Betterment Description


Betterment is a New York based online – investment Adviser Company which is registered by the U.S. Securities and Exchange Commission. The company is specialized in providing all kind of recommendations regarding investment as well as advices and fully automated and diversified investment management to its clients, for much less than the expenditure you would incur on hiring a traditional financial adviser or wealth manager.

All transaction of Betterment occurs online exclusively. Betterment does not employ any further brokerage sales representatives and it is a directly execution only service.

Betterment Business Model

Betterment is a goal-based investing service that if fully automated. The software invests in a portfolio of passive index-tracking equity and fixed income exchange-traded funds (ETFs) and offers both tax advantaged and taxable accounts including the traditional Individual retirement accounts (IRAs) and Roth IRAs (individual retirement accounts).

Betterment’s core portfolio programming actually incorporates the insights of Modern Portfolio Theory, the behavioral asset management and Black – Litterman model. Modern Portfolio Theory (MPT) basically relies on the diversification and asset allocation and attempt for maximum portfolio return for a certain amount of given risk. Black-Litterman enables passive asset allocation by using the world market capitalizations and makes an attempt to estimate the expected returns. Behavioral Asset Management focuses entirely on investor returns, and attempts to increase the returns an investor achieves, including minimizing potential market-timing behavior.

Betterment Fees and Commission Charged

The best facility which betterment provides to all the investors is that they are allowed to start their business by investing a very little amount. Moreover the fee charged by Betterment is quite low. It is clear with the table given below:

Builder plan Better Plan Best plan
Management fees(% of total balance) 0.35% 0.25% 0.15%
Minimum balance NIL $10000 $100000 or above

Betterment’s Essential Features

  • No Initial Deposit – Opening an account with Betterment does not involve any kind of initial deposits.
  • Custom Asset Allocation –Your risk tolerance and the type of accounts (taxable vs. tax-deferred) you are holding is assessed accordingly the asset allocation which is customized.
  • Available Accounts – The types of accounts that are available with Betterment are:-
    • Traditional Individual retirement account
    • Roth Individual retirement account
    • Trusts
    • Individual Account
    • Rollover Individual retirement account
    • Non-profit Account
    • Account Simplified Employee pension individual Retirement Arrangement
    • Joint Account
  • Minimal Annual Fees – Betterment offers astonishing features at very less amount of fees : –
    1. For the Builder package you need to pay 0.35% of average balance, with $100/mo. direct deposit.
    2. For taking the better package 0.25% of average balance will be charged also $10,000 minimum balance is required in your account.
    3. For upgrading to the Best package you need to pay 0.15% of average balance while there must be a minimum of $100,000 in your account.
  • Tax-Loss Harvesting –

Betterment help you to minimize the amount of your taxable investments by offsetting your gains with losses’. This feature is freely available to all the taxable accounts.

  • Automatic Deposits –

In case you don’t get enough time to invest money? Then don’t worry as Betterment offers you feature of automatic deposits. Transfer money into your account on a scheduled basis. For automatic deposits preferences available include: monthly, fortnightly, weekly and every other week.

  • Automatic Portfolio Rebalancing –

Betterment automatically buys and sells the Exchange traded fund(ETF) within your portfolio to rebalance your allocation whenever your portfolio gets out of the target allocation.

  • Smart Deposit –

Automatically make deposits if your bank balance goes over a specified amount.

  • Retire Guide Calculator –

This helps you to plan for retirement by plugging in your existing savings.

Betterment as Risk Reducer

Betterment is created so that investing could be made as easy as opening a bank account. Though, Betterment is may not be federal deposit insurance corporation (FDIC) insured that means that your returns are not always guaranteed and they may be subject to market risk. It’s even possible your investment could lose principal amount. However, the company through its measures takes proper care that every investor can develop up to its best potential by earning highest amount of returns on the funds invested by them and also neutralizing the risk of losing sums of money.

Also, compared to other investment options that don’t have principal risk, they do have other types of great risks which could be much worse than losing your principal. Betterment is a Securities and Exchange Commission (SEC) registered broker-dealer and is a potential member of the FINRA (Financial Industry Regulatory Authority) and Securities Investors Protection Corporation (SIPC). Thus we lay huge emphasis on protection of the investors by safeguarding them against all the risks of market.

How to use Betterment?

  1. Switch to website and sign up.
  2. The signup process is quite easy without any hustle and takes approximately five minutes.
  3. During the process, you need to respond to a series of many short questions about your investment wants and expectations.
  4. There is also a slide bar that allows users to set the allocation of their assets (i.e., 60% stocks with 40% bonds).
  5. Once the choices and options are selected, you must then link your personal checking account. After that you can transfer money into the Betterment account whenever you want to or you can setup an automated deposit.
  6. When money is moved into the account, an automated system will purchase exchange traded funds (ETFs). The purchases will be made based on the way you’ve defined your asset allocations.
  7. Your investments are very liquid and selling your investments is also very easy with betterment as Betterment itself will perform the sell trades for you.
  8. Any dividends earned will be automatically reinvested. Each quarter, any portfolio that is showing an off 5% and more than it is rebalanced automatically.


  • Simple Asset Allocation :- It gives you insights of proper assets allocation thus increasing return from every asset
  • Low Management Fees:- Its very cheap and affordable comes with a small amount of fees
  • Perfect for Young Investors :- Young investors looking for great future return will found it amusing
  • Retire Guide Calculator :- easy to use tool for everyone


  • Not the best thing for High Net Worth Individuals:- For the more advanced investor or higher net worth individual, Betterment might not be the perfect fit.
  • No Two-Factor Authentication available – Betterment currently does not support two-factor authentication security which makes it much difficult for hackers to compromise your account.