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Betterment Review 2020: Everything You Need to Know

The first robo-advisor, Betterment is a popular, large automated investment advisor offering low-cost investing, tax optimization, excellent cash and checking accounts, and a human touch. If you are looking for a goals oriented investing approach that you can set and forget, Betterment is an excellent choice.

Asset Brief is an independent publisher focused on helping you improve your financial decisions. Some of the products featured may be from our partners. This does not influence our reviews, which are based on many hours of research.

5.0 AssetBrief rating

Betterment’s low management fees, goals-driven investing, ease of use, and human advising options make it a great choice for beginners and advanced investors.

Management fee
Account minimum
investment fund

What is Betterment great for?

  • Great for beginners
  • Hands-off investors who want a “set it and forget it” investment approach
  • Investors who want a more human touch — financial advisors are available to provide guidance
  • Advanced investors who want to tweak their portfolio based on their market views
  • Socially conscious investors interested in a socially responsible investment option
  • Long term investing and exposure to the stock market
  • Retirement planning
  • College savings plan
  • Goal planning approach
  • Automated monthly deposits towards financial goals
  • Cash savings account
  • Checking account

Pros & Cons

Fast and easy account setup
Excellent user interface that is very easy to use
Goal oriented investment approach, with the ability to add as many goals as you want
Automated periodic transfers to fund goals
Sync external accounts to see your holistic financial picture
Intelligent portfolios optimized based on your financial goals and time horizon
Retirement accounts
Taxable investment accounts
High yield cash account
Checking account
Socially responsible investing option
Ability for advanced investors to tweak your portfolio weights
Tax optimization strategy including tax-loss harvesting and asset location
No trading commissions
529 college savings account
Ability to speak with certified financial experts
Automatic portfolio balancing
Fractional shares which allow investors with low minimum balances to still take advantage of Betterment’s offerings
Two tiers of service based on how often you would like to speak with a financial expert
Inability to borrow or take a line of credit out against your investments
No option for individual stock or fund picking

A quick look at Betterment

Feature Details
Minimum balance
  • $0 for Betterment Digital
  • $0 for savings / checking accounts
  • $100,000 for Betterment Premium
Management fee
  • 0.25% for Betterment Digital
  • 0.40% for Betterment Premium. Premium includes Digital and provides unlimited access to a human financial advisor
Account fees

No account opening, withdrawal, account closing, trading, or account transfer fees.
Expense ratios
Betterment’s ETFs have an average expense ratio of around 0.11% compared to around 0.50% for the industry.
Portfolio construction
Betterment considers 14 asset classes for your portfolio.
  1. US Total Stock Market
  2. US Value Stocks - Large Cap
  3. US Value Stocks - Mid Cap
  4. US Value Stocks - Small Cap
  5. International Developed Market Stocks
  6. International Emerging Market Stocks
  7. US High Quality Bonds
  8. US Municipal Bonds
  9. US Inflation-Protected Bonds
  10. US High-Yield Corporate Bonds
  11. US Short-Term Treasury Bonds
  12. US Short-Term Investment-Grade Bonds
  13. International Developed Market Bonds
  14. International Emerging Market Bonds
Portfolios are constructed from these asset classes based on your investing time horizon.
Portfolio choices
Investors choose their financial goal and how many years it will take them to reach the goal. Based on this, Betterment constructs a portfolio comprised of a mix of stock and bond asset classes.

Four portfolio choices
Betterment uses the default Betterment Core Portfolio, but you can switch it out for one of four portfolios.

  1. Betterment Core Portfolio (default)
  2. Socially Responsible Investing Portfolio
  3. BlackRock Target Income Portfolio
  4. Smart Beta Portfolio

Ability to tweak portfolio holdings
You can tweak the weights of the individual asset classes inside your portfolio.
Investment vehicles
Exchange Traded Funds (ETFs) are used to represent each asset class.
Available accounts
  • Cash / Savings accounts
  • Checking account
  • Investment accounts (individual and joint accounts)
  • Retirement accounts: traditional IRA, Roth IRA, Roth conversions, SEP IRA, and 401(k) and 403(b) rollovers
  • 529 college investing plan
  • Trust accounts
Tax efficiency
Automatic tax-loss harvesting and asset location to increase after-tax returns.

