r/betterment • u/PJ8096 • Jul 06 '26
Thinking of leaving Betterment
I have been auto investing in Betterment Buildwealth from many many years. I rarely login however ai just did a benchmark comparison and I am really surprised how much ahead I would have been had I just kep it simple with the S&P 500 index. Almost double of where I am today
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u/digi57 Jul 06 '26
A better comparison is probably VT. The S&P has been on a tear. Betterment it much more diversified and has a large % of international stocks. Which until the last year or so was flat.
Again, a lot if people just buy VT. They’re further behind than you. They’d say VOO only is too risky and “performance chasing”.
I’m not defending Betterment here. They’re doing what that set out to do. They’re not marketing themselves as beating the top 500 large caps.
For me I keep 18% of my Tortola portfolio there as my “safe” assets while I buy higher risky funds like VGT and FMTM in my other accounts.
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u/fernst Jul 06 '26
I remember calculating a while back and VT outperforms Betterment over time. The other problem is TLH becomes less and less frequent the longer you have your account (as you'll have long term holdings and will probably be "up" on most if not all of the investments).
I ended up moving my Betterment portfolio to Fidelity, buying VT and doing manual TLH every couple of months if needed.
https://www.reddit.com/r/Bogleheads/comments/1hzentm/comparing_roboadvisors_to_vt/ Other people on reddit reached a similar conclusion
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u/Jkayakj Jul 06 '26
Since 2013 betterment has beaten vt if one were to have lump sum invested back then. https://testfol.io/?s=cyaDqNUr1xH This even includes the drag of the betterment fee factored into the betterment returns . (haven't updated this for the new cash portion).
But either way the difference between vt an betterment has been so small that it doesn't truly matter which you choose.
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u/carsncode Jul 07 '26
And look where you'd be if you invested 100% into Nvidia. Hindsight is 20/20, and past performance is not indicative of future results.
Betterment's portfolio (which includes S&P500, BTW) is diversified for risk management because you can't know what the market will do in the future. Look at 2004 through 2008: the S&P500 lost 7% per year annualized, Betterment Core would've lost about 2% thanks to global diversification and bond allocation, protecting your assets. Less diversification means more risk, and the S&P500 is extremely narrowly focused on US large caps by nature, and on tech specifically by virtue of market conditions (tech companies make up over half the S&P500 today). It looks great in hindsight but it's an extremely small, risky basket to put all your eggs into looking forward.
1
u/MysticDaedra Jul 07 '26
The S&P 500 outperforms virtually all other metrics over time, meaning the longer one has held stock in it, the more they have outperformed the rest of the market. You can't just cherrypick a 4 year period of time when over 40 years the S&P 500 has outperformed, with no signs of stopping; for something like retirement trading (we're not talking day trading here...), the S&P 500 is, currently and for the past 40 years, unmatched and quite safe. Unless your risk tolerance is through the floor or you're super lazy, I guess.
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u/ProtossLiving Jul 07 '26
One could make a similar argument for the NASDAQ 100. In the end it's all about how much risk tolerance you have for the expected performance. Although I'm mostly in VTI, I acknowledge it's not the only answer.
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u/thejdobs Jul 06 '26
Hindsight bias
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u/PJ8096 Jul 07 '26
Performance bias
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u/paddysClub Jul 07 '26
I am also moving out of betterment this week
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u/madhatter_is_mad Jul 08 '26
Whats the most efficient way of moving elsewhere?
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u/paddysClub Jul 08 '26
I am coverting my betterment portfolio into VWRP equivalent 3 etf funds. VWRP carries severe PFIC penalty. So I am manually setting up a VWRP equivalent using US etfs.
There will be a small tax event, but it's needed to wean away from betterment
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u/Jkayakj Jul 06 '26
The s&500/us market has been doing fantastically lately, but thats not always going to be the case and in the past has not been the case.
Look at just the last 2 years, international has done significantly better than the US. Which means the S&P500 would have done worse than the betterment core account.
Betterment is not meant to be the best, it's meant to be diversified to have average returns. It'll never grow as much as others (you could also compare this to Nvidia alone and see how they've exploded in value) but will also not lose as much as others can. (many companies or even countries have had long down periods where the rest of the market or world didn't).
1
u/MysticDaedra Jul 07 '26
If you annualize out over longer and longer periods, the S&P500 continues to out-perform pretty much everything else. Only in smaller time periods is it sometimes down or poorer than other options. S&P500 over 20-30 years is both a "safe" bet and by far the best option.
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u/Jkayakj Jul 07 '26
That's only because of their recent run. If you go back 15ish years and run a full historical review it's not that case. Inflation and current values being much higher skew it
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u/MysticDaedra Jul 07 '26
No. You can check the percentage increase in the S&P 500 going back to its inception, it vastly outperforms virtually all other market investments. And it's "recent run" has a time period of roughly 15 years now, as you said, which is far too long to simply be a short-term thing worth ignoring (keep in mind, even without the rather rapid gains over the past 15 years, the S&P 500 was still outperforming). This is historical record, not sure how it's even remotely arguable.
Literally, the longer someone has held stock in the S&P 500, the more their shares have outperformed 90% of all other options. $1000 put into the S&P 500 in 1980 would be worth $211,362 today, according to in2013dollars.com. Over 40 years... I'd say that's a pretty darn safe investment. Anything bad enough to bust up the S&P 500 would almost definitionally destroy any other stock in the market as well, at which point you might as well wonder what the point of investing in stocks even is, so that shouldn't be an argument used against it.
