I was considering his company. I’m in the 25% tax bracket and I just wanted to know if enabling tax-loss harvesting is right for me. My problem isn’t the ability to ride volatility.. I’m super okay with that. That’s the ride this fund would’ve taken you on. They also have Target Retirement funds that allocate the funds for you in a single low-fee fund. Portfolio Constituency Rules and the Value Premium in the Small-Cap Space: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2394711. Thank you so much.. To paloma When I turn 100 years old (and I plan to! If you want to add some Emerging Markets, a broader bond mix (to include TIPS and Corp Bonds) and some REITs….then perhaps you will have something closer to .15-20% expenses…but .58% is a ton. Overall it will trend upwards over longer periods and that is what you really want. What risk are you hoping to diversify away here? I am 36 years old and I unexpectedly lost my husband last year. with Wisebanyan. for a similar time period: Sept 2013 starting balance was 28,511.85 Read this: http://www.bogleheads.org/wiki/Asset_allocation However, this amount includes part of my emergency fund and money that could be withdrawn at an unknown time. She said taxes are paid when the stock comes to you. You can even tell Vanguard to automatically invest the money each month for you, withdrawing it from your checking/savings account: That’s it. U.S. High Quality Bonds are still subject to interest rate risk. The market is “due for a correction” and it would suck to put that money in and see it go down 10-15%. Only 401ks are protected in bankruptcy. I’ve seen several people suggesting moving the 401k straight to Vanguard so I’ll do just that as soon as I can access my account- company split changed some things. :P. You are talking about admiral shares with low fees…. That MMM didn’t seem to address it here is perplexing to me. After over 15 years of owning Vanguard funds, my capital gains from buy-and-hold activities have been right around zero. EMB is the primary ETF used to gain exposure to International Emerging Market Bonds, due to its low expense ratio, tight bid-ask spread, and high level of market liquidity. Betterment’s use of secondary ETFs enables Tax Loss Harvesting+™ and Tax Coordination™. Barring actual societal collapse, hang in there, it will eventually recover everything you’re “down”, and then some. He was in finance and I was fortunate enough to be left with all our retirement accounts (around 190k) and a few life insurance policies (around 370k). Then you could just set the Vanguard to re-balance annually on the same date (which is a fairly common practice). Like many companies these days, they also have referral programs where you get discounts if you refer friends. However when it gets to around $10k I will transfer to Vanguard index funds. YTD its 4.81 as of 5/1. To combat this, I’ve always said “Just buy the Vanguard Total Market Index fund (ticker symbol VTI).” That gives you a near-optimal ownership of hundreds of companies, in single giant, stable, low-fee fund run by an honest company. Investment Minimum: You don’t need to meet any threshold to invest in Vanguard’s VTI … But, I think using VTI/VTSAX/S&P500 outperforming Betterment over the last 10ish years to not really be fair. Then you also get to keep the principal you saved from the loss harvesting. I have close to $1M in investable assets, but am semiretired so am in a low income bracket. It’s easy and you don’t have to do hardly any work to increase your contributions. Recently opened up a betterment account with $1k + $100 auto-deposit a month. The investor shares require a $3k minimum at a slightly higher (though also very low) expense ratio. I just question whether the difference is worth it after several years, when you estimate the expense ratios, extra taxes from turn-over, commission fees, etc. I Just happened to find this from Vanguard website…..it may be very useful after you retire. Thanks for the correction information. Earn Rewards: Sign up now and earn a special reward after your first deposit. Cashing out right away means you’d only pay a sliver of income tax on the earnings after vesting. You can’t simply point to two funds (half of which are actually underperforming), which are doing well, when the vast majority of value funds aren’t, to prove that value funds can beat the market. Dear MMM, They charted it out for us: Here’s how I recommend newbies invest. “Ideally, I would love to move these to low cost Vanguard funds.”