Tax Impact Preview allows you to preview tax impact of portfolio changes.
Automatic rebalancing

Portfolios are rebalanced automatically for no additional fee. Deposits, withdrawals, and dividends trigger rebalancing.
Human financial advisors
Financial advisors are available by phone for an additional fee. Advisors are Certified Financial Planners.

Advice packages are $199 for a 45-minute phone conversation and $299 for a 60-min conversation.

Betterment Premium, which has a 0.40% management fee, offers unlimited access to a financial advisor.
Resources & tools
Many tools and resources available. Goal setting tools are excellent.
Savings account
The Betterment Everyday Cash Reserve is a high yield savings account, with up to $1 million FDIC insured.
  • No fees
  • Unlimited transfers
  • Minimum deposit of $10
  • No minimum balance
Checking account
Betterment Everyday Checking is coming soon, but not yet available.
  • No fees
  • No minimum balance
  • ATM fees are reimbursed worldwide
  • FDIC insured up to $250,000
  • No overdraft fees
Customer support
9am - 6pm ET, Monday-Friday

You can ask technical questions as well as investing questions.
Ease of use
Very easy to use platform.
Line of credit
Not available
Mobile app
Available for iOS and Android. Very easy to use, and apps on both platform are highly rated.

Our review

Betterment’s goal-driven investing approach combined with a low management fee, tax optimization, and an easy to use interface cements its place as one of the top robo-advisors for beginners and investors who want a set it and forget it approach.

What is Betterment?


Betterment, founded in 2008, was the first robo-advisor, an online automated investment advisor that helps you manage your investing and retirement accounts. Today, it is one of the biggest online robo-advisors.


Betterment was founded in 2008 and launched 2010 in New York City by Jon Stein, a Harvard and Columbia Business School graduate, and Eli Broverman, Brown and NYU School of Law graduate.

How has Betterment grown over time?

Since its 2010 launch, Betterment has grown to over $16 billion in assets under management, 245 employees, and over 542,000 users. The average user invests around $30,000 with Betterment.

Where Betterment stands out

No minimum balance

Betterment has no minimum balance for its popular Betterment Digital investing offering.

The upgraded premium option, Betterment Premium, offers unlimited access to financial advisors and has a $100,000 minimum balance across all your investing accounts at Betterment (e.g. retirement accounts, taxable accounts, etc.).

Goals-driven investing

What makes Betterment stand out is its goals driven approach to investing. For example, you can set up goals for retirement, buying a house, purchasing a car, going on vacation, and more. You can add as many goals as you want.

First, you choose the primary purpose of this goal.

The primary goal types are:

  1. Cash reserve - A high yield savings account
  2. Safety net - For building an emergency fund
  3. Retirement - IRA, Roth IRA, 401(k), 403(b)
  4. Education - For private school, continuing education, or college
  5. General investing - When you don’t have a particular goal in mind, but would like to invest your spare cash
  6. Major purchase - Dream house, car, vacation, and more

Next, you input details about your goal.

You can give your goal an icon and a name. You then give your goal a target dollar amount, such as $10,000, and when you need to meet your goal, such as 5 years.

Finally, based on your investment horizon and target amount, Betterment will automatically create an optimized portfolio for you.

The longer the investment horizon, the more your portfolio will be weighted towards stocks. The shorter the time horizon, the more it will be weighted towards bonds.

This is because while stocks are riskier than bonds — they have a higher chance of going up and down — they also tend to have higher returns.

If you have a longer time horizon, it’s okay if your portfolio goes down in a week because there’s a good chance that in three years, it will be up. However, if you need to meet your goal in 6 months, you really don’t want to risk having your portfolio be less than what you put in.

Automated rebalancing

Betterment will automatically change the mix of your portfolio as the time horizon to your goal decreases.

Remember that if your time horizon is short, the portfolio will be more weighted towards bonds and if it is long, the portfolio will be more weighted towards stocks.

