Betterment Review: Get Up to 12 Months Commission Free!

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Betterment is a low cost robo-advisor who simplifies investing for the masses. Read my Betterment review to see how to get your first 6 months free!

Betterment is a robo-advisor that simplifies investing by providing professional management of your portfolio for minimal cost. This Betterment review for 2020 will go over how they can help you reach your investment goals.

Betterment began in 2008 and is the most established player in the robo-advisor space. They have over $15 billion in assets under management and 400,000+ clients. Through a relatively low price and solid approach, Betterment provides access to a financial advisor without any added cost.

Add this to a relatively low price and solid approach and Betterment is a good fit for many investors. You don’t trade individual stocks or mutual funds with Betterment. You invest in a bucket of Exchange Traded Funds (ETFs) that are personalized to your specific goals.

They also do not have a minimum balance requirement. With that bit of background out of the way, let’s get on with the review of Betterment.

Betterment Portfolio Options


You Don’t Actively Trade: You do not trade individual stocks with Betterment. That is simply not their approach. Their approach is similar to buy and hold investing strategy where they focus on your long-term goals.

Buckets to Choose From: If you do not trade stocks with Betterment, then what investment options do they offer? It’s quite simple, they select buckets of ETFs based on your particular goals. You can also choose to partake in their Socially Responsible Investing (SRI) portfolio if you wish.

They have two main buckets they select from and they personalize the amount each ETF will make up of your portfolio. The first is their stock market bucket which provides balanced exposure to U.S. and International funds. It is made up of:

  • VTI – Vanguard Total Stock Market ETF
  • VTV – Vanguard US Large-Cap Value Index ETF
  • VOE – Vanguard US Mid-Cap Value Index ETF
  • VBR – Vanguard US Small-Cap Value Index ETF
  • VEA – Vanguard Europe Pacific (EAFE) ETF
  • VWO – Vanguard Emerging Markets ETF

The second basic bucket they provide is their bond bucket. Below are the options to select from:

  • SHV – iShares Short-Term Treasury Bond Index ETF
  • VTIP – Vanguard Short-term Inflation-Protected Treasury Bond Index ETF
  • BND – Vanguard US Total Bond Market Index ETF
  • MUB – iShares National AMT-Free Muni Bond Index ETF
  • LQD – iShares Corporate Bond Index ETF
  • BNDX – Vanguard Total International Bond Index ETF
  • VWOB – Vanguard Emerging Markets Government Bond Index ETF

New portfolio options: Betterment recently added new portfolio options for both new and existing clients. Those are: Blackrock Target Income Portfolio, Goldman Sachs Smart Beta Portfolio and Betterment Socially Responsible Investing (SRI) portfolio.

The Target Income Portfolio consists of 100 percent bonds and is meant for those in retirement that want a more conservative portfolio. The Goldman Sachs Portfolio uses a rules-based approach with the goal of outperforming the traditional market index. The SRI Portfolio is fairly self-explanatory, here’s our guide to the SRI approach.

Additional Betterment Features


They Personalize Your Service: The nice thing about Betterment is they don’t just stick you in a random selection of funds, but offer personalized service. When you open an account with Betterment they ask you a small handful of questions to understand your goals.

They take your responses and use them make your portfolio. The questions are straightforward and you should be able to answer them within 10-15 minutes.

Retirement Income: This is a new feature added by Betterment that allows you set up a system for sustainable cash flow for those that are in retirement. Decumulation during retirement can be tricky to balance and Betterment provides investors in retirement a way to better balance that.

RetireGuide™: This feature was first added several years ago and differentiates them from other robo-advisors. The purpose behind RetireGuide™ is to provide you personalized retirement planning advice at the goal level.

RetireGuide™ looks at several key things:

  • Income when you retire (based on your current investments)
  • Make plans based on availability of Social Security
  • How much you should save each year

A recent update to RetireGuide™ also allows you to look at your entire retirement picture, including all external accounts – both taxable and non-taxable. This includes linking your 401(k) plan to your accounts, in addition to the ability to link other external accounts.

With these changes, RetireGuide™ lets you to get a holistic view of your retirement planning regardless of where your investments and external cash reside. By thinking of your retirement needs at a goal level, rather than by specific accounts, you can make more informed decisions to optimize your investment potential.

