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Anyone use a robo-investment service like Betterment?

fuzzybabybunny

fuzzybabybunny

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How well does it do? What are your thoughts on it? I'm considering moving parts of my portfolio over to one. I personally do not have the know-how nor interest to study up on the intricacies of the market and to keep current with the nitty-gritty of business news.
 
It's stupid. Puts too much money in shit like bonds. Charges you for what should be a 1 time fee of "put it in no-load SPDR"
 
fuzzybabybunny said:
Can't you adjust how aggressive the algorithm is so that it doesn't invest in any bonds?
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There are various algorithms that use balanced portfolio theory, which leads to some amount ending up in non-equity securities... and if I wanted a non-equity security I would buy an I-bond. If I wanted to go past the max on i-bonds I would wonder what I did wrong with my life that I should be so afraid of the world that I'm buying TIPS

But if you were inclined to pay some asshat in a suit to waste all your money: yea, do this instead.
 
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Vanguard LifeStrategy or Target Retirement mutual funds.

LifeStrategy funds maintain static allocations of stocks and bonds, and are available in four varieties: 20% stocks/80% bonds, 40/60 s/b, 60/40 s/b, and 80/20 s/b.

Target Retirement: They start with mostly stocks and some bonds, and then as the target date gets closer, they automatically start to shift more into bonds in order to reduce volatility risk. TR funds are as set-it-and-forget-it as you can get when it comes to investing, especially with it set up to auto-invest. Your bank account will see a regular deduction on a schedule you choose, and it's invested. Dividends can also be set to auto-reinvest in the fund.


They're also low-cost, and don't have front-loads or back-loads, so you're not paying lots of money in fees for advisors who can't guarantee good performance anyway.




Betterment: I'm not too familiar with it, aside of what I'm getting from their Wiki page now....
My IRA is held directly at Vanguard. I haven't had need to get a third party involved. Looks like their pricing isn't bad compared to what some other financial advisors would cost you.
(If your long-term annual growth rate is at a historically-reasonable 7%, even a 1% fee is hefty: That's 14% of your annual return. Over a lot of years, that makes a big difference. You're supposed to be investing for your retirement, not the advisor's.)
 
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jlee said:
Vanguard index funds ftw.
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This.

Want safety? Use Index Funds.
Want self-adjusting hands-off? Use Index Funds.
Want Aggressive? Use Index Funds (higher retirement year)
Want Safer less aggressive? Use Index Funds (lower retirement year).
Want Cheap? Use Index Funds.
Want cheaper than cheap? Maybe you will find SLIGHTLY cheaper in simple non-adjusting index funds like one for the S&P. But that requires adjusting and monitoring.

Unless you're an expert, or incredibly young to the point where it doesn't matter how aggressive you are (20's and maybe early 30's), then I see no reason not to go for Vanguard Target Retirement Index accounts. If your 401k fees are too expensive, focus on your IRA first.
 
s0me0nesmind1 said:
This.

Want safety? Use Index Funds.
Want self-adjusting hands-off? Use Index Funds.
Want Aggressive? Use Index Funds (higher retirement year)
Want Safer less aggressive? Use Index Funds (lower retirement year).
Want Cheap? Use Index Funds.
Want cheaper than cheap? Maybe you will find SLIGHTLY cheaper in simple non-adjusting index funds like one for the S&P. But that requires adjusting and monitoring.

Unless you're an expert, or incredibly young to the point where it doesn't matter how aggressive you are (20's and maybe early 30's), then I see no reason not to go for Vanguard Target Retirement Index accounts.
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Safety: Only safe from excessive fees, and only in some cases. You can still buy expensive index funds. There are also active funds that really act like index funds, but without the low price.
They're certainly not safe from market risk. If the index plunges, you'll go along for the ride. (Most active investors will also be there with you.)


If your 401k fees are too expensive, focus on your IRA first.
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- 401k up to the full match amount.
- IRA.
- Pile more on the 401k.

