Betterment Review: Is Automated Investing Worth 0.25%?

The S&P 500 is up over 16% this year, and you’re researching robo-advisors instead of just buying an index fund yourself. That tells me something: you want to invest, but something is stopping you. Maybe it’s the complexity of rebalancing. Maybe it’s the paralysis of too many choices. Maybe you traded poorly in 2022 and want guardrails.

Betterment has been solving this problem since 2008—managing over $65 billion for more than 1 million customers. But here’s the tension: you can replicate their portfolios with low-cost ETFs for nearly free. So why pay 0.25%?

This review answers that question honestly. Not everyone should use Betterment. But for the right investor, the fee isn’t the cost—your behavior is.

Quick Verdict: Is Betterment Worth It?

Yes, Betterment is worth the 0.25% annual fee for investors who want automated tax optimization and won’t reliably DIY their own rebalancing and tax-loss harvesting. The service shines for hands-off investors with taxable accounts where tax-loss harvesting can offset (or exceed) the management fee.

If you’ll actually rebalance quarterly, harvest tax losses manually, and maintain discipline through market crashes—skip Betterment and DIY. If you’re honest that you won’t do those things, the 0.25% is cheap insurance against yourself.

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What Betterment Actually Delivers

Betterment isn’t just a portfolio—it’s a system designed to remove the friction between you and disciplined investing.

The Core Product: Automated Investing

When you sign up, Betterment builds you a globally diversified portfolio using low-cost ETFs. You pick your goal (retirement, house, general wealth), answer a few questions about timeline and risk tolerance, and the platform handles everything else:

• Automatic rebalancing: Your portfolio drifts from target allocation? Betterment fixes it without you lifting a finger.
• Dividend reinvestment: Every dividend gets reinvested immediately—no cash sitting idle.
• Tax-loss harvesting: In taxable accounts, Betterment automatically sells losing positions to offset gains, then buys similar assets to maintain exposure. This is the feature that can pay for itself.
• Asset location: If you have both taxable and tax-advantaged accounts, Betterment coordinates which assets go where to minimize your tax burden.

The platform offers 11 portfolio options, from the standard Core Portfolio (globally diversified stocks and bonds) to specialized options like Innovative Technology, Climate Impact, and even a Crypto ETF Portfolio for Bitcoin and Ethereum exposure.

What the Experience Looks Like

You’ll see a clean dashboard showing each goal’s progress, projected outcomes, and tax impact previews before you make changes. The mobile app is full-featured—you can adjust allocations, set up recurring deposits, or check performance from your phone.

For most users, the ideal experience is: set up automatic deposits, check in quarterly, and otherwise ignore it. That’s the point.

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The Real Value: Tax Optimization

Here’s where Betterment earns its fee—or doesn’t, depending on your situation.

Tax-Loss Harvesting Math

According to Betterment, nearly 70% of customers using tax-loss harvesting covered their taxable advisory fees through estimated tax savings in 2022. Industry estimates suggest tax-loss harvesting can generate 0.5% to 1%+ in annual tax savings for taxable accounts in volatile markets.

Let’s do the math:

• Betterment fee: 0.25% annually
• Potential tax-loss harvesting benefit: 0.5-1%+ in taxable accounts
• Net result: Tax savings can exceed the fee

The catch: this only works in taxable accounts. IRAs and 401(k)s don’t benefit from tax-loss harvesting because gains aren’t taxed until withdrawal anyway.

Bottom line: If most of your investments are in tax-advantaged accounts, Betterment’s tax optimization advantage shrinks significantly.

Asset Location

Betterment also coordinates where assets live across account types. Bonds (which generate taxable income) go in tax-advantaged accounts. Stocks (which generate lower-taxed capital gains) go in taxable accounts. This coordination is tedious to do manually and easy to get wrong.

Betterment Pricing: The Complete Picture

Understanding Betterment’s fee structure matters because the effective cost varies dramatically based on your balance and deposit habits.

Digital Plan (Most Users)

Critical insight: If you have a small balance without recurring deposits, you’re paying the $5/month flat fee—which translates to a much higher effective rate. A $10K balance with $5/month fees equals 0.6% annually. Set up $250/month deposits to switch to the percentage-based fee.