If you have a 10 year goal that you are saving towards, as the time horizon decreases from 10 years to 8 years to 5 years to 2 years, Betterment will automatically adjust what your portfolio invests in.


To decrease the risk of your portfolio losing value as you get closer to needing the money.

Automated saving & recurring deposits

If you want to automatically put away $10 or $200 towards a financial goal every month, you can do that with Betterment.

This is a great way to set a goal and forget, while working towards that goal every month.

Betterment lets you decide how often you want to contribute to your goal, whether it’s weekly, every other week, twice a month, or monthly. And you can choose what date this is, so you can match up the recurring deposits with when you receive your paycheck.

Not sure how much you should be contributing each month so you reach your goal?

Betterment will tell you. You can toggle the deposit frequency, and Betterment will show you how much you should be contributing so that you meet your goal.

Human financial advisors

Unlike robo-advisors like Wealthfront, Betterment provides access to human financial experts who can provide advice on your financial plan and how to use Betterment.

Individual calls

If you have a Betterment account, you can set up call with a financial advisor. A licensed financial expert will review your finances, create an action plan, and provide you with education content. Packages range from $199 to $299 for a 45-60 minute call.

The options are:

  1. Getting Started - $199
    45-minute call to help set-up your Betterment account

  2. Financial Checkup - $299
    60-minute call to review your financial situation and investment portfolio

  3. College Planning - $299
    60-minute call

  4. Marriage Planning - $299
    60-minute call to review both of your financial goals, merging finances, budgeting, and debt

  5. Retirement Planning - $299
    60-minute call to review your financial situation and investments

Unlimited calls

If you are interested in on-going calls with a financial expert, Betterment offers the Betterment Premium plan, where you pay a higher account management fee of 0.40% and receive unlimited access to financial experts.

Two-tier investment plan

Betterment offers two types of investment plan, depending on whether you want to have unlimited access to financial advisors.

Betterment Digital

Betterment Digital is the regular plan that most people choose. It has a management fee of 0.25% and provides access to all the robo-advising features.

Betterment Premium

The Betterment Premium plan has everything the Digital plan has and offers unlimited access to financial experts for financial guidance. The plan has a management fee of 0.40% per year and a minimum balance of $100,000.

Discount for high balances

For both plans, if you have more than $2 million with Betterment, you receive a 0.10% fee discount on amounts above $2 million.

Multiple investment options

Whereas some robo-advisors, like Wealthfront, offer only one portfolio option — the optimized portfolio they have created for you, Betterment offers four portfolio options. Each option is available at the individual goal level.

You can have multiple portfolio strategies within your Betterment account.

Who is this useful for?

This is great for the investor who wants to be more active in investing.

For the beginner, these investment options are just that — options — there’s no need to use them and you can stick with the default Betterment portfolio.

Portfolio strategies

The default portfolio strategy is the Core Portfolio. This is a set of globally diversified stock and bond allocations.

You can choose to not use this and instead use one of the following.

  • Betterment’s Socially Responsible Investing Portfolio strategy
    • For the socially conscious investor, this portfolio reduces exposure to companies that don’t meet certain social, governance, and environment criteria

  • Betterment’s BlackRock Target Income Portfolio strategy
    • A predominantly bond ETF portfolio managed by BlackRock
    • You can choose among four risk profiles
    • BlackRock is one of the biggest global investment management companies with over $7.4 trillion in assets under management

  • Betterment’s Smart Beta portfolio strategy
    • A portfolio managed by Goldman Sachs Asset Management, that takes on more systemic risk
    • Goldman Sachs is one of the biggest investment banks in the world

Ability to tweak portfolio weights

For the more advanced investor who has views on the financial markets, Betterment allows you to tweak the weights of each asset class in your portfolio.

Do you want to increase your exposure to US large cap value stocks? You can do that in Betterment.

You will still benefit from Betterment’s tax optimization strategy.

Use of low-cost ETFs to provide exposure to a breadth of asset classes

Low-cost Exchange Traded Funds (ETFs) are used to construct your portfolio, which keeps your fees down.

ETFs passively track indexes like the S&P 500 and are not actively managed, which keep your expense ratios low.

ETFs are also more tax efficient than mutual funds.

