[Three-fund portfolio: Robo-adviser or 3 funds?]

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about10
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[Three-fund portfolio: Robo-adviser or 3 funds?]

Post by about10 »

[Split into a new thread from: The Three-Fund Portfolio --admin LadyGeek]

I just joined this group and am pretty impressed with the smart folks here. I'm not a pro-investor by any means.

I use Betterment which allows for an equity/bond % split and no more. I've got it set at about 66% equity and 33% bond. They seem to split their equity ETF's to about equally domestic and international. It boils down to about the same 3 areas of investing suggested here but they have it split into about 20 ETF's.

My question is - is Bettement a good idea in the opinion of this well-informed group, or would I be better off with just 3 ETF's on my own?
Silk McCue
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by Silk McCue »

A high level answer. You can invest effectively using a 3-Fund portfolio at Vanguard and elsewhere with less complexity and lower expenses. There are great resources on this site that you can use to increase your knowledge. Hopefully others will come along and provide you specific feedback on Betterment.
Mors
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by Mors »

Betterment has two nice features. The main feature is tax harvesting in taxable accounts, it usually makes bigger profit than its annual fee. The supplamentary feature is the "tax coordinated" accounts, where it manages your 401k, ira and taxable account in tandem regarding optimal fund placement. Now the last one is not difficult to do by yourself usually, but in combination with tax harvesting makes for a very tax efficient portfolio.

This is the reason I consider it the best robo advisor for most cases. If you do not invest in taxable accounts though you may prefer a 3 or 4 fund portfolio or a managment free robo advisor (wisebyan, schwab) for smaller annual expenses.
Ron Scott
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by Ron Scott »

Reminds me of Mencken's excellent commentary: "For every complex problem there is an answer that is clear, simple, and wrong."

I'm not much for financial advisors and don't use them.

The 3-fund approach doesn't work for my situation either as I don't have room in my IRA and Roth to place all my bond money, so I buy short-intermediate-long munis in my taxable account. I also tend to favor John Bogle's advice about international stocks (don't buy them) which runs counter to the 3-fund approach.

While not rocket science, there's enough complexity for me in all this to avoid the most elementary of approaches.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.
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camillus
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by camillus »

There are other options that are equal or better in terms of simplicity and cost: target date funds and lifecycle funds. It can't get much more simple than owning one fund.

I am jealous of Betterment's interface though. Betterment looks really cool.
51% US / 34% ex-US / 15% “bond”
Nthomas
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by Nthomas »

camillus wrote: Sun Oct 08, 2017 4:29 am
I am jealous of Betterment's interface though. Betterment looks really cool.
I agree. The aesthetics are very appealing.
ThePrince
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by ThePrince »

My experience and returns with Betterment have been excellent.
David Scubadiver
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by David Scubadiver »

.25% fee on your assets for life is quite a drag. Less so than using a financial advisor and probably better result than using an advisor. So not a terrible outcome overall.

I see the appeal having opened a trip account with Wealthfront (same fee) and Wisebanyan (free)
Topic Author
about10
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by about10 »

Thanks to all for your comments. Betterment has done well for me in two areas mentioned, the investment choices with their coordinated taxable account and an IRA, and the tax-loss harvesting from the taxable account. The gains have also been quite good.

But I figure diversification is a wise thing so I may put some money at Schab or Wisebanyan.

Thanks again for the advice.
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BL
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by BL »

Maybe you could set up a spreadsheet to compare with the 3-fund portfolio?? Lately, stocks have been doing very well, so I expect yours to do the same. I see no harm, but no real advantage either, in what you are doing. Sure beats store-front advisers!
investor997
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by investor997 »

I used Betterment for about two years until early this year when they raised their fees from 0.15% to 0.25%. Since then, and with the benefit of knowledge gained from reading this forum, I moved my assets out and currently self-manage a Three Fund-ish portfolio at a brokerage. I enjoy the self-managing aspect of it. It's not difficult and it keeps me engaged and aware of what's going on.

There's only a couple comments I can make: Be careful of enabling TLH on betterment if any of the underlying ETFs resemble investments you hold outside their scope (401k, etc). You want to avoid any sort of wash sale situation. Also, I'd avoid them altogether in a tax-advantaged account like an IRA or Roth IRA. There's no TLH benefit there, so there's less value in the management fee.

Betterment, however, was a no brainer. You simply adjust the dial to match the AA you want, link your checking account to set up periodic contributions and forget it. For people like my girlfriend who have absolutely no idea what they're doing or even the desire to learn how [remember that "mansplaining" thread?], Betterment is a godsend. TLH is nice; it kicked in several times from 2015-2016. I also had a positive experience with their email-based customer service on the few occasions I needed it.
David Scubadiver
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by David Scubadiver »

You could do both -- open up an M1 Finance account (or FolioFN), create a 3 fund portfolio and use them for the balancing. Seems like overkill, but it is an option.
TexasEng
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by TexasEng »

investor997 wrote: Tue Nov 07, 2017 9:26 pm I used Betterment for about two years until early this year when they raised their fees from 0.15% to 0.25%. Since then, and with the benefit of knowledge gained from reading this forum, I moved my assets out and currently self-manage a Three Fund-ish portfolio at a brokerage. I enjoy the self-managing aspect of it. It's not difficult and it keeps me engaged and aware of what's going on.
Investor997 - How did you leave Betterment? Did you just take the tax hit on the sale? I'm looking to manage my taxable at a brokerage on my own now as well.
investor997
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Re: [Three-fund portfolio: Robo-adviser or 3 funds?]

Post by investor997 »

You can request an in-kind transfer from Betterment but they'll only send out whole shares. For example, if your account held 5.62 shares of VTI prior to the transfer, there will be 0.62 shares left over that you'll have to liquidate (and potentially pay taxes on).

The larger your account, the less overall percentage of it will be held in fractional shares.

Betterment primarily uses VTI (domestic), VEA/VWO (int'l) and BND to build the portfolio, but they also buy some other ETFs like VTV/VOE/VBR to give the portfolio a value tilt. I never sold any of these. No harm in letting them sit there, IMHO. I just keep adding to the main Three Fund ingredients (ie VTI).
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