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Betterment Review: It Makes Investing Easy

5/20/2016

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betterment logo

Betterment is one of the best tools for investing I have ever seen. If you’re not using it by now, you’re missing out. Investing can seem so complex that people get intimidated and end up not investing at all. Betterment makes investing as simple and painless as possible.


Join Betterment today!

It's Easy


Betterment allows you to plug in your age and annual income to develop a plan to help you accumulate wealth. You can get a pretty accurate representation of what it will take to achieve your financial goals. Betterment tells you exactly how much you need to deposit each month based on the total amount you want to invest, whether it be for retirement or just to build wealth.
Betterment is truly a “set it and forget it” type service. It does a fantastic job of being a hands-off investment and tracking tool to help you stay on top of your finances.

It’s Low Cost

They invest your money into low-cost index funds at a fraction of the cost of traditional financial services. I know I just wrote about how much I love dividend stocks (yes, even more than index funds), but I still have a pretty big bulk of my long-term investments in index funds.

Betterment’s strategy of passive investing allows you to take on the right level of risk for your time horizon (which is why you provide your age), because their advanced algorithms do all the work.

One of the biggest reasons why I love Betterment, and index funds in general, is because of its low-cost strategy. The majority of investment management fees hover around 1% per year. This doesn’t seem like much, but as the years go on (and your money compounds), it certainly adds up. This means you can let your savings compound on top of themselves, leading to even more money down the road. Here’s a screenshot showing you how much money you can save: 

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Two Things I Really Like

Two of Betterment’s best features are its automated portfolio rebalancing and tax harvesting.

Betterment’s algorithms automatically buy, sell, and reinvest your money to keep your asset allocations in balance. Why is this important? Well, let’s say you’re make a long road trip with the speed limit a constant 55 miles per hour. Chances are you would see the speed limit sign and adjust your rather sluggish cruise control to 55 mph, sit back and enjoy your favorite music. Up ahead you see a steep hill approaching. Knowing that your speed may be reduced before the cruise control kicks in, you step on the gas pedal and accelerate, keeping a steady 55 miles per hour through the ascent. Once you reach the top of the hill you see a steep downward slope. Even with the cruise control, you know gravity will cause you to accelerate beyond the speed limit and possibly risk getting a speeding ticket, so you now downshift or apply the brakes. Strategic asset allocation is not much different.

Strategic asset allocation involves setting predetermined target allocations for various investments, and periodically rebalancing them back to their original allocation. When employing a strategic asset allocation, your investment choices are first selected to provide a risk-adjusted return over the time horizon of your client. Nothing remains the same and with time, the value of each portfolio allocation will change up or down depending on market performance. Like the road trip, you find that the entire road is not flat but full of peaks and valleys. This uneven fluctuation of the different portfolio asset classes causes the allocation to shift. As the portfolio was constructed to provide a specific strategy and allocation, you must rebalance the portfolio so it matches your original allocation. I think it’s awesome that Betterment does this automatically.  

The service also has automated tax loss harvesting. Because of the smart rebalancing, Betterment will end up selling some index fund shares for you at a profit, which means you’ll get hit with capital gains taxes. Don’t worry! This can be easily offset by selling other shares that have lost money in the same year and using that money to buy other funds that will allow you to own those same companies. If you’re look at tax-advantaged accounts, this feature won’t really apply to you, but if you have extra money to invest, you can save a lot of money. Betterment makes sure that you capitalize on any losses you incur to offset your taxable income. The gains that come from this strategy could easily offset the fee they charge.

It Has Awesome Customer Service

One of the things I didn’t realize when I first started using Betterment was that they have an amazing team of experts behind everything they do. I was extremely impressed when I found out that they were available 7 days a week via phone, email, and live chat to handle any questions or concerns that I had.

They also had a ton of educational emails after I signed up. I’m always up for financial education, and as an email marketer myself, I love seeing a great drip campaign. The emails were tutorials about investing, with topics ranging from market timing to tax bills. I noticed that Vanguard does the same thing, but it’s a little bit more, well, boring. Betterment’s email marketing is much more concise and digestible.

It’s Safe

When I wrote my review of Mint, I got a lot of people asking me about its security measures and how safe other services might be with your money. Therefore, I took an extra-hard look at Betterment’s security features and was pretty impressed. It has bank-level security (256-bit SSL data encryption), which is to be expected. Also, it is a member of the SIPC (Securities Investor Protection Corporation), which means that your account is protected for up to $500,000.

How Can You Get Started?

The Betterment signup process is incredibly easy and takes less than five minutes. All you have to do is respond to a series of short questions about your investing needs to determine the perfect asset allocation, or you can always do it manually if your risk tolerance differs. Once you’ve answered the few questions, all you have to do is link your bank account. Money can be transferred whenever you like, or you can specify an automated deposit. I prefer making my savings automatic.

Here is a screenshot from the current signup process:

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So what are you waiting for? Give Betterment a try today!
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5 Habits to Adopt for Successful Investing

5/17/2016

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There's a fair amount of luck involved in investing. However, a lot of your success (or failure) as an investor also comes down to the habits you form with regard to managing your portfolio.

There's no foolproof rulebook, but if you want to set yourself up to be a successful investor, these five habits certainly can't hurt!

