Betterment

Betterment pioneered the robo-advisor category and remains the largest independent digital investment platform, managing over $40 billion in assets for 800,000+ customers.

## How Betterment Works

Users complete a risk questionnaire and connect financial accounts. Betterment's algorithm builds a diversified ETF portfolio matched to the user's goals and risk tolerance. The portfolio is automatically rebalanced when asset allocations drift and tax-loss harvested to minimize tax drag.

## Portfolio Construction

Betterment uses low-cost Vanguard, iShares, and other index ETFs diversified across stocks, bonds, and asset classes. Core portfolios include US stocks, international stocks, US bonds, and international bonds. Socially responsible investing (SRI) and Goldman Sachs Smart Beta portfolios are also available.

## Tax-Loss Harvesting

Betterment's tax-loss harvesting runs daily. When a position loses value, it's sold and replaced with a similar asset to maintain exposure while capturing the loss for tax purposes. This feature, available on all taxable accounts, can add 0.77% or more to annual after-tax returns according to Betterment's research.

## Account Types

Betterment supports Roth IRA, Traditional IRA, SEP IRA, 401(k) rollovers, joint accounts, and individual taxable accounts. The Betterment 401(k) platform is offered to small businesses.

## Fees

Digital plan: 0.25%/year on assets under management. Premium plan (requiring $100k minimum): 0.40%/year plus access to licensed financial advisors.

## Cash Account

Betterment's high-yield cash account pays competitive APY through FDIC-insured partner banks, with no minimum balance and instant transfers to your investment portfolio.