If you are investing money into stocks, retirement, and using a checking account, you may think you have a plan with your savings. Do you have a strategy? Is your investing automated, or do you rely on yourself to remember to invest periodically? If you are not putting all the effort you can into saving your money, Betterment might be a good tool for you.
Betterment is a top robo-advisor that can work to help save you money. You can automate everything and grow that nest egg faster. This will allow you to save up for your next larger purchase at a faster rate, or save more towards retirement so that you can quit work earlier. Betterment is an especially useful platform for new investors that are just getting their feet wet with stocks.
This article only covers a few ways Betterment helps you invest, check out this great Betterment review to learn all about their service. The world is your oyster with Betterment, read on to learn how it can help you save more.
In this article
To use Betterment’s great automatic investing feature, you will first have to link your checking account. You can schedule your automated deposits for whenever you want, Betterment recommends that you schedule them right around the time you get paid from your job.
Automatically investing your extra money is one of the best ways to save money since it prevents you from spending it. The method of “paying yourself first” really pays off because you do not leave cash lying around doing nothing.
Make your money work for you, right away! With Betterment, you manage your own investments, avoiding financial advisor fees which will save even more money.
Since your deposits are automated, this will stop you from trying to time the market which is a fool’s errand. Many historic financial studies have shown that even investors who perfectly time the market do not beat those that employ dollar-cost averaging (DCA) investment strategies.
Therefore, dollar-cost averaging (or investing often and consistently despite what the market is doing) is the best investment strategy. If you set up automatic investments with Betterment, you will be doing exactly that – reaping all the benefits of DCA.
Within Betterment, you can have a custom asset allocation. This means you can adjust your investment risk level to what you are most comfortable with. Automated diversification is a good way to help you save your money because it reduces your investment risk.
Betterment lets users select their stock/bond allocation too. For example, you can select your stock/bond allocation to:
- And more
Betterment also has a variety of stocks and bonds that you can choose from. Although, their portfolio offerings are slightly limited to only a variety of options to choose from. For example, there are 6 ETFs/Index funds to choose from and 7 bond funds to choose from.
Investment diversification is important because it has been shown to not only lower your investment risk but diversifying grows your investments more over time when compared to portfolios that are not diversified.
Climate Impact & Social Impact Portfolios
Betterment offers a few portfolio options that are considered socially responsible investments. The two most prevalent ones are the Climate Impact and Social Impact portfolios.
The Climate Impact Portfolio has:
- Green bonds
- All funds exclude companies with fossil fuel reserves
- Contains companies with the lowest carbon footprints
- Is invested primarily iShares MSCI ACWI Low Carbon Target ETF – CRBN
The Social Impact Portfolio has:
- Invests in companies that have diversity
- Invests in funds and companies that value racial, ethnic, and gender diversity
- Is invested primarily in NACP ETF, SHE ETF, and US companies
With Betterment’s socially-responsible investment you can invest your money knowing that it is helping a cause that you believe in. These funds are optional for you to invest in, but are a nice addition that could help you save more if you know it is going to a cause you support.
Once you set the stock/bond allocation you prefer, how do you ensure that your allocation stays the same? For example, if you set an 80/20 stock/bond allocation and the stocks and bonds grow at a different time. Over time, after your assets grow your allocation may skew to something like 90/10.
When this happens, you will want to rebalance your portfolio back to your 80/20 goal. What is great with Betterment is that you do not even have to worry about this as they do the rebalancing automatically!
Surely, Betterment’s automatic rebalancing keeps things simple for you and makes it that much easier for you to keep investing.
Automatic Dividend Reinvestment
Another way that Betterment helps you invest more is its automatic dividend reinvestment feature. What is a dividend? It is a share of profits from the corporation you own stock in. They are paid on a routine basis, most commonly every quarter.
When you get a dividend, it is best to reinvest it into the same company or ETF/index fund to get the best long-term growth. Investing in dividend stocks is important and Betterment’s diversified portfolios do exactly that.
Since Betterment automatically reinvests your dividends, you will not have this extra money sitting around doing nothing until you notice it. The dividend will be invested immediately and this extra will start working on growing that nest egg of yours immediately!
Betterment Account Types
Since its launch in 2010, Betterment has been the leading robo-advisor and has grown to include multiple account types. This is useful for investors that prefer doing minimal work with their accounts and finances.
Instead of having to transfer funds between banks when saving/investing, you can hold all your accounts with Betterment, saving you time and simplifying your cash & investment management.
Here are all the accounts types you can open with Betterment:
- Betterment Spend — Mobile checking account with a debit card.
- Betterment Save — High-yield savings account.
- Betterment Invest — Brokerage account where you invest in the stock market.
- Betterment Retire — Account with IRA/Roth Ira and 401(k) retirement accounts.
As you can see, with Betterment you do not even need a secondary bank, reducing the hassle of lengthy bank transfers and fees.
With the easy to use interface of Betterment and the many ways it helps you invest, you will be raking in extra growth in your portfolio for years to come! Betterment is not the only robo-advisor on the market, take a look at this robo-advisor comparison for additional options.
Betterment is a great tool for passive investors that prefer minimal work in their investing. If you have the mindset where you prefer to set up your investments once, and then have everything be automated- Betterment is a fantastic option for you!