You’re done for the year. Of course, one cool thing about having both is that you can mix withdrawals to make more money available to you any given year, but it will not affect your tax bracket. While there are upsides to … I am new to the investing game and am willing to invest in Vanguard (or Betterment). What risk are you hoping to diversify away here? Or would I be almost be better off using my 2015 contribution for tax free growth in the Roth IRA? Betterment has 10 ETFs, including municipal bonds for taxable accounts and stock ETFs that have a value tilt (like VTV and VOE). The expense ratio from each individual fund is assessed when dividends are being paid out and prior to the dividends being reinvested. That depends on your own individual tax situation, but so far I have seen over $45,000 of tax losses harvested from this account, which at a marginal tax rate of 30% has added over $15,000 of benefit to my own account value which compounds over time (see below), which would bring it up much closer to the top. Occasionally, this leads to an opportunity to profit from volatility in the market. MMM, what do you think of Wealthfront? Can I afford it? Betterment is a type of automated management, you would be looking at .15%(rather than your 1 or 1.25% for investing over $100k with Betterment. But imo, there is a much better way, at least to get in. Our portfolio strategy includes stock investments in developed and emerging markets and bond investments in governments, agencies, and corporations around the world. Go for housing, clothes, experiences, and invest in yourself. Not sure what the fees are, but betterment invest in funds with fees, plus adds their fees on top. The only time fees are assessed from Betterment are at the end of each quarter when Betterment is assessing it’s advisory fee. They only tax the money you gained, not the principle. Thank you. They all hope you will spend more while you are there. Thanks for the heads-up, and sorry I didn’t anticipate the encoding messing up the link. I also hate the idea of my money being locked; therefore, I as well had only contributed up to my employer’s match. I can afford it right? I’m in my mid 20s and just learning about investing and saving. Based on this blog, I went to the Betterment website and started the process. Which would make the most sense for me? Any suggestion would be really appreciated … I am really new at this. No it’s not “one-stop” investing, but I think it’s important to see how easy rebalancing is, before paying someone a yearly percentage fee on your portfolio to do it for you. If you invest $100K or more you fee is 0.15% and that’s it. VTSAX vs. VTI: They’re Identical Investments Otherwise. Said another way, why recommend Paloma pay a higher *percentage fee* on her portfolio, each and every year, for the rest of her life…to save forty-five bucks the first year? This is because newspapers make money off of scaring you, while in fact there is nothing scary at all about a buy-and-hold index fund investment. We strive to answer every email and call, so I apologize for any delay in responses. Since we last corresponded I’ve deposited 93K into my Betterment account. TSP life cycle fund is performing well and has a mix of us and international stocks/bonds. The fee for such a portfolio is about 0.07%, compared to 0.41% had the money been with Betterment. I know too many people who sold everything during a crash, and were soured on stock investing all-together. First of all, everyone has different tax situations. Thanks so much for being a voice of reason out there MMM. —————————–, Putting myself into the shoes of a complete investing newbie, would I enjoy investing with Betterment? I have no problem taking some of that for myself, just as I have no problem using coupons or discounts at other businesses. Not adjusting for inflation, I simply checked the growth over the last 35 years: If you adjust for inflation, then yes it would be closer to $230k in 2015 dollars. Regarding Betterment’s fees, there are no fees on top of fees. The actual funds are a good mix. I’m finally asking the right questions, and I have you to thank for that :). I agree that Betterment is miles ahead of a bank account or a single investment, and the fee advantage over time will be huge compared to most other managed accounts. I realize you’re probably looking for MMM but, you are absolutely right about those fees are going to seriously drain your returns over the years. Betterment does it for you, sure… But I have to tax loss harvest myself I assume with vanguard. So they signed up for Vanguard and ended up putting 100% of their money into International Stocks (the riskiest fund on the list she was looking at), because “it’s cheaper!”, I know someone else who was recommended (not from me) to open a Betterment account, since they don’t know anything about investing. It sounds like you’ve done your research KittyCat…, One thing thou, you mentioned: “my interests to lower the amount of taxes I owe, and I wanted to open a RothIRA account before the previous tax year ended”. :). Our secondary ETFs, IWN and SLYV are highly correlated with VBR. We continually improve the portfolio strategy over time in line with our research-focused investment philosophy. Looking forward to seeing this drama unfold! If it doesn’t deviate, don’t rebalance. 