Ultimately, this updated feature provides advice on what you need to save and where to invest it across your entire portfolio.

Tax-Coordinated Portfolio: This is the newest featured added by Betterment. This new feature allows you to allocate your assets to maximize your tax efficiency across all your account at Betterment, retirement accounts included.

Charitable Giving: This is a brand new service to Betterment that launched in late 2017. With charitable giving you can give to a number of charities directly from your Betterment account.

Betterment will show you how much you have eligible for donation, the potential tax savings and operate strictly from your long-term gains.

SmartDeposit: Do you like to invest money throughout the month? That is the premise behind SmartDeposit. SmartDeposit allows you to invest money once you reach a certain balance in your bank account.

This feature is something you must select in your account. If you do, it allows you to put any overages in a bank account directly into your Betterment account.

Live support: Betterment just added a new feature where any investor can message a rep directly from their mobile app. You can use this to ask any questions you may have, or help with setting goals.

Additionally, if you have a Plus or Premium plan you get unlimited phone call access to CFP professionals.

Investment Review: This is a new feature offered by Betterment I really like. With this feature, Betterment analyzes your outside investments based on four particular areas: investment accounts, tax savings, fees and risk exposure.

This is a great way to ensure your investments are in shape, and that you’re not missing any opportunities. You don’t pay a dime for this, it’s free of charge.

How does Betterment handle your spare cash?

Betterment recently introduced Betterment Everyday Cash Reserve as an option for spare cash in your account. The FDIC-insured, product offers an APY of up to .40 percent, after fees, on your cash.

This is one of the highest rates in the market, and offers FDIC insurance of up to $1,000,000, plus unlimited withdrawals.

Additionally, Betterment recently released an FDIC-insured checking product, called Betterment Checking, to pair with the Everyday feature. Taking advantage of either product does not eliminate the two-way sweep function as that is still available.

Betterment Checking has no minimum balance requirement, and no fees. The money manager also reimburses ATM fees to your account from any ATM that accepts Visa, or roughly 2.8 million throughout the world.

If you want to learn more about the benefits of the new cash features, consult the Betterment site for more information.

How much does Betterment cost?

Straight Forward Pricing: By not trading stocks, you avoid any commission fees. That’s not to say it’s free – of course. Betterment has just recently changed their pricing structure, making it much simpler to understand.

You fit into one of two categories for pricing with Betterment. Those are listed below:

  • Digital – .25 percent and no minimum balance requirement
  • Premium – .40 percent and a $100,000 minimum balance requirement

Regardless of the tier, the price is based on your account balance. If you have over $2 million with Betterment you receive a .10 percent marginal discount on balances over $2 million.

The main difference between the two tiers is you get unlimited calls with CFPs with the Premium tier. Beyond that, most every feature is the same between the two tiers.


Advantages of Betterment


Great for beginners: What I love about Betterment is they’re great for beginners. Having spoken with many beginner investors in my past, I know investing can be confusing.

If you’re a new investor and want to get started Betterment simplifies that process. They take your goals to make up a portfolio. You have little to figure out on your own. It doesn’t get simpler than that in my opinion.

They do the heavy lifting: The other thing I like about Betterment is they do a lot of the heavy lifting for you. They rebalance your account for you as well as reinvest any dividends for you. For the beginning investor this really makes Betterment unique among some of the alternatives.

Betterment also recently added a new feature that allows them to sync all of your brokerage accounts to see if there are fee saving or investment possibilities available – something that most other brokerages don’t offer.

Their portfolios stay on top of the market: Their buckets are not a ‘set it and forget it’ approach. They’re not changing them on the fly either. They recently changed their bond bucket in light of what is going on in the bond world to put clients in a better position.

The powers that be at Betterment do this in order to stay abreast of what’s going on in the market while also positioning investors to succeed. I also love that many of the funds chosen are low in fees so more of your money is working for you.

I use the free service available at Personal Capital to stay on top of this myself.

There is no minimum account balance to open: Many online brokerages have an account minimum. Betterment does not. This is great for those with little to invest, or those simply wanting a secondary investing option to what they’re doing elsewhere.

Tax Loss Harvesting: In simplistic terms, Tax Loss Harvesting (TLH) allows you to boost the return of your portfolio by selling losing holdings which in turn lowers taxable liability on gains and income. You don’t need to do anything to take advantage of this feature and is available to all Betterment clients.