If you've got a really good 401k though with cheap, diversified options (some do exist, amazing😱) and a good match, feel free to shove money into it. But you're usually stuck with the fund options you're given.
 
Jeff7 said:
Safety: Only safe from excessive fees, and only in some cases. You can still buy expensive index funds. There are also active funds that really act like index funds, but without the low price.
They're certainly not safe from market risk. If the index plunges, you'll go along for the ride. (Most active investors will also be there with you.)
Click to expand...

Oh believe me, if you want safety you should totally bury your dollars in the backyard. Or hide it in your mattress.

There is no such thing as "safety" in terms of actual dollars. You can lose to inflation or you can put it to risk.
 
Jeff7 said:
Safety: Only safe from excessive fees, and only in some cases. You can still buy expensive index funds. There are also active funds that really act like index funds, but without the low price.
They're certainly not safe from market risk. If the index plunges, you'll go along for the ride. (Most active investors will also be there with you.)


- 401k up to the full match amount.
- IRA.
- Pile more on the 401k.

If you've got a really good 401k though with cheap, diversified options (some do exist, amazing😱) and a good match, feel free to shove money into it. But you're usually stuck with the fund options you're given.
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The tax advantage of a 401k will pretty much always outweigh plan fees (IMO). $18k tax-advantaged is nothing to sneeze at.
 
I'm trying Betterment. I was sold on the promise of something called "Tax Loss Harvesting". It's some kind of tax loophole. But apparently they can only guarantee it's legal if you have no other investments anywhere else. And I'm not sure yet if money in a pension plan or in a money market in a retirement account count as "other investments". So I haven't turned on "Tax Loss Harvesting" yet.
 
edro said:
My 401k has an S&P500 fund that is only .32% Expense Ratio.
I have a good sized chunk in that.

Everything else is up in the 1%+ range.

Are everyone's 401k funds this expensive?
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No, NOT AT ALL.

Personally. I would do as Jeff stated (and I implied) with putting in an amount equal to your max company match, and then fill up your IRA before worrying about putting anymore in your 401k. That is excessively high.

Right now, the majority of my 401k is in Target Retirement 2050. It has a 0.05% expense ratio. We have a total of 66 options, with higher fee ones for more risky emerging markets ones. I would post them all, but the list is too long.

If I want even smaller, I can do:
Vanguard Inst Index Fund Inst Plus 0.02%
Vanguard Tot Stk Mkt Idx Inst Plus 0.02%

I'm not saying I have "normal" expense ratio's vs. Other employers. But I will tell you that .32% is a part of the "high" employers.
 
Ken g6 said:
I'm trying Betterment. I was sold on the promise of something called "Tax Loss Harvesting". It's some kind of tax loophole. But apparently they can only guarantee it's legal if you have no other investments anywhere else. And I'm not sure yet if money in a pension plan or in a money market in a retirement account count as "other investments". So I haven't turned on "Tax Loss Harvesting" yet.
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LOL

That sounds to me with "Tax Loss Harvesting" is simply what boils down to a net loss. If you invest $10,000 into Company A and gain $1000, but also invest $10,000 into Company B and lose $3,000 - you can effectively claim a net loss of $2,000. That's not a tax loophole, nor should it ever be considered one.
 
Ken g6 said:
I'm trying Betterment. I was sold on the promise of something called "Tax Loss Harvesting". It's some kind of tax loophole. But apparently they can only guarantee it's legal if you have no other investments anywhere else. And I'm not sure yet if money in a pension plan or in a money market in a retirement account count as "other investments". So I haven't turned on "Tax Loss Harvesting" yet.
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You should look up tax loss harvesting and the wash-sale rule.

Thats because of the wash-sale rule. the loss will be disallowed if the same stock is purchased within 30 days even if its in another account.
 
s0me0nesmind1 said:
No, NOT AT ALL.

