A Betterment Guide for College Students
Regardless your age, you need to start planning for your future by choosing the best investment option that will yield greater rewards and long-term benefits. After all, no one wants to work more than how they should upon reaching retirement age. So as early as now, you should secure your finances and enjoy a debt-free life by saving for your retirement immediately after college. With Betterment, you can gain an access to essential tools that you will need to save and optimize your investments in simple ways.
Overview of Betterment
Betterment offers financial management tools that are readily available online. These tools enable you to decide on the amount you should invest monthly. Once you have started to deposit money to your account, it immediately works for you by selecting the right investment option that meets your needs.
This SEC-registered investment advisor is a broker-dealer company regulated by the FINRA and SEC. Moreover, the securities in your Betterment account up to $500,000 are protected by the SIPC. With the simple and transparent system that Betterment provides, you can be certain that your money is placed in well-established funds that are chosen for their efficiency, outstanding management and a proven track record.
Betterment Vs. Other Investment Options
Some people wonder how Betterment differs from traditional online brokers in terms of features and benefits. Primarily, Betterment comes with unique features such as no minimum balance, straightforward pricing scheme without hidden fees or transaction charges.
What’s more, it allows you to focus on a conservative bond portfolio and a stock basket, which are two investments that investors rely on. Betterment also entitles you to auto re-balancing of your portfolio, reinvestment of dividends, seamless diversification, and transaction in exact amounts that spares you from buying whole shares.
Your Betterment account is also quite easy to use, as compared to an online savings account. While bank accounts are guaranteed to prevent them from losing their value, the returns on your investment may not be quite high. At Betterment, you could expect higher returns, and you are given the chance to select the amount of risk by setting your preferred allocation between the stock market portfolio and ultra-safe Treasury bond portfolio.
Is Betterment Easy to Use?
Betterment believes in the application of the Modern Portfolio Theory, which is by far the finest approach in keeping track of your individual portfolio. When you invest in a wide range of assets with lower risk than most individual assets, the MPT effectively maximizes portfolio returns for a chosen risk amount. Betterment selects its investments based on years of historical analysis and extensive research.
An excellent way to analyze investment options and savings is by considering risks and rewards. For instance, savings accounts in banks have the lowest principal risk because they are FDIC-insured.
However, the reward is also minimal, particularly when you take inflation into account. On the other hand, Betterment offers a simple approach that is simple to use and ensures greater long-term benefits. In addition, it enables you to overcome common behavior biases when it comes to investing.
The Skinny on Investing
Generally, stocks are riskier than bonds. However, stocks can grow more when given the time. With this in mind, the amount you may allocate to stocks is based on your risk tolerance, as well as your preferred length of time to invest for your specific goals.
Betterment guides you to the most practical allocation based on your target time zone or retirement age, as you have provided. You have the option to tweak the time zone based on your preference such as aggressive, moderate or conservative.
Since the expected returns of markets are positive, it is ideal to invest quickly without timing the market. It is also worth noting that although the prices of stocks go up or down, they typically pay at least 2 percent in dividends. Hence, your expected price return is likely to be flat while your total return is still up. If you choose to wait, you may end up having a lower total return even when it is not by a significant amount.
Benefits that Investing with Betterment Offers
Betterment is easy to use and cost-effective, as compared to other options. At present, the company offers an annual fee of 0.15 to 3.5 percent, depending on your account balance. Thus, it is a smart way to invest because of what you can get from this low fee.
Investing your money with Betterment has several advantages. Since the system offers simple ways to start investing, you no longer need to stress out on the type of investment you need to buy. All you need is to select the allocation of your stocks to bonds. Furthermore, the company incorporates technology in diversifying investments.
This feature allows investors to change their overall portfolio with just a single click of a button. You will also appreciate the fact that Betterment uses its past market performance in predicting future performance. Thus, you can create your financial goals and allow Betterment to track your progress precisely. This feature is very helpful because it gives you an idea about the amount of money that you may still need to invest.
Is Betterment the Right Company for You?
If you are in search of the best place to begin investing, then Betterment is certainly an outstanding place to start. It is quite easy to get started even without prior experience or knowledge in investing. Although there are other brokerages with cheaper fees where you can invest your money, these options may require so much of your time and energy when it comes to managing your portfolio.
Hence, Betterment is for you if you are an inexperienced investor with barely enough ideas on how to make prudent investment decisions. It is also suitable for people who are not familiar with diversifying or managing a portfolio, or those who needs simplicity in investing.
No matter what your age, your future is bound to be much better and more comfortable if you begin saving money for your retirement the soonest possible. Thus, recent college grads will find Betterment as the best company that can help them invest in simple, inexpensive, and practical ways.