The #1 PROBLEM with Betterment Investing

Lets discuss Betterment and their 2.69% savings account, and whether or not this could be worth it – enjoy! Add me on Instagram: GPStephan

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Betterment is what’s called a “Robo Advisor,” which asks you questions based on your savings, earnings, and investing goals…and then they’ll build you a portfolio tailored to your situation. This is perfect for beginners, who are often overwhelmed by all the investment options out there, and just want a simple, easy approach to making their money make more money.

In terms of WHAT Betterment invests in, it’s pretty much a broad selection of index funds through Vanguard, along with a few other ETFs.

When it comes to this, Betterment charges you a 0.25% Management Fee on your money. And I’m personally NOT a fan of 0.25% management fees. This fee is over 6x HIGHER than what Vanguard charges for their VTI fund.

Now, I will admit…Betterment has ONE advantage over Vanguard, because they can automatically do what’s called Tax Loss Harvesting. In a PERFECT scenario, the tax benefits from tax loss harvesting COULD pay for their 0.25% management fee and make it worth it.

But in terms of their savings account:
There are zero fees and zero minimum balances. Money in this account is also FDIC insured up to $1 million dollars, which they’re able to do by spreading your money throughout several partner banks.

However, in order to unlock the 2.69% interest rate, you’ll need to sign up to be on their new checking account waitlist. But for that 2.69% interest, their fine print states this is only a promotional offer until December 31, 2019. That means, pretty much by the time I post this video, you can only get about 5 months worth of this interest rate…before there’s a chance they’ll discontinue it and lower their payout.

Now of course, they make it clear this interest rate is not guaranteed and may change at any time…and in their defense, Wealthfront can chose to lower it’s 2.57% at any time, as could any other bank…so if you DO decide to go to with Betterment and their 2.69% account, just understand that it might not be permanent, and to manage your expectations.

I see this as a decent move from Betterment to increase attention to their platform, and if people move their money over to a savings accounts, they’re THAT much more likely to then invest with Betterment. And then from that, Betterment is likely to receive a .25% management fee to help offset their cost.

Really, at the end of the day, this is just about customer acquisition – and in order to gain a stronger audience, they MUST go above and beyond in order to stand out, which they’ve done with their 2.69% savings account. But just remember, in my own opinion, paying a .25% management fee is way too high compared to MANY of the other alternatives out there…and the 2.69% interest rate IS absolutely incredible, but it’s not guaranteed to last…and that small difference is something VERY important that everyone should understand, just to be able to manage your expectations of what to expect.

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