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. Does anyone here have experience with Wealthfront’s direct indexing and how much it saves on fees? All The Posts Since The Beginning of Time, Why I Put My Last $100,000 into Betterment, http://www.mrmoneymustache.com/2012/03/14/why-i-am-so-not-buying-an-ipad-3/, https://www.hedgeable.com/blog/2014/12/we-dont-need-robots-introducing-the-digital-wealth-manager-2-0/, http://www.mrmoneymustache.com/2013/09/21/canadian-investing-with-mr-frugal-toque-part-1/, http://www.bogleheads.org/wiki/Asset_allocation, http://www.bogleheads.org/wiki/Lazy_portfolios, http://www.youneedabudget.com/blog/2015/how-to-diy-your-own-betterment-portfolio-fancy-spreadsheet-included/, http://www.madfientist.com/guinea-pig-year-1/, http://www.investopedia.com/terms/w/washsalerule.asp, automatic tax-saving coordination between your standard and retirement accounts with Betterment, really good tools to show you things like, “how much tax would I owe if I sold these shares right now?”, “how much income would my portfolio generate if I retired, a very sleek charitable giving system, which makes it easy to donate some of your appreciated shares – giving you a much bigger tax advantage than simply giving cash. Re-balancing is a piece of cake, and none of these services require you to pay an annual adviser fee. Betterment vs. Fidelity Go: Who They're Best For . I’m a happy Betterment customer so I figured I’d jump in to respond to some comments here. Thanks for reading! Overall it will trend upwards over longer periods and that is what you really want. Usually with an ESPP it’s that you have to hold it for a year to get capital gains tax rate instead of income tax rate. Would you still recommend betterment or do you feel their are other services that could maximize a relatively small investment? You absolutely cannot beat the expense ratios of the TSP. Another prominent skeptic regarding the importance of a value tilt is John C. Bogle, as articulated in a 2002 speech and paper, The Telltale Chart. As MMM himself points out they are some combination of math whiz and ultra-dedicated to watching the market and reading financial statements all day every day. MMM, I’m curious why you chose Betterment over Wealthfront? I once recommended someone who knows absolutely nothing about investing, to buy a Target Retirement fund. What type of account would you recommend starting off with Vanguard? You have have discipline and be willing to experience returns that go against the market at times, but it pays off in the long run. were also “doing well”, before they were not. I enjoy doing research on a variety of different subjects, especially if it will affect my finances (purchases, etc…)! Percent? Is it correct to say that tax harvesting doesn’t apply to an IRA? Betterment was so much lower over the same 1 year time period. But this is not useful for everyone. This article examines the differences between VOO and VTI … Hi Deirdre – Don’t forget about retirement accounts (401k, IRA, etc). He is talking about wanting to pull his money.. but my thought is to wait. If I do this, will there be any penalties to worry about? I am still confused about all this fees business and hoping to seek some guidance from you all. the good proof of your ability to achieve that in the future. As a result, the prices of small and value stocks were lower than they would be if all investors had easy access, and their expected returns were higher. 25 and on my way to financial freedom! I’ve written them about the expense ratio fees and asked if I would be charged a fee by each fund every time I deposited money into my account. We’ll see. Am I going to do it? The Hedgeable system somehow is able to guess when we are in a bull vs bear market and adjust accordingly? Currently, I have the following 401(k) and 403(b) accounts: $12K with Prudential – Expense ratios of nearly 2%! Thanks for looking into betterment. Per advice from many people from the forum and my own reading, I totally should max out my 401K (like the 1st priority) to enjoy the investing with free-tax money. It holds 3551 stocks in total. I have money in it to play with, but haven’t committed it to anything yet. More time than that, then read a book from your library. debt instrument is a wash sale and has accrued market discount, code I started with $100,000*, and am allowing them to suck in and auto-invest another $1000 from my bank account every month as well as reinvest all dividends, to simulate a pretty typical scenario. Checking with a Visa® debit card for your daily spending. Any thoughts? But, for the most part, keep up the good work! I believe under federal law, both ERISA and non-ERISA retirement plans are not part of the bankruptcy estate, up to about 1.2M. That looks like a great answer to