. – Fidelity Diversified Intl K If I am not mistaken, they can also sell investments at optimal times too to minmize taxes but you need to call them for details. It looks to me that VTSMX and VTSAX should cover low and high minimums if you think the market is ok and maybe VBMFX and VBTLX if you are cautious about the market. In the month of January alone, tax loss harvesting saved me more money than Betterment costs me in a year. Most of them all have valid points. Sounds like time for a refresher course on what investing really is! 3. you might disagree with how the money is spent by the government, so you might also want to minimize for that reason as well. Here are the ETF's currently being used by Betterment, as of October 28th, 2019: (I list primary ETF only, they also have a secondary ETF when tax-loss harvesting) Stock Funds. Could you explain how you calculated the “Your portfolio is off by” value? I’ve read almost all their blog posts explaining their thought process behind how they weight portfolios, their dividend reinvestment/rebalancing automation, etc. And just about every blog I read has multiple strategies, so it’s very difficult to weed out which ones will work best for me. Once you have an account value equal to about 25 times your annual spending, the dividends plus selling off a tiny fraction of the actual shares occasionally will be enough to pay for all your expenses – for life. Should I sell it for VXUS instead? Unfortunately I don’t see a Vanguard Total Market fund, but the TRP Equity fund is pretty close. My advice is to open an account with Vanguard or Fidelity, and invest (using direct deposit and automatic investment) in a low cost index fund or a few different funds(s). Bogle looks at the data (section 2. Thank you! Cheers! Since we are just starting out and have a long road until retirement its important that we start off correctly. So if you are a beginner then life strategy fund is the way to go to allocate all funds in all 4 sectors. Most accounts through Vanguard are “self-advised” or do-it-yourself. I wanted to make sure that I was communicating my currently financial position and concerns accurately. Unless otherwise specified, all return figures shown above are for illustrative purposes only, and are not actual customer or model returns. Personally, I’m all about keep-it-simple and I like that you are already using Vanguard’s Target Retirement funds. VOO S&P 500 index etf, VOOG S&P 500 growth etf and VTI Total stock market etf. VNQ 4.8 REITs You have have discipline and be willing to experience returns that go against the market at times, but it pays off in the long run. They wrote me back but I’m not sure I understand their answer. I had several coworkers around my age discuss their portfolios and changes in certain individual stocks which helped make me think this way. Wow, great catch!! More than 6 years with that IRA and it’s been very VERY good. A one percent fee over 30 years will deplete your portfolio by 26%! If you recently left a company and they sent you a check for your 401k balance then you NEED to deal with it NOW. If you have more questions, you can email me at adamhargrove at yahoo. So is this beneficial to someone who is looking to just save? I will continue to read up; thank you so much for your assistance! Betterment appeals to me because I am a beginner, I don’t have much to invest right now, and there seems to be fairly small amount of risk depending on how much I plan on investing. If you’re withdrawing $40,000 to live (using the 4% rule), that fee will represent 7.75% of your total yearly expenses. Betterment only charges 0.25% (+ fund fees, so about .35% approximately) for accounts $10,000-$99,999 and Vanguard charges only 0.16% for their 2060 Target Retirement Fund. More specifics are in part 2 of that article: https://www.mrmoneymustache.com/2013/12/15/canadian-investing-with-mr-frugal-toque-part-two/. Thanks for your perspective! Pick an allocation, buy a few super low cost funds (one for US stocks, one for global stocks, one for bonds), set up your direct deposit and automatically buy-into the funds you choose…then get on with the enjoying the rest of your life. © Betterment. $56K in cumulative fees over 20 years I have no clue how to let those dividends mature and care for them. Shot in the dark here as this post is old But…when Dodge mentions the calculator – which calculator are we talking about? Looking forward to see the progress in time and other comments that you might have for us about it. Brokerage services provided to clients of Betterment LLC by Betterment Securities, an SEC-registered broker-dealer and member of FINRA “To receive the reward you’ve selected, you must open a TD Ameritrade account and fund it with a minimum of $2,000 within 90 days of your submission.” Sounds like you have that amount, no problem! Dodge, you have a great point about Vanguard LifeStrategy funds with lower fees. Our secondary ETFs, SCHB and ITOT, which also have low expense ratios, are highly correlated with VTI. The average individual made 1.85%, which is a full percentage point less than inflation over the same time period!! My question is this: Given that I have nearly $76K in 401k and 403b combinations that are in funds with relatively high expense ratios, what is my best strategy at this point? Harvesting feature m happy with my older, highly-appreciated taxable account still sitting Vanguard... Deposited 93K into my Betterment account math is pretty easy: ( 1.0 extra! 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