No need to go picking stocks and hoping for the best. SPTN EXT MKT IDX ADV (mid cap) 9.08% 0.07% I had to jump out. VTIP is the selected ETF used to gain exposure to U.S. Inflation-Protected Bonds due to its competitive bid-ask spread, low expense ratio, and robust asset base. If we really want to get serious about behavioral finance, I’d argue it’s possible the majority of people seeing this conversation, would be much better off with a 60/40 stock/bond portfolio over the long run vs 90/10. – TRP US Value Equity Trust 0.25% for $10k-$99,999 (maximum fee would be about $21/month for $99,999). I mean, we are talking about an extra .35 to .50 on the average, and that doesn’t even include the extra drag produced by the bid/ask spreads. With $371,000 million in assets under management within the robo-advisor segment, there’s no denying this trend is rapidly growing. OK, maybe we could add a second word to that: Efficiency. It’s not going to earn a lot of money but that’s not what emergency funds are about. Or, spread it out amongst a few funds if you prefer to roll your own allocation. You also have required minimum distributions (RMD) once you are 70.5 years old. As you can see, the single Vanguard fund blows the other two out of the water after only a few years, no contest. I also don’t want the allocation to switch automatically more towards bonds as I get older, which I think the Life strategy funds did when I last read about them(?). Interesting article about just that point here: http://www.vox.com/2016/5/24/11721298/charles-schwab-intelligent-portfolio. This is an account I’d contribute to every month. Does anyone here have experience with Wealthfront’s direct indexing and how much it saves on fees? Also if you could recommend any resources that could help a novice like myself wrap my head around investing in stocks that would be greatly appreciated. Definitely don’t rush to move that money you have in savings. I got sucked into their white paper and I was still considering going with them, until I found your comment. Why not try a target date retirement fund. I received 2.8 % return, as per their site performance calculation. If one or two from of the group succeed for any short time period (like the time periods shown in the graphs above), I wouldn’t consider that enough validation to throw my entire life’s savings at such a strategy. Vanguard vs. Betterment & Wealthfront vs. Vanguard. This means you’ll have more taxable gains when you eventually sell them But for many of us, this is years down the road in retirement when we have ditched the full-time salary and thus are in a lower tax bracket. Edit: As of April 2015 Betterment provides the Tax Loss Harvesting service free on all accounts. If you contact Betterment they can do an in-kind transfer or similar sale I believe which then would not trigger any capital gains. Ideally, I’d like to throw money at both, but I can only choose one for right now to start investing in.. I’m not scared of letting stocks ride for the long haul or scared of throwing more money into it month to month, but I am scared of what to do year-to-year with stocks that I already own while they’re doing their thing. I’m in the 25% tax bracket and I just wanted to know if enabling tax-loss harvesting is right for me. I am pretty sur Betterment will not do the W8Ben thing ! You might want to check out the lending club experiment on this site as well. AGG is the primary ETF used to gain exposure to U.S. High Quality bonds, due to its low bid-ask spread. Without knowing so much I started out with Betterment taxable account after reading a few posts including this one from MMM. It’s not exactly a fee, so they can get away with saying no fee. These are the Target Retirement funds: https://investor.vanguard.com/mutual-funds/target-retirement/#/. transaction or the amount of accrued market discount. :). There’s a fair amount of Betterment bashing on the forums, so it’s nice to have the creator of the forums in the corner of Betterment. VOE is Vanguard’s mid-cap value fund, so I can’t accuse you of cherry picking the one good fund out of thousands of bad. More feedback always welcome, as this is after all an experiment. Keep it up! Betterment’s are higher than Vanguard but still very reasonable. probably existing customers). Does the tax loss harvesting complicate things a lot for tax purposes? I wonder what it reinvested into, VWO or something similar. And the 5 year is 11.12% which you’re not going to make 1200 bucks into 1 million over 3 years. A Betterment porfolio tracks the majority of the developed world’s stocks. Does anyone have direct experience comparing the two? VTSAX vs. VTI: They’re Identical Investments Otherwise. Let’s compare Vanguard’s mid-cap Value fund, to Vanguard’s mid-cap Index fund: It’s more volatile, with a lower low during the 2008-2009 crash, and it has underperformed the index fund for almost the enterety of its existence. Did you ever end up finding what you needed and choosing? “…We suggest these results might go a long way in explaining why market-based growth fund returns generally equal those of their value fund counterparts over time…”, Oh no! Or should I consider using WiseBanyan or Betterment instead until I have built up enough funds to put in something like VTSAX more permanently? I’m not saying it’s a magic bullet or anything, but I do think there’s something to it. But certainly, timing could have been a big factor. This is in-line with John Bogle’s assertion. Once you Max out TSP then think about Vanguard IRA with Life strategy funds or target retirement funds. Would you tweak your recommendation for newbies in Vanguard if a person has only the next ten years to invest? Neither Betterment LLC nor Betterment Financial LLC, nor any of their affiliates, is a bank. I will continue to read up; thank you so much for your assistance! So automate your investing, live simply (while spending on things that REALLY MAKE YOU HAPPY) and then get back to WORK :). Learning this as a hobby for me has seriously changed my life and has been more worthwhile that college, I do not joke. Good idea David.. but it probably wouldn’t be practical from my side. As far as the robo-advisers, or any other type of adviser for that matter, maybe it is my extra frugal nature that tells me there must be a better way to get automation without dishing out so much cash. And as for rebalancing, Betterment rebalances automatically whenever your drift hits 5%, which strikes me as a better system than just checking once a year or once a quarter or something like that. I’m still currently working and make about $88K per year so I think moving them to a Roth IRA will have pretty big tax implications, right? I want you to know that you have been a huge inspiration for me, ever since I found your web site just a few months ago. They also diversify the bond portion of a portfolio, resulting in higher expected risk-adjusted