A while back, I created a portfolio on Betterment. Now, I must admit that among financial topics, investing is one that, personally, I have found to be pretty complicated. Perhaps that is why I chose to go the automated route, because it vastly simplifies the process.
I don’t have to worry about muddying the waters of things like ETFs, S&P 500 index funds, and mutual funds. Instead, I contribute what I can, and my portfolio regularly earns about without me doing anything at all. How cool is that?
“But Fees! Won’t anyone think about the fees?”
Sure, I get it. People want to maximize their returns, especially when it comes to investing. And yes, Betterment (and others) are going to charge you a fee. But given the fact that you are earning money for doing absolutely nothing, and they do all the dirty work, why wouldn’t it make sense for them to get a small cut?
When I say “dirty work,” what I mean is the fact that I currently have 19 different funds in my portfolio. No, I didn’t pick those. Betterment did it all for me, and I have been earning a bit ever since I started. I’m not sure I would be able to keep up with 19 different funds on my own – so, instead, I let them do it for me.
Currently, the fee is 0.25% annually. Again, I don’t have a problem with that given that my portfolio earns regularly. My current time-weighted return is 15.1%, so in my opinion at least, paying 0.25% to Betterment is more than worth the hassle and headache that automating the process saves.
I should probably mention that this post is not sponsored by Betterment or anything like that. They just happened to be an investment firm I heard about when considering setting up a portfolio, so I went with them. I haven’t been disappointed, but yes, there are others.
NerdWallet has an article on the best “robo-advisers,” and they do rate Betterment #1 overall. Even if you don’t know Betterment, though, some other names on the list that you may know include WealthFront, Vanguard, and Charles Schwab.
With great risk comes great reward
Another important note is that, yes, the idea here is that you are being rewarded because you take on risk. Fortunately for me, I did not have an investment portfolio through any major crashes such as in 2008. Even if I had, though, it’s likely that by this point, the picture would be looking much better.
Here’s a guest post on Betterment that dives deeper into it, but essentially, no matter how big the crash, the long term is always more important than the short. This is conventional wisdom in the sense that it isn’t just Betterment saying this (hence my pointing out this being a guest post).
Yes, the market will see its ups and downs, but you are likely to do well in the long run despite short-term losses.
So far, I’ve seen that to be true.
What are your thoughts on this topic? While I have had a positive experience overall with automated investing so far, that certainly doesn’t mean I would never consider alternatives. I would love to hear your thoughts.