Betterment Review (original) (raw)

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Who Should Choose Betterment?

Betterment is a solid robo-advisor choice for people who want to get serious about investing for something big, like a home down payment, college fund or their own retirement. Betterment’s algorithms match your risk tolerance and specific goals to diversified portfolios of low-cost exchange traded funds (ETFs).

There is no minimum deposit requirement to open an account, but a $10 minimum deposit is needed to start investing.

Betterment offers two service tiers: Betterment charges an annual management fee of 0.25% or 5/monthdependingonyourbalance,while∗∗BettermentPremium∗∗isanoptionforcustomerswitheligiblebalanceofmorethan5/month depending on your balance, while Betterment Premium is an option for customers with eligible balance of more than 5/monthdependingonyourbalance,while∗∗BettermentPremium∗∗isanoptionforcustomerswitheligiblebalanceofmorethan100,000; across eligible investments and charges an annual fee of 0.65%. Opting into the higher service tier gets you unlimited, free consultations with Betterment’s team of financial advisors.

Opening a Betterment account is relatively straightforward, as is picking the right investment portfolio for each of your goals.

How Betterment Works

You start by giving Betterment your basic personal details, including your age and Social Security number. Then you pick one or more financial goals: building up an emergency fund, long-term investing in a taxable account or saving for retirement in an individual retirement account (IRA). You can choose between a traditional IRA, Roth IRA or a SEP IRA.

To fund your account, you can set up one-time or recurring deposits after you link your external bank account to the platform.

After you enter your particulars and choose your goals, Betterment presents you with a menu of customized investment portfolios for each goal. The default Core Portfolio is made up of ETFs in about a dozen asset classes.

You can choose from several portfolios, including one for socially responsible investing (SRI). The makeup of each depends on what kind of goal you’re saving for. Betterment will generally recommend more stocks, for instance, if you’re looking to save for retirement. If your goal is investing your emergency fund, the portfolio would be mostly bonds.

How Betterment Manages Your Money

Betterment uses a slew of low-cost ETFs that mirror established indexes to help build diversified investment portfolios. The exact mixture of funds depends on your profile and goals.

Exactly which assets allocation you get—or what percentage of your portfolio goes into each fund—is determined by your goals. For instance, an emergency fund portfolio holds roughly 30% stocks and 70% bonds. A general investing fund for a 35-year-old investor—basically money you don’t need for a long while—holds 90% stocks.

Some competing robo-advisors ask you a set of questions to gauge your risk tolerance. Betterment uses your age and goals to fashion the standard Core Portfolio mentioned above as the default choice for a typical investor.

So that 35-year-old will see most of their money directed toward stocks, divied up between asset classes such as large-cap U.S. stocks and big international stocks, among others.

In addition to the default Core Portfolio, the platform differentiates itself from competing robo-advisors by giving you several custom portfolio options to choose from:

Several of these portfolios hold ETFs with higher expense ratios than those in the default Core Portfolio, where you’ll mostly find low-cost Vanguard and BlackRock iShares offerings.

You can also attach other accounts, such as your 401(k) or outside IRA, and Betterment will project how close you are to reaching your retirement needs.

¹Investing in bonds involves risk; performance is not guaranteed.

²Only Betterment provides investment advice to its clients, not BlackRock or Goldman Sachs; no entity provides legal, tax or accounting advice. Learn more about BlackRock and Goldman Sachs.

Other Betterment Features

Professional Financial Advice

Betterment makes it easy to connect with certified financial planners (CFPs) to work through how best to optimize your Betterment accounts as well as broader financial topics.

Betterment Premium users can schedule sessions for free.

Tax Management Features

Betterment offers automatic tax-loss harvesting¹ as a standard feature. Tax-loss harvesting is a method of rebalancing your portfolio holdings to limit capital gains taxes. To help minimize your tax burden, Betterment sells securities that have lost value and replaces them with similar investments.

Betterment also offers a Tax-Coordinated Portfolio feature that allocates investments in certain assets across taxable and tax-advantaged retirement accounts that may help lower your tax bill.

By holding some assets, like bonds, that earn interest income (and may incur taxes) in your retirement accounts, you’ll help minimize the amount of income tax you may owe in a given year. To compensate for moving more of your retirement holdings to bonds, Betterment’s Tax-Coordinated Portfolio shifts more stock holdings to your taxable account.

This keeps your overall portfolio holdings in check for your age and goals while minimizing the amount you may owe in taxes. To use Betterment’s Tax-Coordinated Portfolios, you’ll need to open both a taxable account and a retirement account.

Betterment Checking and Betterment Cash Reserve

Betterment’s cash management accounts—Betterment Checking² and Betterment Cash Reserve—are available as separate, free-standing products. You can open either account, or both, without a Betterment investment account.

