- Betterment is one of the more popular roboadvisor
investing platforms out there,
they do a great job of guiding you
through the whole process,
from helping you choose your investments
to investing the money for you,
once it's deposited into your account,
but the one problem,
they charge a fee to do this work for you.
Now, I'm not completely trashing them for this
because they need to make money to operate
under their current business model,
so I get it.
I'll have to admit that their fee is reasonably low
at .25%
plus the cost of whatever investment they put you in.
what if,
just what if we could gain the system a little bit
by using their advice without paying the .25% fee,
and in turn,
saving you $25,000 in the process.
In this video, we're covering two things.
First, I'll give you a little Betterment review of my own.
We'll go through some pros and cons of investing
through the platform.
The second thing I'll do is show you
how to invest your money
using Betterments advice for free.
This video could save you at least $25,000
so you might wanna invest a few minutes
into paying attention?
Hey, I'm Jarrad with an A.
And on this channel,
we like to talk about all things (mumbles)
personal finance,
and investing.
Please hulk smash that thumbs up button
since this is one of those videos
where I could really, really use some of your support on,
because if Betterment sees this video,
then they'll probably blacklist me
from ever working with them
since this is gonna keep more money out of their pocket
and put a lot more in yours.
Just to clear up some confusion
before we get too deep into it.
Betterment is an investing platform.
This means that you don't actually invest in Betterment
as a company,
so you're not buying betterment stock, for example,
you're actually investing in different securities
like indexes through Betterment.
Think of Betterment,
like the kitchen table during thanksgiving dinner,
and the food on that table
would represent different investments,
you're choosing which foods,
that you wanna pull off of the table
to put onto your individual plate,
based on what you're in the mood to eat,
or in this case,
what you'd like to place into your investment portfolio.
There's actually quite a few things
that I like about Betterment,
so let's get into those right meow.
Creating and investing with Betterment
is both as simple as making a hot pocket.
The directions are extremely basic
and very difficult to mess up.
Betterment is amazing for anyone
who wants to be very hands off with their investing.
If you're someone who wants to deposit your money
and know that it's being handled,
then they're great for that type of thing.
Since the investments are pretty chosen,
there's not really much for you to worry about
once your money goes into the account.
Because of this hands off approach,
investing through betterment is perfect
for beginning investors.
If you're someone who wants to start investing now,
but doesn't wanna really screw things up,
then using Betterment
while you educate yourself a little more
is a strategy that I like.
As you become more educated
and feel comfortable investing on your own.
That's when you can roll over your money
into a platform that I really like,
which is M1 finance.
Betterment will ask you a series of questions
that will help them curate a portfolio for you
based on your risk tolerance
and investing time horizon.
Once you finish the series of questions.
They'll show you the portfolio that they recommend for you
based on the answers that you gave,
at this point,
you can choose to tweak their recommendations
or just roll with what they suggest.
They are money nerds just like me.
They use all kinds of data
and different strategies in the background
to help choose the perfect portfolio for you.
Think of them like an alternative to a financial advisor,
but because they use data to drive their decisions,
they're usually cheaper than most advisors out there.
This is the area where a roboadvisor like Betterment
really shines.
Betterment uses different Vanguard securities
as its primary choice of what to invest your money into.
This is really great for you
because Vanguard is usually extremely low cost.
They also use securities from other companies
as secondary investment options.
Just an FYI,
the main reason that they'd use the secondary options
when investing your money,
is to take advantage of tax loss harvesting.
If you were using them for retirement accounts,
then you won't have to worry about this type of thing.
But speaking of tax loss harvesting,
for taxable investment accounts,
Betterment takes care of tax loss harvesting
for you automatically.
I'm not gonna get into too much detail on this
because I could spend a whole video on this specific topic.
But it's basically when you sell investments at a loss,
to offset the taxes that you would pay
when you intentionally sell other investments at a gain.
I like that they do this for you
since it's really complicated to execute,
but once again,
it's only useful for taxable investment accounts.
Quick disclaimer,
don't try to go do this on your own
without fully understanding tax loss harvesting,
because if you do it wrong,
then there are tax penalties that you don't wanna pay.
TLH is more of an advanced topic that the majority of people
even myself don't really have to worry about.
But if you think that you do,
go talk to an accountant
or a fee only advisor.
Honestly the list is pretty short,
when it comes to the things I don't like about Betterment.
The only thing that have really going against them
is the fact that they charge 0.25%.
Now, let me be very clear,
this is an extremely low fee,
but if I had to nitpick,
then this is the one thing
that I don't like about Betterment.
If you're a new investor
that doesn't wanna learn about investing,
then using Betterment is better than not investing at all.
In my opinion it is extremely important
that everyone at least understands the basics of investing
so that they can do a little bit of it on their own.
But I still know people out there,
who don't want anything to do with investing at all,
for those kinds of people,
I either help them set up an M1 finance account
or if I'm not able to get with them
to do this type of thing,
I point them towards investing through Betterment
or wealth front
until they fully understand about investing in general.
If after this video you're not interested
in using Betterment,
then I'll link up my investing videos in the description
that will give you the knowledge
and confidence to start investing on your own.
Although Betterment is extremely cheap to use.
Let me show you exactly how much .25% will cost you
if you decide to invest through them.
We're gonna use a cost of fees calculator
from nerdwallet.com.
So we need you to fill in some of these blanks.
The initial investment we'll say you're just starting out,
so your initial investments,
you don't have anything invested we'll say,
future annual contributions,
we're gonna pretend like you're investing in a Roth IRA
and you were single,
therefore you can invest up
to $6000 dollars per year.