returns. It is all the same stuff with no fees. Or a Roth IRA? Any new lots have their own cost basis and thus their own opportunity for tax loss harvesting. It’s easy and you don’t have to do hardly any work to increase your contributions. If your Betterment account is 45% domestic, 45% international, and 10% bonds, then presumably having a line representing 45% VTI, 45% VXUS, and 10% BND is the appropriate comparison to the Betterment portfolio? Welcome to your first two lessons on investing: One of the features of Betterment is that their computers spend all day looking at the stock market while you are off doing other things. But backtesting is a tricky game to play no matter what: you can always find a range of dates to prove almost any hypothesis. It’s super short, is intended to just tell you why you are doing this and what you absolutely need to know to make the project a success. This is free money. If the pretty blue boxes entice people to login and constantly check their accounts, that can also lead to negative behavioral factors. Betterment vs. Wealthfront vs. Vanguard – Overview What is Betterment? I’m down 25 he’s down 80. Even taking into account the several recessions since then, you’d have come out ahead like gangbusters. See offer details, Now available: New and improved Socially Responsible Investing portfolios. $10K with Vanguard (mostly International/Emerging Markets) – 0.22% – 0.44% Lameness from Schwab. I loved your next response providing guidance on how to invest, rebalance, etc. Betterment LLC's internet-based advisory services are designed to assist clients in achieving discrete financial goals. But it will give you a sense of what you’re going to get. So is this beneficial to someone who is looking to just save? I liked you even more when you said this : ” For every $100,000 of VTI you own, you’ll get $1780 in annual dividends. You say that I “will likely see no more tax loss harvesting on that same invested money.” I assume you mean that for those particular lots of securities, it’s unlikely that the price will drop back below my new cost basis (as lowered by a harvested loss). Size and value are two factor tilts of Betterment’s portfolio optimization that aims to drive higher expected returns. – Vanguard Ttl Int Stock Ind ADM Betterment’s use of secondary ETFs enables Tax Loss Harvesting+™. Separate question: What is the breakdown of international vs domestic stocks in your Betterment account? – Vanguard Wellington, Bonds “Box 1f. Obviously you are putting your eggs into one basket to a large extent, but 15%+ returns off the top are pretty appealing. If your income ends up rising even after retirement (as has happened to me and many other early retirees), TLH might be counterproductive if you end up selling these shares into an even higher income stream in the future. But imo, there is a much better way, at least to get in. Most will cover transfer fees, or even give you money to do it. The bond portion of the portfolio includes governmental, agency, and corporate bonds from around the globe. Then, take a look at the funds—all ETFs—underlying each part of the portfolio strategy. I’ve spent the last hour and a half reading this very interesting and informative blog but did’t see one post that alluded to my situation…a 73 year old mostly retired guy(my wife has a good job) with a $70K portfolio with Fidelity consisting of 70% dividend paying stocks, 20% bond mutual funds and 10% cash which has yielded about 11% return the last few years. I’m finally asking the right questions, and I have you to thank for that :). I’m a happy Betterment customer so I figured I’d jump in to respond to some comments here. Wondering if direct indexing will make up for, or exceed, the .10 extra I’d pay if I went with Wealthfront. While municipal bond credit risk is slightly higher than risk-free U.S. Treasuries, it still remains very low, which is attractive for risk-averse investors. Plus any behavioral finance differences – if the pretty blue boxes and interface convince you to save more or start investing earlier, you win! Then the fee drops to $13/month for a $100k balance, and scales up with balance from there. In doing my own research it looks like the returns over the last year have been similar to what I could do with Betterment, or direct Vanguard investing, except that the fee paid to the adviser then comes out meaning I am behind. I think it would be helpful to point out (or maybe I missed it) that the lowest fee level requires you to have at least $100,000 in your account. Whether you keep it all in a CD earning a straight interest that you never ever sell, or day trade with options, in the end it only matters if the IRA is of the traditional or ROTH variety. Sooner or later, it will catch up with you. It is surprisingly low in badassity, however. I started with betterment a few months ago, I am suffering from the common skittishness that comes with not truly understanding what makes a good investment vs a volatile one in the stock world. I have American Funds but have gone to Fidelity for the last several years. As a 60 something couple in retirement with significant IRA balances that now support our lifestyle I wonder if this is a good way to invest to minimize fees. But this is not useful for everyone. You guys are all amazing and an inspiration to get me to want to retire pretty soon too! Hey MMM- great info here, Betterment seems like an awesome place to ‘stash funds after maxing out tax advantaged accounts. Can I afford it? You also have the TLH feature that can more than pay those fees (~0.77%). Could you explain how you calculated the “Your portfolio is off by” value? I think it will be great training. At the very least, I’m glad I’m not as behind as I thought I was. “Should I try to move the $$ into an IRA?”. Have around 400K in IRA but am getting killed in fees. Yes most online discount brokers will let you invest in Vanguard funds and ETFs for little or NO fees at all. For old accounts, yes you can rollover to IRAs as well. Box 1g shows only $0.74 of the wash sale–indicated in box 1f–as being disallowed, so the rest of that amount should still be a valid tax loss harvest! After seeing the math, it’s clear these decisions will not increase the level of my lifelong happiness. I am still confused about all this fees business and hoping to seek some guidance from you all. For more details, see our Form CRS, Form ADV Part II and other disclosures. This is not applicable for those with low balance ….Most of the admiral shares need >10 000 in that fund group …you may need 100k or more to get admiral shares in all 4 categories with low ER …. The last 35 years returned more than 11.5%, if you were 100% US stocks. 8.5/10. Government job, very secure as a technical professional luckily. For details on wash sales and market discount, see Schedule Definitely reinvest the dividends. 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