Betterment Checking works like a conventional checking account, complete with a Visa debit card. Betterment Checking charges no maintenance fee and zero overdraft fees, and it reimburses all ATM charges. Account balances are held by nbkc bank, which provides up to $250,000 in FDIC insurance for your cash.

The Betterment Visa Debit Card is issued by nbkc bank, Member FDIC. All ATM fees and the Visa 1% foreign transaction fee are reimbursed.

Betterment Cash Reserve operates as a cash account and provides a parking space for cash you haven’t invested in one of your portfolios. You’ll earn what passes for high interest these days—new customers can earn up to 4.00% (variable) APY. Note that after three months, their base rate goes to 3.25% variable APY on all balances as of 12/12/25—and you can make as many monthly transactions as you wish. Betterment partners with multiple banks for Cash Reserve, which offer up to 8million(joint),8 million (joint), 8million(joint),4 million (individual) in FDIC insurance on your eligible balance, subject to certain conditions.

Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. Learn More. Annual percentage yield (variable) is 3.25% as of 12/12/25, plus a 0.65% boost (“APY Boost”) for new clients with a qualifying deposit. $10 min deposit for base APY. Terms apply; if the base APY changes, the Boosted APY will change. FDIC insurance provided by Program Banks, subject to certain conditions.

Crypto ETF Investing

Betterment also offers cryptocurrency investing³. Users can access Betterment’s managed Crypto ETF portfolio:

Betterment does not charge a separate management fee for their Crypto ETF, fees are included as part of their standard investing fee.

Before making any choice, however, investors should understand that cryptocurrency can be extremely volatile³.

Betterment Fees and Costs

The basic tier of service, Betterment, is available for all customers, regardless of their account balances.

Customers with eligible account balances of at least $100,000; across eligible investments can opt in to the Betterment Premium tier of service, for unlimited talks with Betterment’s financial advisors.

For both tiers of service, expense ratios charged by the ETFs comprising your investment portfolios generally range from 0.07% to 0.17%. Expense ratios may be higher for the Socially Responsible, Smart Beta and Target Income built with BlackRock portfolios.

Betterment Advantages

Betterment’s services seem tailored to the needs of younger professionals who are advancing in their careers, are starting and growing families and want help making sense of investing.

The lack of a minimum balance requirement means you can get started immediately (although there’s a $10 minimum to start investing), and the option, and ease, with which you can construct a low-cost SRI portfolio suits a generation disposed to social responsibility. Not all robo-advisors offer SRI portfolios.

We’re big fans of a goals-based approach, where you save a specific amount by a specific time. When first setting up your account, any goals you input require you to declare how much you want to save by a given date, say $10,000 by March 2025. Details like this make it more likely that customers will stick to their goals, rather than indulge in some ambiguous urge to have more money.

The cash management accounts are functional enough to potentially replace your standard bank accounts.

Not all robo-advisors offer tax-loss harvesting, and some require either a minimum balance or additional fees for the feature. Betterment offers tax-loss harvesting for free, which can both lower your potential tax bill and automatically rebalance your portfolio so you maintain only as much risk as you’re comfortable with.

Betterment Disadvantages

The various portfolio options are useful, but new investors may feel a bit overwhelmed by the choices. How do you know if, say, an SRI fund is right for you? How are you to tell the difference between a smart beta portfolio and the default option?

Adopting the default Core Portfolio option provides diversification at a low cost, matching your risk tolerance and savings needs. SRI, on the other hand, is a moral choice—but the expense ratio fees tend to be higher. New investors, meanwhile, probably won’t need to mess with smart beta funds or tailoring a portfolio’s asset allocations.

We’re not particularly impressed with the recommended portfolio for your emergency fund. You’ll likely be presented with one that invests 30% in stocks and 70% in bonds. While the majority of that is likely in a relatively liquid asset, like short-term Treasury bonds, it’s still too much risk for money that is meant to be available at a moment’s notice when you need it.

We can understand their reasoning: money parked in a savings account will get chipped away by inflation and Betterment’s algorithms say that such a fund will protect value by earning a bit more without taking on too much risk.

That may appeal to some, but it’s easy to imagine a world where both stocks and bonds drop in value at the same time when you lose a job and want access to emergency cash to pay your bills. At such a time, you don’t want to be forced into selling low. Some users might feel better about keeping emergency funds in their Betterment Cash Reserve account, or even better, a separate high-yield online savings account.

¹Betterment does not provide tax advice. TLH is not suitable for all investors. Learn more.

²Account is FDIC insured up to $250K through nbkc bank, Member FDIC. FDIC insurance only covers the failure of an insured bank. Betterment is not a bank.

3Crypto ETFs involve risks such as price volatility, limited history, technology flaws, and loss of principal.