When you include their new Tax-Coordinated Portfolio feature, this really puts Betterment ahead of the game when it comes to taxes and your portfolio.


Disadvantages of Betterment


Can’t asset allocate with other investments: The main disadvantage with Betterment is you can’t asset allocate with outside accounts. This is not unique to Betterment as many robo-advisors operate in the same fashion.

You can have your 401(k) displayed within your account, but you can’t create a plan with that in mind.

Not good for DIY investors: Like the above, this is not unique to Betterment. If you like to manage your own investments then Betterment, or any other robo-advisor may not be a fit for you.

The other main player in the space is Wealthfront. Check out our Betterment vs Wealthfront guide to see how they differ and how they’re alike. Either broker is a good choice, it just depends on your needs and preference.

Betterment review – My Take


Betterment is a low cost robo-advisor who simplifies investing for the masses. Read my Betterment review to see how to get your first 6 months free!

If you are new to investing and don’t want to deal with the stress of investing Betterment is a great option to consider. Betterment takes a lot of the work out of investing for you and allows you to go with a balanced buy and hold strategy.

They allow you to personalize an investment approach that is applicable to you personally. An outside advisor who may put you in something without knowing much about you or what you really want.

That’s not to say that advisors are “bad” in any sense, just that you can have more control by managing it yourself. A robo-advisor like Betterment gives you the benefit of a financial advisor without having too many fees or minimums to meet.

If you’re new to investing want help with your investing Betterment is a solid option to consider. That’s also not to say Betterment is only for newer investors as their core approach is one I’d recommend for most investors.

With that being said, depending on your circumstance, Betterment could be a great option to consider for your investing needs.

If you open a new account with Betterment they do offer a new account promotion. The Betterment promotion is as follows:

  • 1 month free of charge with a starting balance of $15,000 – $99,000
  • 6 months free of charge 6 months free of charge with a starting balance of $100,000 – $249,999
  • 12 months free of charge with a starting balance of $250,000+

Remember, you can open an account with Betterment with no minimum balance! Additionally, each deposit you make within the first 45 days counts towards the promotion. If you end up depositing a total of $1000,000 in the first 45 days, for example, you receive six months of free management.

Open an account with Betterment today and get up to 12 months commission free!

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John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.

Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.

Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.

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  • I’ve read a bit about Betterment before, and it sounds like good stuff. More info for Rick and I to consider as we get ready to start investing. Fun and games planned for this weekend, woohoo!

    • John says:

      Assuming it’s a good fit for you then it could be a good potential fit Laurie. Like I’ve said in the past, feel free to ask me any questions as you move closer to that Laurie I’d be happy to help. 🙂

  • I have been with Betterment for over a year. My account has brought in over 12% returns for the year and I think that is good enough for me. It is easy and I like it. They currently hold my Roth IRA. That being said, I will be opening a different brokerage account just to do some individual stock trading focusing around dividend paying stocks.

    • John says:

      I seem to remember you mentioning that in the past Grayson. Glad to hear they’ve worked well for you and think it’s great you’ll be looking to add some to that through dividend paying stocks.

  • I do have a Betterment account and it is as easy as you said. I signed up for the bonus earlier this summer, but have kept the account open just to not pay the trading fees, which can eat up your investment if you aren’t putting in a lot of money. I’ll see after a year how the fees compare with doing the same thing at Vanguard.

    • John says:

      That sounds good Kim, glad to hear that it has been easy for you. That said, I’d be inclined to think the fees would likely be better at Vanguard.

  • I think Betterment is definitely a good choice, though I would still prefer that someone start with one of Vanguard’s target date fund, as long as they can meet the $1k minimum. The fees are slightly lower, though the difference isn’t big enough to get too up in arms about. But overall I think the more services like this that exist, the better.

    • John says:

      I think they can be, assuming it’s the right fit for your needs. I’d likely be more inclined to go the Vanguard route if you want something simple, though I do like how Betterment seems to take a lot of the guess work out for the novice investor.

  • I recently wrote a review of Betterment. It was that review that got me to start investing. I got into Betterment and earned over 9% in 4 months. I’m loving it. This is a great outline too!

