The hardest part of investing is taking that first step. Most people never start investing because they lack the knowledge of where to invest. Today we have so many different investment companies competing for our money. Their advertising can sometimes be confusing and contradictory. Even if you do manage to sign up for an account then you are faced with the choice of what to invest in. All these concerns have been addressed and solved by Betterment.com.
The application process allows you to get started entirely online. They say you can the process only takes 60 seconds. It takes a little longer but couldn't be easier. Enter your personal information, they verify it through information on your credit report. You then enter your bank information so they can link it to set up quick deposit and withdrawls.
After answering a few simple questions Betterment.com offers a asset allocation suggestion based on my answers, goals and age. They gave me an allocation of 50% stocks/50% bonds.
Their current breakdown of stocks and bond portions are:
Stock Portion Only
- 25% Vanguard Total Stock Market (VTI)
- 25% iShares S&P 500 Value (IVE)
- 25% Vanguard Europe Pacific (VEA)
- 10% Vanguard Emerging Markets (VWO)
- 8% iShares Russell Midcap Value (IWS)
- 7% iShares Russell 2000 Value (IWN)
Bond Portion Only
- 50% iShares Barclays TIPS Bond ETF (TIP)
- 50% iShares Lehman 1-3 Year Treasury Bond ETF (SHY)
What's all this going to cost me? (fees)
When I last reviewed Betterment.com they had a 0.9% annual fee for all accounts with balances up to $25,000. There were no monthly fees, no maintenance fees, no minimum requirements, and no commission charged for any trades. In March, their fee schedule has been changed to lower fees for most users, but also raised some fees for certain smaller accounts.
Here is the new fee schedule:
If your just getting started there is a requirement to have $100 per month added to your account. If you do not they charge a $3 monthly fee. This should not be a problem if you plan on making the $100 minimum deposit every month. If you are not ready to at least invest $100/month do not sign up for this program.
Remember that to open an account and receive the $25 bonus you must have an initial deposit of $250. Add that to the monthly deposit of $100, at the end of the year your balance should be $1,450. With a 0.35% annual fee you will be paying about $5 of annual fees. Compare that to a discount brokerage that charges from $9.99/trade to $3.95/trade. Using Betterment,com keeps fees low and more money working for you.
$25 Bonus Offer For New Accounts
The $25 bonus offer for opening a new account, with a $250 initial deposit is a sweet way to try the process out.