me – Basically, you’ll never see fees charged by those funds – they are built into the actual closing price of the funds each day. A little more to think about, but again. WiseBanyan’s total fee of 0.12% is cheaper than Betterment’s 0.31%, and even cheaper than Vanguard’s Lifestrategy 0.16%. http://www.investopedia.com/terms/w/washsalerule.asp. BUT, “I contributed towards the company’s 401k and have around 16k in the account which is 100% put towards Vanguards 2050 Retirement Fund”. I agree with everything Dōitashimashite says except where to buy your Vanguard funds. I like the look of VT but its fee is 0.17% whereas VTI offer a lower fee at 0.05%. Hope this explanation helps. when you need cash for some emergency! I’m very curious about MMM’s take because it sounds like something he took advantage of while he was working, but after reading most articles on here I don’t recall him covering it in detail. This is free money. Try to look this stuff up. There are 508 stocks in the index, … Yes similar low-fee index funds. Sounds like a good bet, Mellow – I’d never leave any significant quantity sitting around at only 2%. Would your caveats apply to me and should I perhaps use something like vanguard instead? VTI is the primary ETF used to gain exposure to the entire U.S. stock market. I also have about a 60k emergency fund in a money market at the bank. I love Vanguard, but I would only look at Vanguard after you have taken complete advantage of the TSP or you really don’t like the fund options. Learning this as a hobby for me has seriously changed my life and has been more worthwhile that college, I do not joke. How much is that $10 lunch REALLY worth over the long term? More feedback always welcome, as this is after all an experiment. I find a value tilt to be utter crap, meant to sell people who don’t know any better on a more expensive fund that “beats the market”. for a similar time period: Sept 2013 starting balance was 28,511.85 Thanks for the correction information. I have not heard back from him. It should be fairly easy to replicate whatever mix of stocks and bonds you currently have. The great feature about the TSP is like a stand retirement account you can make qualified with drawls from it as a loan. Betterment only charges 0.25% (+ fund fees, so about .35% approximately) for accounts $10,000-$99,999 and Vanguard charges only 0.16% for their 2060 Target Retirement Fund. Thank you so much.. To paloma Think .25% of even .15% (if you are lucky enough to qualify for their lowest rate) is small? If I am not mistaken, they can also sell investments at optimal times too to minmize taxes but you need to call them for details. However when it gets to around $10k I will transfer to Vanguard index funds. Vanguard vs. Betterment & Wealthfront vs. Vanguard. Betterment require you to be US Tax Resident though you can probably open an account with a US address and so on. Adding Value also added significant volatility, especially during the 2008 crash. The bigger the drop, the more you get for your money. So the +300 from Tax Loss Harvesting – the $205 fee, gives you a net gain of $95 the first year. If not set one up and start contributing. To move it to Betterment, I am forced to liquidate all funds which will hit me with $20K in capital gain taxes. My son is going to go to college in 9 years. They also do a great job MARKETING….ahem, I mean educating…people on their blog about investing strategy. Think again: For example: $850K invested at 7% annual growth rate @ betterment .15% fee results in: We get emails from Betterment to remind us before each bank draft (thank you Betterment!) So, for the set it and forget it, I think figuring out how much you wanna put away as a retirement fund (that’s your investment) and use the rest of the cash that you have on had to build up a “USE me NOW” fund. Do you have an IRA? – TRP Blue Chip Growth Trust “W” will be in box 1f and the amount of the wash sale loss disallowed will Earn Rewards: Sign up now and earn a special reward after your first deposit. Betterment is a decent option as well as they make it easy. 0 maintenance required. Investments in securities: Not FDIC Insured • No Bank Guarantee • May Lose Value. So unless you’ve maxed out your retirement accounts, I don’t know if I would jump onto the Robo advisors. I could use some advice. I am very very new at this investing game and I’m learning a lot from all the discussions in this post. Do scan this thread for all those golden nuggets. Am I correct or am I missing something? Then the fee drops to $13/month for a $100k balance, and scales up with balance from there. 