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Message
Is it bad to solely invest in Betterment after maximizing 401(K) contribution?
Posted on 7/1/16 at 1:23 am
Posted on 7/1/16 at 1:23 am
Wife and I have a good bit of money left over every month after paying all our bills and maxing out our 401(K)s. We have enough money saved that covers our living expenses for about 6 months. We don't qualify for IRA or Roth IRA.
We don't have the time to research individual stocks or which ETFs or MFs to buy for a given asset class. So for the last 6 months we have taken all the money left over at the end of each month and put it into a Betterment account.
Betterment (Roboadvisor company with $4B in AUM) does automatic re-balancing and tax loss harvesting and provides good diversification. Here is our portfolio breakdown after we chose a 90%-10% stocks-bonds split.
Over the last 6 months since we started putting money into this account, it has beat the 80-20 portfolio, S&P 500 (SPY) and Vanguard Bond Index (BND). The blue line is the time weighted return of our 90-10 portfolio.
Questions:
- Is this a sound long term investing strategy?
- Looks like Betterment already provides a good bit of diversification. Should we try to invest in other asset classes such as REITs, Treasuries or Commodities for further diversification or would that be a waste of time?
We don't have the time to research individual stocks or which ETFs or MFs to buy for a given asset class. So for the last 6 months we have taken all the money left over at the end of each month and put it into a Betterment account.
Betterment (Roboadvisor company with $4B in AUM) does automatic re-balancing and tax loss harvesting and provides good diversification. Here is our portfolio breakdown after we chose a 90%-10% stocks-bonds split.
Over the last 6 months since we started putting money into this account, it has beat the 80-20 portfolio, S&P 500 (SPY) and Vanguard Bond Index (BND). The blue line is the time weighted return of our 90-10 portfolio.
Questions:
- Is this a sound long term investing strategy?
- Looks like Betterment already provides a good bit of diversification. Should we try to invest in other asset classes such as REITs, Treasuries or Commodities for further diversification or would that be a waste of time?
2
Posted on 7/1/16 at 6:33 am to Street Hawk
FYI betterment halted trading to customers last Friday from trying to pull funds out of their accounts. Seems kinda controversial to me that you advertise complete algorithmic trading but yet have human intervention when the market falls only 3%. That's wild.
Posted on 7/1/16 at 7:37 am to Street Hawk
Im not an advocate of it in any way, but I think in your situation you should look up the 3 fund portfolio from bogleheads. Its a simple 3 fund portfolio that basically invests in every stock + bonds. The fees are incredibly low and the money can be under your control not betterments.
Posted on 7/1/16 at 7:47 am to dabigfella
By maxing out your 401k I'm assuming you mean you hit your maximum allowable contribution every year?
I like or at least think the allocation in that portfolio of Betterment is good, I don't know exactly how they work. But it's extremely simple to take their allocations or anyone's and simply buy ETFs or MFs in your own account through schwab, vanguard, etc. there's no need to worry about adjusting your portfolio, just buy more of this or that when you get around to adding more to it.
I agree with the above that all you really need is 3-5 funds to buy to diversify fine. More than that is to sell books and subscriptions as much as truly 'diversifying' you.
FYI one benefit to owning actual real estate is you can set up an SEP-Ira or other Ira as a small business owner. So you'd be sort of double investing there.
I like or at least think the allocation in that portfolio of Betterment is good, I don't know exactly how they work. But it's extremely simple to take their allocations or anyone's and simply buy ETFs or MFs in your own account through schwab, vanguard, etc. there's no need to worry about adjusting your portfolio, just buy more of this or that when you get around to adding more to it.
I agree with the above that all you really need is 3-5 funds to buy to diversify fine. More than that is to sell books and subscriptions as much as truly 'diversifying' you.
FYI one benefit to owning actual real estate is you can set up an SEP-Ira or other Ira as a small business owner. So you'd be sort of double investing there.
Posted on 7/1/16 at 9:36 am to dabigfella
The automatic tax loss harvesting is neat.
Posted on 7/1/16 at 9:37 am to baldona
quote:
By maxing out your 401k I'm assuming you mean you hit your maximum allowable contribution every year?
I like or at least think the allocation in that portfolio of Betterment is good, I don't know exactly how they work. But it's extremely simple to take their allocations or anyone's and simply buy ETFs or MFs in your own account through schwab, vanguard, etc. there's no need to worry about adjusting your portfolio, just buy more of this or that when you get around to adding more to it.
I agree with the above that all you really need is 3-5 funds to buy to diversify fine. More than that is to sell books and subscriptions as much as truly 'diversifying' you.
FYI one benefit to owning actual real estate is you can set up an SEP-Ira or other Ira as a small business owner. So you'd be sort of double investing there.
Yeah, my wife and I are contributing the yearly maximum towards our 401(K)s.
Betterment charges 0.25% for managing the account for balances between $10K and $100K. Once you cross $100K, the fees drops down to 0.15%.
For illustration: $100K at 0.15% would be about $13/month in fees. $50K at 0.25% would be $10/month.
Now the question is these fees worth paying for portfolio allocation, active re-balancing and tax loss harvesting in addition to the normal expense ratio fees for whatever funds they are buying in the portfolios.
Like dabigfella said, I will look into contructing my own simple portfolio or maybe just mirror the Betterment portfolio with my own low expense ETFs like you are suggesting. Certainly food for thought.
Posted on 7/1/16 at 10:42 am to Street Hawk
quote:
Betterment charges 0.25% for managing the account for balances between $10K and $100K. Once you cross $100K, the fees drops down to 0.15%.
that isn't insignificant in terms of fees. charles schwab has a tool that does the same thing for free. My financial adviser was pushing it, when I shat on her active management suggestion.
Posted on 7/2/16 at 11:09 am to Hawkeye95
I don't think going that route is bad. It's much cheaper than having wealth management folks charging you 1% a year.
I use Charles Schwab's "Intelligent Portfolios" and it's worked well and taken the headache out of having to research stocks to purchase in a brokerage account.
Schwab doesn't have any fees on top of the fees related to the mutual funds themselves which are typically at or below the fees charged by Vanguard or other comparable mutual fund companies.
I use Charles Schwab's "Intelligent Portfolios" and it's worked well and taken the headache out of having to research stocks to purchase in a brokerage account.
Schwab doesn't have any fees on top of the fees related to the mutual funds themselves which are typically at or below the fees charged by Vanguard or other comparable mutual fund companies.
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