Low management fees

Betterment’s 0.25% management fee for its Digital plan is low and accessible. Mutual funds generally charge 0.5% to 0.8%, according to the Investment Company Institute.

Cash/savings account fee is 0%.

Tax strategy

Betterment offers tax optimization at no additional fee. This includes tax-loss harvesting, automated asset location, and tax impact preview.

Tax-loss harvesting sells assets that have gone down in price to help lower your taxes. The sold asset is replaced by a very similar one, so your portfolio allocation does not change.

Automated asset location will optimize which of your accounts will hold assets with higher or lower tax rates. Ones with higher tax rates will be held by your tax-advantaged retirement accounts. Ones with lower tax rates will be held in your taxable investment accounts. You will need both a taxable and tax-advantaged retirement account at Betterment to take advantage of this.

Tax Impact Preview lets you see the impact of taxes on withdrawals and allocation changes before you make.

Easy to use

Betterment is extremely easy to use both on the desktop and on mobile. The design is clean and simple.

Link external accounts

External accounts at other financial institutions can be linked to Betterment to help you see your entire financial picture and take advantage of Betterment’s online investment tools.

Linking external accounts only takes a few minutes.

High yield savings account

If you are looking for a place to park your cash and still earn decent interest rates, Betterment’s high yield savings account — Betterment Everyday Cash Reserve — might be a good fit.

It has no fees, no minimum balance, unlimited transfers, and is insured by the FDIC for up to $1 million. Rates are variable and tied to the Federal funds rate.

This account can be an individual or joint account.

Checking account

Betterment will be launching its checking account — Betterment Everyday Checking — which has no monthly maintenance fee, no minimum balance, no overdraft fees, and is FDIC insured up to $250,000. ATM fees will be reimbursed worldwide.

The account will come with a Visa debit card.

Thus far, over 157,000 have joined the waitlist to join.

Fractional shares

Unlike Wealthfront, Betterment uses fractional shares. What does this mean? This means that your cash can be used to purchase a fraction or an ETF share.

When is this useful? This is great if you have a low minimum balance.


For example, let’s say that a share of ETF XYZ costs $150 and you have only $100 in your account. Without fractional shares, you would not be able to invest in XYZ. However, with fractional shares, you can purchase $100 / $150 = 66% of XYZ.

More of your money can be invested.

Where could Betterment could improve

Tax-loss harvesting at a stock level

Whereas Wealthfront has tax-loss harvesting at a stock level for higher minimum balances, Betterment only has tax-loss harvesting at the index level.

This means that Wealthfront can sell the underlying stocks of the ETF, whereas Betterment will only sell the ETF.

However, Betterment does offer an “asset location” strategy, which will place tax efficient assets into your taxable accounts and tax inefficient assets into your tax-advantaged retirement accounts. Wealthfront does not offer this.

Betterment also provides a Tax Impact Preview tool that lets you see the impact of taxes on any portfolio changes before you make them.

Ability to invest directly in stocks

If you want to directly invest in a stock or an ETF, you will not be able to with Betterment. You might consider opening a separate brokerage account to do this.

Betterment returns and performance

How would your investment in Betterment have performed?

We can look at the 1, 3, and 5-year returns based various Betterment allocations. Betterment allocates your portfolio between a mix of stocks and bonds. Longer-term goals have more stocks and fewer bonds in the portfolio and short-term goals have fewer stocks and more bonds.

We compare Betterment’s returns to two common benchmarks on both ends — on the stock end, the S&P 500 index and on the bond end, the 5-year US Treasury bills. These are not perfect benchmarks, because Betterment also invests your stocks in global ETFs. The S&P 500 represents only about 80% of the US stock market and 36% of the world’s total stock market.

It’s important to note that Betterment’s portfolio is not about beating the S&P 500. It’s about creating a portfolio with the optimal mix of stocks and bonds for your goals. If your goal is shorter term, you want less risk, and so you don’t want to be as exposed to the overall stock market, like the S&P 500., Betterment

Full review

What’s the theory behind Betterment?