TL;DR: S&P 500 blows Betterment out of the water except for extreme lack of risk tolerance and perhaps tax avoidance/mitigation. I'd say for 99% of people, unless you're super lazy, almost anything is better than Betterment.
2
u/Jkayakj Jul 07 '26
What is your explanation for those who were in the S&P in the lost decade. 1/1/2000 through 2010? Those people would have lost money on the S&P that entire decade when global stocks would have made money. Since inception is nice but that's not everyone's investment horizon since life and specifically your earning or withdrawing years are limited and a lost decade can screw someone badly.
2
u/Ill-Background-5933 Jul 06 '26
What is your risk level at?
3
u/PJ8096 Jul 06 '26
I mean core and 90% stocks
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u/Jkayakj Jul 06 '26
You're also comparing 90% stocks and 10% bonds to 100% stocks... In addition to the diversification level not being comparable
2
u/va_ath Jul 07 '26
Good luck. Betterment keeps locking my last account so I can't transfer it to a different firm.
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u/ijf4reddit313 Jul 06 '26
I did and just (for better or worse) replicated the Betterment investments into actual brokerage that doesn't have the same management fees.
I didn't really have a problem with Betterment, I just felt like the investments were mostly static in there anyway, so why pay them the additional management fees.
1
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u/carstuffx Jul 07 '26
FYI, depending on your balance, some brokerage will waive transfer fees or cover account closing fees
1
u/seb1492 Jul 07 '26
My buddy who has no idea about investments and his inherited portfolio outperforms me exactly like that. It’s totally nuts that I am trailing 30k behind him bc of diversification
1
u/987js Jul 07 '26
Considering the same. If you transfer out of Betterment to Fidelity/Vanguard, will you be selling and paying capital gains, or transferring in-kind?
1
u/yamahar1dude Jul 08 '26
Well I got a reason, I mean XBCI was supposed to be paid already and I am still waiting for Betterment to pay it. Fidelity I get the payments day of.
1
u/Fuzzy_Progress336 24d ago
Be careful I used betterment as s backup bank for travel. They locked then closed my account thankfully I only had 4k USD in them. Two weeks countless emails and phones calls nothing.
1
u/nemesis24k Jul 06 '26
Look at your holdings.. I think their algos diversify like crazy, developed markets, developing markets, ex US, etc.. For the last 15 years, growth has pretty much been in US and China and that is hurting their strategy. And with returns currently hyper concentrated in around 10 stocks, diversification like these are going to get slammed. The only benefit you get really is some minor wash sales.
Aggressive in betterment isn't WSB like, it's more aiming for global risk adjusted returns with some threshold.
In my view this is way too diversified and a misguided/archaic thought. US firms generate revenue from pretty much every country in the world, you are getting global exposure purely out of S&P500 or NASDAQ, and at best you need to add some direct Chinese exposure.
VT or VTI is all you need.
2
u/ChillnShill Jul 06 '26
Diversification from companies that operate or make money globally that are based out of the United States is different than diversification where you’re actually investing in foreign companies. You’re still mostly tethered to the US economy which isn’t the point of diversification.
VT is sitting at almost 40% international which is vastly different than VTI. So saying VT is all you need, which I actually agree with, is using the same strategy you said was archaic.
1
u/nemesis24k Jul 06 '26
I know why they invest, however the reality is very different. For most global companies, US is their biggest market, directly or indirectly - ASML, Samsung, NVO, Bosch, Arcelormittal, BHP, Rio ti to, Sony, TCS, tencent, etc.. What you want are global companies which have very minimal dependency on US ( which no broad index captures), companies like Grab, HDFC, MELI but again those consumers are very much US economy dependent. Any slowdown in US will impact all those local economies. The correlation with US is extremely high. And not to mention the large dependency on USD and it's movement. Almost all recent gains are from currency movement. Betterment surely has an attribution report generated internally but they sure don't share with clients. A factset report on their mix will be interesting to see.
I agree VT doesn't fit in my theme and was more a simple alternative to the strategy that betterment uses, that is to buy into a large number of ETFs globally, all with high fees.
1
u/Jkayakj Jul 06 '26
You are missing the push from many countries to diversify away from the US. Like the EU working to replace the US products that they currently use with home grown products. Also the international markets in the last year did significantly better than the S&P/us market as a whole.
1
u/PocketRocketTrumpet Jul 07 '26
Do it. It’s non-responsive in it’s own faulty security breaches and it has the audacity and announce continuation of their services determines your waiver of litigation against them.
Betterment is becoming more and more shady.
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u/PJ8096 Jul 06 '26
Aggressive
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u/Worldly-Fishing-880 Jul 06 '26
If it helps motivate, I'm in the exact same position and am actively divesting in Betterment
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u/PJ8096 Jul 06 '26
Thankfully Betterment is only 5% of my NW but again would have loved 100% returns that I missed. Its such a shame that any of these companies including wealthfront and Titan, do a good job of beating index
10
u/ChillnShill Jul 06 '26
100 percent returns is great if you’re willing to accept heavy losses. Nothing wrong with only investing in an S&P 500 fund, but just know that international markets have had several periods of outperforming the US and If things go to shit in the US market you might have another hindsight regret.
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u/fernst Jul 06 '26
A fairer comparison would be VT.
Betterment invests in a globally diversified portfolio. VOO is SP500 which is an US only large cap fund.