  • Great review John, and I appreciate you pointing out some of the negatives of Betterment as well as the positives. I am looking to open some investment accounts in the new year, perhaps an IRA and then an individual stock trading account. I definitely appreciate your reviews so far this year on various investment companies, most of which I am looking into currently.

    • John says:

      Thanks DC! Yea, each brokerage has their own set of good/bad things and those related to Betterment are a bit unique. Thanks for the feedback on the reviews, that’s my hope. I have a couple more planned over the next few months and will follow it up with a roundup overview afterwards.

  • I agree that Betterment may be good for beginning investors. I like the pool of funds they use, which are mostly low-cost Vanguard index funds. They use a strategy that is called slice-and-dice where rather than using the market cap-weighted index fund (VTI), they add in some mid and small-cap value index funds. I do some of this on my own without paying Betterment’s additional fees. My only hesitation with recommending Betterment to new or small investors is that people often stay with what they are comfortable with. That would not be all that bad with Betterment, but people would make more money by eventually handling their investments themselves. Personally, though, I would rather just give a new investor a copy of the Bogleheads’ Guide to Investing, let them read it, and then help them set up a portfolio.

    • John says:

      I like their pool of funds and do that on my own as it is. That is a good point about new investors staying with what they’re comfortable with and can really hinder them in the long run if they stay with that mindset.

      I see your point on what you’d recommend, the problem is though that the large majority of new investors out there can’t do that effectively. I spoke with people in that spot every day for several years and even that was advanced for them.

  • Nick Loper says:

    I’ve been torn between using a service like Betterment or WealthFront, or a traditional financial advisor, but am kind of terrified by the giant upfront fees and the research to suggest that index funds outperform managed funds over the long run.

    And then reading that the Vanguard funds have even lower fees. So still not sure what to do.

    In fact, the indecision has led to sitting on the sideline for most of the year and missing a nice 25% run up!

    • John says:

      I’ve not heard much about WealthFront, so I couldn’t answer to that. I can understand not wanting the fees of a traditional advisor though.

      Sorry to hear you’ve missed out of the run up. That said, you generally can’t go wrong with a solid, low-cost index fund especially if you’re undecided on where to put your money in the market.

  • I just can’t seem to wrap my head around their fee structure, which is really kind of high (considering most accounts will likely have less than 100k), compared to a vanguard index fund. Do they use some sort of algorithm based on answers to questions, or is it personalized service?

    • John says:

      From what I’ve read and researched it’s not algo based, but it personalized to you. That said, I could certainly be wrong on that. What you have to remember about the pricing though is that you’re paying nothing for the trading, rebalancing, etc. It may not be cheaper than a Vanguard fund, but you’d be surprised at how many have difficulties deciding on a Vanguard fund.

  • Sounds like a solid approach. However, this is really just another wrapper around a diversified portfolio of index funds. Look, you can go to Fidelity, Schwab or Vanguard and get pretty much the same thing. They have detailed questionnaires to judge risk tolerance and you sit down with them to craft a portfolio of diversified no-load mutual funds, index funds and ETFs. You do a mix of large, medium and small funds that cover growth, value and blend and you can get a fairly close result with less cost.

    • John says:

      I think it is for the right investor Steven. That said, yes many can go the route of Fidelity, Vanguard and the like but many would not even qualify to have that ability to sit down and talk with someone about the right kind of portfolio to set up for themselves because of the amount they’d be starting with. In the end, it’s another option for a beginning investor to consider as they need to make sure they find something that fits what they need and are comfortable with.

  • Cindy says:

    I keep seeing comments that Betterment is good for beginners. But is it good for someone who’s been investing but is not the DIY type. I’ve been investing for over 10 years, however I have not been active with my accounts. I’ve gone with an advisor and bought some mutual funds that they recommended and it’s just sitting there. I just came to realize how much I’m paying in fees and wanted to look at reinvesting somewhere else. I want something simple but will still get me to my retirement goal. I don’t mind paying a little bit of fees to not have to worry about researching who to invest with and opening accounts with multiple brokerage firms. I also like the automatic rebalancing and tax loss harvest. Would you say this is good for someone like me? I am concerned about the self-custodian part…is my money safe? Is the gains they say accurate?