1. Define Your Investment Outlook

Too often we separate investments into "short-term" and "long-term" plays, but fail to delve into what exactly those distinctions mean. Really, the terms short- and long-term are completely relative, and might mean different things to different people. This is why one list of habits of successful investors mentions learning how to define long-term as an important step. I'd expand on that to just say it's important to learn to define your investment outlook from a timing perspective. Are you looking at short or long plays? What do those terms mean to you? Is "long" one year or ten? Figuring out how to ask and answer those questions of yourself is one of the most effective ways to lay a foundation for your investing strategy.

2. Learn To Diversify


Particularly for beginner investors, diversification can be a tricky hurdle to clear. Your instinct will almost certainly be to invest in what you feel you know, be it a given company or even a whole industry with which you have some familiarity. That's all well and good, but cramming a whole portfolio into a single industry can be a recipe for disaster. It's important to learn the value of diversification early on, and to form a habit of looking for similar investments (in terms of risk/reward and money put in) in different, unrelated stocks. The idea is that one crashing has no influence on the others and the likelihood of a net loss is decreased.

3. Practice Constant Education

As this article on the traits of successful investors put it, the best defense against simple mistakes is education. Often, beginner investors believe that education happens before a portfolio is opened, and from that point forward it's simply about managing investments. But the truth is the more you can learn - about the market itself, the companies you invest in, or general investing strategies - the more effective you'll be in managing your portfolio. Wise investors know that education is continuous, so it's good to get in the habit of dedicating a little bit of time each week to studying the market.

4. Adhere To Limits

It's commonly recommended that investors form plans regarding upper and lower limits for when they'll pull out of investments. This list of additional habits of highly effective traders called it the worst mistake investors make to buy high and sell low. It can be very frustrating and can indeed go against every instinct you have, but generally speaking it's best to avoid this kind of mistake by falling into the habit of adhering to strict limits. By checking yourself with predetermined limits you're effectively taking emotional reactions out of the equation.

5. Roll With the Punches

Here's a nasty (but completely ordinary) little truth a lot of beginning investors aren't ready to accept: at some point you're going to make a bad move, or get very unlucky. The stock market is volatile, and no one navigates it perfectly. One of the most important habits an investor can develop is an ability to accept that there will be some losses and frustration. This allows you to persevere in a logical manner rather than pull out your money or start making risky decisions to make up for a loss.

Practice these five habits and you'll be setting yourself up to become a successful investor.
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How You Can Live a Comfortable Lifestyle Before and After  Retirement

5/8/2016

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Author: Patricia Sanders
If you ask “how much will your lifestyle cost?”, then the answer will be: our costs depends on the kind of lifestyle we want. Some people love to live a modest lifestyle while others desire a lifestyle full of entertainment and luxury. Each lifestyle says something about how the person wants to live life. So you’ll never be able to draw a parameter of comfort when it comes to living your life. However, your lifestyle will depend on your income. Money gives us the freedom to live life on our own. But you must consider saving money to steadily maintain your lifestyle.

How much money do you need?

Knowing your net worth is certainly important or else you can't get the exact idea about what you want. So assess how much you earn, your total assets, and your liabilities. Thus, you can set up your financial priorities.

Below are two charts showing weekly expenses of two lifestyles: a) Lifestyle before retirement (working life) b) Lifestyle after retirement. The numbers are based on assumptions and can vary. You can get an overall idea of expenses of working life and retirement life from these charts.
 
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5 Tips to Maintain a Comfortable Lifestyle
 
Some of you love to live a lavish lifestyle, and some of you may prefer living a modest lifestyle. Whatever your choice, you should live a lifestyle that’s within your means. Below are some tips you must follow.
 
1. Formulate your own budget
 
Many people think that following a budget means living a strict life, which can limit their luxury. However, the idea is not true. Following a budget is important to achieve financial freedom. Budgeting is tough, but it’s not a pause for your comfort. It helps you to understand where your money is going and how you can limit your expenses.
 
2. Save as much as possible to achieve financial freedom
 
To maintain a comfortable lifestyle you have to concentrate on money saving. Earning a huge amount of money can give you the freedom to live lavishly. However, if you don't save, then you’re certainly ruining your financial future. Simply earning money is not enough. You should save as much as possible to confirm lifetime financial freedom.
 
3. Protect your golden age
 
Make sure you're saving in the right way to fund your retirement. Always try to maximize your income in retirement. You should start saving for retirement today, so you’ll be able to achieve the lifestyle you want.
 
4. Adopt frugal lifestyle
 

The most prudent way of living financially comfortable life is by adopting a frugal life. This doesn’t mean you have to segregate yourself from the enjoyment. Rather, you can save more money to secure your future.
 
5. Use online calculators
 

You will never want things to go wrong with regards to your mortgage, savings, retirement, and so on. Using free online calculators will help you in determining values and taking the right decision. Go online to get a different type of calculators which will help you in the calculation. You can get a free mortgage calculator, retirement calculator, pension calculator.
 
Bottom line
 
Achieving financial goals is important. However, saving millions of dollars shouldn't be your sole financial goal. Paying utility bills, buying essential household items, buying a house are also part of the financial goal. To achieve these goals, you need to make financial planning.

Remember, planning is the key and it’s never too early to start your planning. Start planning and step forward to achieve your financial goals.

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​Author Bio: Patricia Sanders is a freelance writer. She is associated with Debt Consolidation Care Community. She loves to write on various topics, especially finance. Her writing helps people to get useful suggestions and financial insight to solve their problems. 
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