Vanguard or Betterment

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Shane
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Vanguard or Betterment

Postby Shane » Fri May 19, 2017 9:43 pm

Hello, everyone. I'm 24 years old and new to investing. I'm already contributing to my company's Roth 401K plan. However, I would also like to open up a Roth IRA account. I don't know much about investing. Although I'm certainly making an effort to learn it through watching videos and reading online articles about investing. I don't expect myself to be an expert overnight so I'm gonna take it one day at a time. My question is the following: do you think Betterment or Vanguard is better for me? I heard Betterment is relatively new compared to Vanguard, but Betterment requires less effort since they do most of the stuff for you. They do charge a fee though. I just to want to open an account that grows slowly over time until I retire at the age of 65 (The year 2057). Although I do want to buy a home in the future, it is not gonna happen anytime soon. I want to save my down payment in a savings account. Please enlighten me.

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CABob
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Re: Vanguard or Betterment

Postby CABob » Fri May 19, 2017 9:54 pm

You are probably correct that Betterment will do the work and be easy from your standpoint, but what do they really need to do and will you learn anything in the process. I think not. I would suggest that in your situation you could probably open up a Vanguard account with a Target Retirement fund or a broad based index fund such as their Total Stock Market fund. Invest regularly and check back in 2057. Or rather than that use the next few month to learn a bit more about investing. Read the wiki here and ask questions if you need to. How is your current 401k account invested?
Bob

Vanguard Fan 1367
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Re: Vanguard or Betterment

Postby Vanguard Fan 1367 » Fri May 19, 2017 11:36 pm

I tried a lot of things before I read John Bogle's "The John Bogle Reader." I think you would be better off at Vanguard but you need to know what the magic of low fee index investing is all about.

You can also save the 22 bucks and read what is available here for free.

harvestbook
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Re: Vanguard or Betterment

Postby harvestbook » Sat May 20, 2017 7:00 am

Betterment has already raised its fees, as recently as January. That makes it a nonstarter for me--you'd have no idea when they would start charging you more or make it costlier to get out. True, they added some "services" but what guarantee do you have those services will be useful to you personally?

http://www.mrmoneymustache.com/2017/02/ ... orthwhile/

Of course, Vanguard's fees could also increase, but since the company is owned by its customers, the fees move in direction of actual fund operating cost. In my experience with VG, costs have only gone down as the company has grown. That's also why I will stick with VG even if another fund giant drops a bps point or three below VG--because the profit motive may change the fees.

However, if Betterment makes it easier for you to stick and stay the course, then that trumps all else, because even Bogle says that is the most important thing. Good luck.

livesoft
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Re: Vanguard or Betterment

Postby livesoft » Sat May 20, 2017 7:09 am

If you can register, login, and make a post at bogleheads.org, then you have already shown that you don't need to pay Betterment.
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retiredjg
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Re: Vanguard or Betterment

Postby retiredjg » Sat May 20, 2017 8:00 am

If you are avoiding Vanguard because you think you don't know enough about investing, that is unnecessary. They (and others) have some excellent all in-one-funds that you can buy - all you have to decide is how aggressive you want to be. And you'll have to decide that at Betterment too if you use them.

For your first investment, I'd suggest a Target Fund since it only costs $1,000 to get started. If you have $3,000 ready to go, I'd suggest something like the LIfeStrategy Growth fund which contains 80% stocks and 20% bonds - a reasonable number for most anyone (other than a very conservative investor) when starting out.

The Target Fund series and the LifeStrategy fund series contain the same stuff. The difference is that the Target Fund series migrates toward more bonds (becomes more conservative) over time The LifeStrategy fund series is fixed - it does not change over time.

I'm not suggesting there is a reason to avoid Betterment, but you don't "need" to use them just because you are a beginner and don't know much yet.

wickywack
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Re: Vanguard or Betterment

Postby wickywack » Sat May 20, 2017 8:09 am

If you're only investing in tax-advantaged accounts (e.g., Roth), Betterment doesn't buy you much. If you want simple, just open an account at Vanguard and put everything in a Target Retirement fund. Given your age, you might start with the 2055 one:

https://investor.vanguard.com/mutual-funds/target-retirement/?lang=en#/?lang=en

It'll automatically rebalance and get more conservative over time. It'll be less than half the expenses/fees of Betterment.

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ruralavalon
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Re: Vanguard or Betterment

Postby ruralavalon » Sat May 20, 2017 10:40 am

You don't need to pay a fee to Betterment or anyone else. And avoiding unnecessary fees is critical to long-term investing returns.

At Vanguard you can very simply use any one of many all-in-one balanced funds such as Vanguard Target Retirement funds, Vanguard LifeStrategy funds, Vanguard Balanced Index Fund, or Vanguard Wellington Fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

financeidiot
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Re: Vanguard or Betterment

Postby financeidiot » Sat May 20, 2017 5:46 pm

wickywack wrote:If you're only investing in tax-advantaged accounts (e.g., Roth), Betterment doesn't buy you much. If you want simple, just open an account at Vanguard and put everything in a Target Retirement fund. Given your age, you might start with the 2055 one:

https://investor.vanguard.com/mutual-funds/target-retirement/?lang=en#/?lang=en

It'll automatically rebalance and get more conservative over time. It'll be less than half the expenses/fees of Betterment.


Agree with WickyWack. Betterment will rebalance your portfolio automatically, but so will any target date fund (and at far lower cost). Betterment's best potential selling point is tax loss harvesting, which you can't do in tax advantaged Roth IRA, IRA, or 401k. Don't worry about roboadvisors until you're maxing out your tax advantaged accounts.

financeidiot
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Re: Vanguard or Betterment

Postby financeidiot » Sat May 20, 2017 5:54 pm

Can you clarify your Roth 401k situation? Are you already maxing out your Roth 401k and now you also want to open a Roth or are you doing both? If you haven't maxed out your Roth IRA, what are you trying to accomplish by opening a Roth IRA (lower fees? early withdrawal of contribution? better investment selection?).

Even though you're probably in a lower tax bracket now that you're starting out, it might not make sense to put everything into Roth accounts. Here's a Mad Fientist article discussion tax advantaged account optimization that you may want to take review:
http://www.madfientist.com/guinea-pig-experiment/

If you want to buy a house eventually, you could skip the savings account and put the money into your Roth IRA. You can withdraw your contributions (but not the growth) at any time.

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randomizer
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Re: Vanguard or Betterment

Postby randomizer » Sat May 20, 2017 6:30 pm

Vanguard.


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