Personally. I would do as Jeff stated (and I implied) with putting in an amount equal to your max company match, and then fill up your IRA before worrying about putting anymore in your 401k. That is excessively high.

Right now, the majority of my 401k is in Target Retirement 2050. It has a 0.05% expense ratio. We have a total of 66 options, with higher fee ones for more risky emerging markets ones. I would post them all, but the list is too long.

If I want even smaller, I can do:
Vanguard Inst Index Fund Inst Plus 0.02%
Vanguard Tot Stk Mkt Idx Inst Plus 0.02%

I'm not saying I have "normal" expense ratio's vs. Other employers. But I will tell you that .32% is a part of the "high" employers.
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Wow, your Target 2050 is only .05%?!
.32% is my CHEAPEST fund!

I just checked again. My STABLE VALUE fund, which is essentially money market is 0.2%!!

F'in Prudential.

Man, I am really thinking about switching most of my contributions over to IRAs at Vanguard.

Thank you for pointing that out.
 
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Kind of got a kick out my wife this morning.

"I'm off to my job making rich people richer"

I guess what she does these days.
 
edro said:
Wow, your Target 2050 is only .05%?!
.32% is my CHEAPEST fund!

I just checked again. My STABLE VALUE fund, which is essentially money market is 0.2%!!

F'in Prudential.

Man, I am really thinking about switching most of my contributions over to IRAs at Vanguard.

Thank you for pointing that out.
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Yar, it's 0.05%. It probably helps that my employer plan is also with Vanguard 😀

For a Vanguard IRA, you can get a Target retirement for 0.18% as well. Could skim more off the top if you get a non-target account with them as well, but at this point I like the hands-off approach.

I would definitely consider going to IRA first. Personally though, even if my 401k sucked - I maxed out my IRA, my wife's IRA, and even my 401k in full this year. Point simply being, after you max out your IRA @ the measly amount of $5500, you have little choice outside of 401k contributions.
 
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edro said:
My 401k has an S&P500 fund that is only .32% Expense Ratio.
I have a good sized chunk in that.

Everything else is up in the 1%+ range.

Are everyone's 401k funds this expensive?
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Not everyone's. Plenty of plans are though.
Most of my options are around 1%. The Target Retirement funds are around 1.10-1.20%. The only option substantially lower than 1% is the Money Market fund, which started in 2009 and has a 0.00% return since then, and has a 0.50% ER. I don't know if that's their idea of a "stable value" fund or not, but it's losing against inflation. The worst is a small cap international fund. 1.39%. A few years ago it was a different share class, and 1.89%.
(Yes, these are R3 shares. They were R2 up to about 2 years ago, so the rates were even higher then.)

Other than a weakly-enforced rule about "fiduciary responsibility," there's not much motivation for companies to go to the trouble of offering cheap funds. You'll often find that the people making the decisions about which plan to choose, or which funds to offer, are relying on the financial sales rep and don't know much about investing themselves. That, or someone high in the corporate ladder knows someone, so there is instruction given to get a plan from that person.
And most people don't want to do math.

"1% is.....what portion of 7%? Can you even do a percent of a percent? Isn't that a really small number that won't make a difference anyway? Can we stop talking about numbers now?"



s0me0nesmind1 said:
Have to climb a ladder to get to the top.

Unless you start at the top..... But thats the game of life. Some start with an advantage.
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Often there's also something trickling down the ladder, making it a bit slick slick: It's the people at the top, pissing on the ladder.




s0me0nesmind1 said:
Oh believe me, if you want safety you should totally bury your dollars in the backyard. Or hide it in your mattress.

There is no such thing as "safety" in terms of actual dollars. You can lose to inflation or you can put it to risk.
Click to expand...
Or buy I-bonds, which are indexed to inflation, and hope that the US's credit rating never implodes.
Or a CD ladder with an FDIC-insured bank, or NCUSIF-insured credit union. I'd say those are at least as safe as a hole in the back yard, and offer a slightly better return.
 
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