    • John says:

      Thanks for stopping by Cindy! Not knowing your exact situation, it can be hard to say with definitive confidence that it would be good for you. That said, if you are looking for a more hands off approach that will do much of the heavy lifting for you then Betterment could be a decent option. The fact that they take care of much of the ins and outs is something that’s attractive to me as you don’t really have to deal with it day in and day out as well as having a ton of fees as a result.

      In terms of protection of your money…with Betterment being a brokerage you’re covered through SIPC insurance, which is the brokerage cousin to the FDIC. With SIPC, you’re covered up to $500,000 in account value, of which $100,000 can be cash. What SIPC essentially covers is if the brokerage goes belly up your principle is covered to that amount, though not any losses you may have incurred in the market. Short story long, you’re money would be covered up to that $500,000 threshold. 🙂

  • Marie Constantin says:

    How about safety with this new company? To my understanding the SPIC insurance didn’t help many of the Stanford, the Madoff, or the Morales victims. Where are the assets held? How safe are these people?

    • All great questions Marie! I can’t really speak much to the other victims, but I’ve read quite a bit that some of the Madoff victims were repaid by SIPC, though maybe not completely. The question, as I understand it, is whether or not they were direct investors of Madoff or if they came in indirectly.

      At any rate, in relation to Betterment, personal assets at Betterment are held in street name. Meaning, they’re separate from any other assets at Betterment and are not used to be loaned out (as in the case of a margin account). They do offer the standard SIPC coverage – $100k cash & $400k securities and they’re a custodial just like someone like Schwab or Fidelity where they’re required to keep all records of your assets.

      I hope that helps and please let me know if there is anything else I can answer in relation to this. Thanks for stopping by. 🙂

  • Mehdi says:

    Hello, I am a college student therefore have a tight budget. However, I am very interested in investing my money to start accumulating capital in order to start my own business in the future. It seems as though Betterment might be a good fit for me as a beginner investor. I would be able to withdrawal between $25-$50 a month from my checking account. What would be a realistic goal on my returns? Is there anything else I should know before opening an account with Betterment?

    • Good questions Mehdi. The first question I’d ask is how much control are you wanting to have over the investing? Are you essentially wanting someone to manage it for you – or are you wanting to make the decisions on what specific investments you’ll be in?

      If it’s the former then Betterment is going to be the best option out there. I’d recommend Wealthfront, but they have a minimum balance requirement of $5,000. Betterment does not have that. If it’s the latter, I’d likely go with someone like Motif Investing which gives you a good mix of each. Here’s my review of them –

      As to the return capability, there’s no real way of saying that as no one knows what the market will do. That said, Betterment does take a good basic approach of following the market as opposed to chasing gains.

      Hope that helps! 🙂 Feel free to let me know if you have any other questions.

  • Keith says:

    Hello guys, the comments you all made really helped me to understand some things about investing witch I want to do. I don’t have a lot to invest and I am surely a beginner. I want to understand how little I can invest. If I understand correctly, at betterment I can invest as little as a $100.00 a month. Is that correct? If so what can I expect in return in the long term haul?

    • Glad you’ve found it helpful Keith and awesome you want to get started investing! Yes, you are correct, Betterment allows you to start with as little as $100 per month.

      There’s no way to say how it’d perform in the long-term unfortunately. That being said, their approach is one that aims to be passive and stay with the market – and not something crazy like trying to time the market. That approach will generally help your holdings perform the way the market as a whole is. Hope that helps & thanks for stopping by.

  • Timothy Mullen says:

    i like the reviews of the betterment and thought this was a great break down. but if you start out with just 100$ a month and they are taking 35% of that each month are you really going to make any money? if nearly ever deposit is hit for almost half? guess i am a little confused.

  • Thanks Timothy! Thank you for stopping by as well. The fee is actually .35% of your annual balance if you make the $100/mo deposit – so not truly $35 out of each $100 you deposit . If you’re under that amount per month they move you to the .25% annually plus $3/month.

    One other option to look at is Wealthfront – here’s a review I did of them –

    They have a minimum balance to start of $500, but you get the first $15k managed for free then .25% annually. They don’t require a monthly deposit like Betterment does. They operate very similar to Betterment and offer many of the same funds. Hope that helps, happy to answer any other questions.

  • I really like Betterment and had great success with it. I think that tax loss harvesting alone makes me forget the fees. It is definitively a great choice for non-registered accounts.

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