So we'll go $6,000 annually,
time horizon will say it's gonna be 30 years
because you invest for the long term
and you're a buy and hold investor.
So we'll say 30 years,
rate of return we'll stick with this 7%.
That's pretty decent amount,
and the expense ratio of the two different funds,
so I have to put something in here for two different funds.
So the first one we'll do for Betterment,
so .25%, that's what they're gonna charge you.
And then for the second fund,
because we have to put something in we will go 1%.
So we'll pretend like a financial advisor saying,
hey, if you invest with me then I'll only charge you 1%,
which doesn't seem like that much.
So let's compare the two just for fun,
but our main focus is to see how much Betterment
is going to cost you if you invest
through them for 30 years.
So let's do the calculate.
Fund one as you can see,
Betterment you get charged over $25,000,
you lose 4.6% in fees,
which honestly over a 30 year period isn't too bad,
it's not life or death.
I wouldn't say,
no don't invest through them at all,
but I would say,
you can do better,
and you can do better on your own,
which we'll get to in a minute here
when I walk you through how to invest
based on Betterments advice,
or without using Betterment.
And as you can see fund two,
just for funds ease,
lost and fees $95,000,
which is insane,
so, always be careful if you're investing
through a financial advisor that is not a fiduciary
because you'd really be getting screwed
if you let them take 1% of your money every single year.
It's time to show you how to use Betterment for free,
I'll take you into my computer to show you step by step,
but what you essentially do is
take the investment suggestions that Betterment gives you,
and you purchase them through M1 finance.
The scenario I'll give you will be for
if you're investing in a retirement account
like a Roth IRA.
So there's gonna be two things that you wanna do.
The first thing you need to do
is open up a Betterment account.
The second thing you need to do
is open up an M1 finance account.
Now I do have a link in the description of this video
to open up an M1 finance account,
it is an affiliate link to help support myself
and this channel at no extra cost to you.
You can use it if you want to,
if not, no big deal,
but I would greatly appreciate it if you did.
So once you open up those two accounts
and kinda get your account created
and put all of your personal information in there.
That's where we are kind of starting from,
that place right there.
Once you've got all that filled out.
First, we're gonna start out in Betterment,
now you will go into add new,
and then you're going to go to retirement,
cause we're pretending like this is a retirement account,
a Roth IRA we'll say.
And then you'll go continue.
Next you're going to choose the goal,
so you are actually going to create
a new retirement income goal.
Then, like I said,
we're gonna go Roth IRA,
create this goal.
We're gonna agree to all the BS,
I'm not gonna go through all this stuff to hold you up.
Then we're going to review the profile.
So this is where you fill out all these details here.
And I'm not gonna fill it out,
I'm just gonna go with the default numbers
that are already in here,
we're gonna update it,
once you finish setting a goal for yourself,
Betterment will choose a portfolio for you.
And once it's created,
you can go into holdings right here,
and it will list everything that they're gonna hold for you,
and the percentage.
So, if you click on this arrow over here,
it will show you the actual fund they're gonna invest in,
and how much.
So what we're gonna do with this information
is we're going to keep a window open up on Betterment,
and then we're also gonna open up another window
on your desktop for M1 finance.
So when it comes to M1 finance,
I just opened up another tab here,
and we need to open up an account.
So I already have a retirement investment account opened,
so for this example,
I'm just gonna use the individual investing account,
but let's just pretend like it's a Roth IRA account.
So we'll continue,
I'm not gonna tell you what my social security number is.
And now it's time to get started.
So, we're gonna go over to Betterment,
and one by one,
we're going to add everything in your Betterment portfolio
to your M1 finance portfolio
based on the percentages here.
So I'm gonna walk you through the first two,
and then I'll just fill in the rest,
and we'll catch up here in a minute.
So the first fund we need to look for in M1 finance
is,
VTI.
We'll just go top to bottom here.
So we'll move over here to M1 finance,
look for VTI,
search here in the stocks,
there it is, click on it,
we're gonna add it to our basket.
And then down here,
we're gonna hit Add again,
and we're gonna go for the percentage
that betterment told us to invest in.
So, in this case it's 32.9.
Now with M1 finance we can't do by the decimal,
so we have to go whole percentages.
So in this case,
we're just gonna round up.
So we're going to go 33%,
33% here,
and then we're gonna go back to Betterment,
and we're going to find the next one.
So we're done with VTI,
then we're gonna go to VTV.
So we're going to add more slices,
search for VTV.
We're gonna add it to our basket,
and then add,
add to our portfolio.
And what percentage did it say 8.8,
so we're just gonna call it 9%.
And then I'm gonna continue here,
and do the rest.
And I'll catch up with you in one second.
And here we go.
We are all done.
So we've got all of our Betterment portfolio suggestions
in our M1 finance account now.
It's all based on whole percentages
like I said,
there was one that I think was 1.8%
I just rounded down to 1%.
So we're gonna save changes,
in the M1 finance,
boom, we're done.
Next, we add our bank account,
we deposit money,
and then it will automatically get invested
into our portfolio based on these percentages.
So if you invest we'll say $100 into this portfolio,
then 33% or 33,
$333 excuse me, of that would be invested into VTI,
$260 into VEA,
M1 finance would take care of all of that purchasing for you
based on those percentages.
There you go,
I just saved you,
probably about $20,000.
Check out these videos to your left,
the top one will take you to a playlist of all of my videos
that will help you out with investing.
The bottom one will take you to a video I made
showing you step by step exactly
how I invest my money for retirement.
And then check out the description for more resources
and playlists,
to help you out with all of your personal finance
and investing needs.
Thanks for watching,
I'll see you in the next one friends.
(speaks foreign language)