This is one of the simplest and most affordable ways to invest your money

Investing for the future is something everyone should be doing, whether for retirement or a rainy day fund. In today's low interest rate environment, you can't leave your money in a basic savings account or a CD and expect much growth. But how do you figure out what to do with your money if you did not major in business in college? And if you don't have the money to pay someone to manage your money? That's where robo-advisors like Betterment come into play. 

What is Betterment?

Betterment is a popular financial robo-advisor, with roughly $4 billion under management. It is an automated investment platform that uses MPT (Modern Portfolio Theory) to create a diversified portfolio that aims to minimize risks while outperforming the market over the long run.

Why use Betterment?

Its main purpose is it to manage your savings automatically — so that you don’t have to. Rather than just saving your money in a bank CD, which can lose money against inflation, you are passively investing (i.e. not paying an advisor to actively manage your funds or study the stock market yourself). Investing on your own requires time and knowledge that not everyone has. Meanwhile, hiring a professional account manager is expensive; the average equity mutual fund charges around 1.3-1.5% in management fees, whereas Betterment's is between 0.15-0.35%. That's about 10% of the average fee for the top tier Betterment account.

The fee you pay Betterment is determined by how much you have invested with them, and is on a sliding scale that encourages continual investment: 

Betterment charges a fee of 0.35% per year for accounts under $10,000 (or a $3 monthly fee without at least a $100 monthly auto-deposit). That fee drops to 0.25% on accounts bigger than $10,000, and to just 0.15% on accounts over $100,000. Rather than paying more the more you save, you end up paying less.

There's also diversification. One of the scariest things that can happen to a new investor is for their individual stock picks to go down, which happens all the time. Betterment also aims to maximize your money's return by investing in different areas that would each react differently to the same event. According to Investopedia, "Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk."

If you're interested in starting an account, click here. 

Where does Betterment invest?

Betterment invests in ETFs (Exchange Traded Funds), which are tax-efficient investment products that pool together many small investors' money to buy shares or bonds of multiple companies. ETFs trade on the world's public markets just like traditional stocks. They also have lower transaction costs than buying individual shares from typical brokers or electronic platforms.

You, the user, can decide the level of risk you want by allocating your investment between different ETFs (in both stock funds or bond funds). 

The overarching theme of Betterment's asset allocation is providing you with a diverse, and therefore, theoretically safer portfolio that should earn you money over the long term.

If you're interested in starting a Betterment account, click here. 

Betterment

What features does Betterment have?

Betterment is straightforward to set up and if you choose automatic deposits, you can have an investing program working for you that's completely hands-off.

• With a goal-setting feature called RetireGuide, you can plan your retirement income based on your savings, when and where you can retire, how much you should be saving each year to achieve that goal, and where exactly to invest your money.
• SmartDeposit is an optional feature that will automatically invest your money of a specific amount from your bank account. This is a forced savings strategy similar to microsavings services like Acorns, which allows you to keep excess cash in your account growing by investing — not losing by competing against inflation.
• These automated programs also work to balance your accounts in the most tax-efficient way possible. Through tax-loss harvesting (which helps boost your after-tax returns) and select asset allocation, Betterment can potentially help make your dividends more tax efficient.
• Betterment also invests fractional shares. This means that all of your money is invested — it does not round your money to the nearest whole share.

Lastly, Betterment has a $0 account minimum. And you can receive up to six months of free management to begin planning your saving strategy.

If you're interested in starting a Betterment account, click here. 

Who is Betterment for?

Betterment can be for a variety of people. It's helpful for novice financial investors who want to invest, but don’t have the knowledge to do it on their own, or the funds to pay for a professional manager. Specifically, millennials have notably poor retirement plans. Because Betterment's management fees are low, even at a high level, it is also a useful resource for those looking to dodge the more expensive fees that professional account managers and other investing services charge. 

All in all, Betterment is for anyone who knows they need to invest, does not have the means — be it knowledge, time, or money, — and is looking for an inexpensive answer. While retirement may seem far away, the time to save for it is right now.

If you're interested in starting a Betterment account, click here.

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