Passive investing

Betterment is a proponent of the passive buy and hold strategy. This is when you buy a basket of stocks and bonds and hold them over a long period of time. The converse is when you are constantly buying and selling in the hopes of timing the market.

Modern Portfolio Theory

Modern Portfolio Theory, a popular economic theory, is the basis for how Betterment invests your money. Modern Portfolio Theory is a popular theory that has been around since the 1950s and earned its creator a Nobel Prize.

The theory constructs a portfolio optimized for an investor’s risk tolerance.

Betterment takes this theory one step further, and weights the portfolio towards:
1. Value stocks, and
2. Small cap stocks

Value stocks are stocks that are relatively cheap compared to their earnings. Small cap stocks are stocks with a small market capitalization, generally under $1 billion.

How does Betterment construct your portfolio?

Betterment first determines how much of your portfolio to weight towards stocks and how much to bonds. Stocks are riskier, but tend to have higher returns. Bonds are less risky, but generally have lower returns.

Betterment uses your investing time horizon to determine the asset allocation of your portfolio. If your time horizon is longer, your portfolio will be weighted more towards stocks. If it is shorter, the portfolio will be weighted more towards bonds.

Betterment then constructs your portfolio from a set of 14 asset classes to provide diversification.

These are:

  1. US Total Stock Market
  2. US Value Stocks - Large Cap
  3. US Value Stocks - Mid Cap
  4. US Value Stocks - Small Cap
  5. International Developed Market Stocks
  6. International Emerging Market Stocks
  7. US High Quality Bonds
  8. US Municipal Bonds
  9. US Inflation-Protected Bonds
  10. US High-Yield Corporate Bonds
  11. US Short-Term Treasury Bonds
  12. US Short-Term Investment-Grade Bonds
  13. International Developed Market Bonds
  14. International Emerging Market Bonds

How do I open a Betterment account?

Creating a Betterment account is very quick and easy. It takes less than 15 minutes.

Betterment will ask you for your email and password, as well as identifying information such as address and social security number, which they must ask for in order to comply with the USA PATRIOT ACT.

What are Betterment’s fees?

Betterment charges a 0.25% annual management fee for its basic investing plan, called Betterment Digital. This gives you access to all of its investing tools and portfolio optimization resources.

If you are interested in unlimited calls with a financial advisor, you can upgrade tot he Betterment Premium plan, which charges a 0.40% annual management fee and requires a minimum balance of $100,000.

The high yield savings and checking accounts have no fee.

Is my money safe with Betterment?

Your money is pretty safe with Betterment. Betterment has a similar setup to big financial institutions such as Fidelity or Charles Schwab.

It has an investment arm, Betterment LLC, which is a US Securities and Exchange Commission (SEC) registered investment advisor, and a broker arm, Betterment Securities, a FINRA member who executes trades and is the custodian of your assets.

FINRA is the leading regulatory organization for broker dealers in the US.

Your investments are SIPC (Securities Investor Protection Corporation) protected up to $500,000 per account. Your cash in the savings and checking accounts are also insured.

Is Betterment good for beginners?

Betterment is an excellent choice for beginners because it automates your investing without requiring a lot of input from you.

All you need to do is set up your goals and time horizon, and Betterment will create the optimal portfolio and adjust this portfolio over time.

Similarly, if you open a retirement, college savings, or general investing account, Betterment will optimize with little oversight from you.

For those who don’t have the time or the desire to manage your finances directly, Betterment is a great alternative.

Should you use Betterment?

Betterment is a great choice for investors who want a hands off approach to managing their money. It’s great for those who want to “set it and forget it.” Its ‘science’ is grounded in decades of economic theory, and its low management fees are attractive.

With a variety of investment accounts available — general investing, retirement, and college savings accounts — as well as a goals driven investing approach, Betterment is a great choice whether you want to save for the long term or want to save for a particular financial goal, like buying a house or going on a nice vacation.

It also offers a high yield savings account, which is a great place to stash your spare cash, and with the future launch of its checking account which will come with a Visa debit card, Betterment is turning into a great place to both invest and store your money.

For those who are interested in stock picking, Betterment can be a great complement to your brokerage account.

Betterment is solid choice for beginners and investors who want a hands-off approach.