INVESTING WITH BETTERMENT: $380/Wk FOR 12 MONTHS SO FAR

Hello friends, welcome back to my blog. Today’s topic is investing with Betterment. I want to say that I have nothing to gain from this blog. I am not a financial advisor or work in that industry. Betterment’s investing is something that I have been doing since December of 2019, and I want to give you guys a quick look at my progress so far using a straightforward investing strategy. It might help someone out there who has questions about investing with Betterment as well.

WHY BETTERMENT?

To understand why I am interested in Betterment, it would be better to have an idea of my financial situation back then in 2018: 

• Paying mortgage for my house in Victorville ($1,700 / month on a 15 years term)
• Maximizing my 401ks
• ROTH IRA (around $6,500 / year)
• Vanguard S&P 500 (VFINX) investor fund: I think I was doing around $200 a week automatic investing.
• No other debts but one car payment ($290/month).

If you have any debt, I recommend pay of those debt first before setting money aside for investing. At that time, there were a few stock investing robo-advisor options on my radar: Wealthfront, Acorn and Betterment. When it comes to stock investing, my belief lines along Index Funds and Exchange Traded funds. Keep in mind that ETFs are different from Index Fund and you can read about it here.

Both Betterment and WealthFront were strong candidate since they both offer low-cost, diversified ETF portfolios, automatic rebalancing and low ongoing management fees. I picked Betterment simply because their minimum investing requirement is $0 versus $500 with WealthFront. If you are interested to find out the differences between Betterment and WealthFront, read it here. 

MY SIMPLE STRATEGY

I started with $5,000 in September 2019 and only investing $100 a week into this account. Four months in, around January 2020, I decided to increase to $200 a week. And in May 2020, I increased it to $380 weekly. The automatic investment made it very easy for me to invest with Betterment. As you can see below, Betterment has helped me earned $1,096.46 up to this point, including the $177.44 in dividends.

PLAN

My current plan is to look for a way to increase my weekly amount of investing in the account. I am taking advantage of the low mortgage interest rate to refinance my house. If everything goes smoothly, my monthly mortgage will decrease roughly $339, and I plan to reinvest that money as well. Below is the forecast of what will happen in the next 30 years if I keep my same strategy:

The forecast did a great job at telling me how much my investment will turn out to be 30 years from now. It is a little sad to realize that there are only 10% chance that my investment will become $5 millions. But at least the chance of me becoming a millionaire is at 75%.

FEE

Betterment offers a competitive annual management fee at 0.25%. If you compare Betterment’s expense ratio with Vanguard S&P 500 which is only at 0.04%, you might question your decision of investing with Betterment. But don’t forget there are differences between Index Fund and ETF. At 0.25% management fee, the Digital Plan comes with: 

• Personalized financial adviceKnow how much to invest, your recommended asset allocation, and more.
• Low-cost, globally diversified investment portfoliosInvest in funds chosen to help maximize your money at various levels of risk.
• Automatic rebalancingMaintain your target allocation when the market causes it to shift.
• Advanced tax-saving strategiesAutomate tax loss harvesting and asset location to increase your after-tax returns.
• Everything in one placeSync external accounts to get a clear view of your money.
• Reliable customer serviceContact our Customer Support Team, available 5 days a week.

So far, they have charged me $15.38, which is 0.08% of my total investment.

OVERALL

I will stick with Betterment because it’s strategy lines alongside with my belief: DIVERSIFIED. I think the hardest thing is to keep investing no matter what’s going on with the market. If you recall, the market plunged 30% at the peak of COVID-19 back in March 2020. A lot of investors backed out, trying to cut short their losses. However, those moves are believed to be dangerous because it is impossible to time the market. As you can see from the image above, the market steadily recovered as time went on to surpassed the top before COVID19.

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