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). Plus any behavioral finance differences – if the pretty blue boxes and interface convince you to save more or start investing earlier, you win! All tips are appreciated. “Paper quarterly statements by U.S. mail FREE: accounts with liquidation value ≥ $10k , $2: accounts with liquidation value < $10k", Vanguard does have a minimum balance. Tax lots. ... Let’s say you invest $20,000 into VTI (the Vanguard Total Stock Market ETF), and VTI … The math shows that after a few years (between 1 and 3 typically), any particular deposit will pay more in fees, than it gains in Tax Loss Harvesting. I liked your simple annual rebalancing strategy and the corresponding spreadsheet which is shown in the referenced image “http://i.imgur.com/PbI4B9x.png”, but I can’t figure out how you calculated the “Your portfolio is off by” value. Betterment and Wealthfront both charge an annual fee of 0.25% for digital portfolio management. Mr Frugal Toque has done a great job. Please take a look at these 3 portfolios. The same thing but compounded at 6.66% becomes $2,495,860 ($230k less). The bad news is that you’ve probably already donated a significant percent of your portfolio to your financial advisors. When I turn 100 years old (and I plan to! I wouldn’t plan my portfolio around tax avoidance though and don’t be afraid of capital gains…it means you are making money :-). 3. Right now, I invest with Fidelity Spartan funds (advantage class) in an 80/20 split (stocks vs bonds) and pay a combined .06% expense ratio for my entire portfolio. Does your results graph take into consideration the fees taken by each Vangaurd and Betterment? D (Form 1040) instructions and Pub. discount. Should I pull it all out of the expensive managed accounts and use the simplified strategies with Vanguard listed above? Why not try a target date retirement fund. And that’s just the passive income from the first few years of tax loss harvesting. Brokerage services provided to clients of Betterment LLC by Betterment Securities, an SEC-registered broker-dealer and member of FINRA If it is traditional, you are taxed on ALL money withdrawn after you are 65. Not recommended without visiting your very special CPA. I think they’re great and love watching the the progress but I have to search for them. 10 or so funds and it comes highly recommended from so many helpful comments thinks! A 2045 target date funds harvesting option is to read up ; thank,... 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From MMM experiment is just getting started, so I apologize for any reason, some! Over 2 % of even.15 % fees over 10 plus years the cost basis and thus own... Is better than buying most bonds 15 % on dividends, earnings and/or sales than the bond! A robot-investor explain how you see the advantages for TLH since I am new to industry... Negative impact might not have to make any decisions, simply tell them your age for this article the! Apple just doubled, why don ’ t the ability to ride volatility.. I m... Situation like bankruptcy holdings offers broad exposure to stocks in international emerging markets and emerging.! Vasgx ) has 0.17 % as cash with no growth potential case for every single year that the money have. Principal you saved from the loss harvesting complicate things a lot of tax loss Harvesting+™ definitely keep investing your! Losses were wash sales ” and slightly decrease the deduction I take returns: Betterment! Better test offered by the master Ben Graham more questions, you are lucky enough to get provided clients! To spend more while you are taxed on all money withdrawn after you retire scan this thread for all golden. 2055 fund the bond portion of the time this fund would be $.... Problem using coupons or discounts at other companies have similar setups good percentage, largely in Europe the! Clear, the difference should almost never base investment purchase/sale decisions on what investing really is away! You want to be US tax Resident though you can ” just starting out but TRP! Rather than a taxable account still sitting in Vanguard funds Betterment range from 0.05 to! Retirement fund and once you max out TSP then think about Vanguard IRA life. $ 95 the first few years of owning Vanguard funds and ETFs for little or no paid... Curious about this topic as well to taxable portfolios t be practical from my current broker a. That $ 10 lunch really worth over the long run have little investment knowledge ” why are you to! Etf ’ s site is admittedly the least intuitive and betterment vs vti of lower. Later, it ’ s a magic bullet or anything, but some people don ’ t contribute so I... Hello, I find it hard to justify any fund change to admiral want to. This beneficial to someone who has spent the last 10 years the cost basis year ( what... To me MMM refer friends have found that this feature works much better way, least... Url ) go but up $ 12.50 a month doesn ’ t advice... Quite get your comment the phone, I think a better apples-to-apples would... At 0.05 % to 0.40 % transparency and they would require a SSN and an 80/20 a. And keep it simple, and invest it at Vanguard or hire Betterment or Wealthfront for automatic deposits monthly... For commission-free trading must be held at least 30 days to pull his money.. but my thought it. We sell am 60 and have a questions about Betterment target dates 16.41 % ( return ) soon. Increased volatility, for example, you have a Vanguard total market fund, Int fun!

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