Premium Plan ($100K+ Required)

Premium adds 0.40% on your first $1M for access to CERTIFIED FINANCIAL PLANNER® professionals. Worth it if you need personalized advice; overkill if you just want the automation.

The Breakeven Calculation

At 0.25% annually:

• $10,000 portfolio: $25/year
• $50,000 portfolio: $125/year
• $100,000 portfolio: $250/year
• $500,000 portfolio: $1,250/year

Compare that to the cost of one poorly-timed panic sell in a market crash, or the tax drag from not harvesting losses. For many investors, the math works. For disciplined DIYers, it doesn’t.

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Betterment’s Investment Approach

Betterment follows modern portfolio theory with a goal-based twist.

The Philosophy

Each goal you create gets its own portfolio with an allocation tailored to its timeline. Retirement in 30 years? Heavy stocks. House down payment in 3 years? More bonds. This isn’t revolutionary, but automating it removes decision fatigue.

Portfolios use low-cost ETFs from providers like Vanguard, iShares, and Schwab. The Core Portfolio is globally diversified across U.S. stocks, international developed markets, emerging markets, and bonds. Expense ratios on underlying ETFs run 0.03% to 0.15%—comparable to what you’d pay buying them yourself.

Performance Claims

Betterment states their Core portfolio has delivered “over 9% composite annual time-weighted returns after fees” since launch. That’s solid, though it largely reflects market returns over a period that included a historic bull run.

Important: Past performance doesn’t guarantee future results. Betterment’s returns are driven by market performance, not stock-picking skill. You’re paying for the system, not alpha.

The Trade-Offs: Pros and Cons

What Betterment Does Well

• Tax-loss harvesting automation: The standout feature. Doing this manually is tedious and easy to mess up.
• Behavioral guardrails: No temptation to panic sell when you’re not picking individual stocks.
• Goal-based organization: Seeing progress toward specific goals is more motivating than watching a single number.
• All-in-one platform: Checking, high-yield savings, investing, and retirement in one place.
• Low barrier to entry: $0 minimum for Digital plan.

What Betterment Doesn’t Do Well

• Cost adds up over time: 0.25% annually on a $500K portfolio over 30 years is substantial—tens of thousands in fees.
• Limited customization: You can’t hold individual stocks in automated portfolios (though Self-Directed Investing now allows stock trading separately).
• Tax-loss harvesting only helps taxable accounts: If you’re mostly in IRAs/401(k)s, this benefit disappears.
• Premium requires $100K: CFP® access is locked behind a high minimum.
• No outperformance expected: You’re getting market returns minus fees, not beating the market.

Who Should Use Betterment (And Who Shouldn’t)

Betterment Is Built For:

• The Overwhelmed Beginner: You know you should invest but haven’t started because it feels complicated. Betterment removes every barrier.
• The Busy Professional: You have money to invest but not time to manage it. Automation fits your life.
• The Reformed Trader: You traded poorly in the past and want guardrails against yourself. The structure helps.
• Taxable Account Investors: You have significant assets outside retirement accounts where tax-loss harvesting adds real value.
• Goal-Oriented Planners: You want to see progress toward specific goals (retirement, house, emergency fund) rather than just watching a number grow.

Skip Betterment If:

• You’re a disciplined DIYer: If you’ll actually rebalance quarterly and harvest losses manually, you can save the 0.25%.
• You want to pick stocks: Betterment is for passive investors. Active traders should look elsewhere.
• Your investments are mostly tax-advantaged: With assets primarily in IRAs and 401(k)s, the tax-loss harvesting benefit shrinks.
• You have a very small balance without recurring deposits: The $5/month flat fee creates a high effective rate on small balances.
• You want to beat the market: Betterment delivers market returns, not alpha. If you want stock-picking, consider Motley Fool Stock Advisor or similar services.

Best Alternatives to Betterment

If Betterment isn’t the right fit, here are your options:

Wealthfront

The closest competitor. Also charges 0.25% with automated tax-loss harvesting. See our Wealthfront review for the full breakdown. Wealthfront offers a few features Betterment doesn’t (like direct indexing at $100K+) but lacks the CFP® advisor access Betterment Premium provides. Choose Wealthfront if you want direct indexing; choose Betterment if you might want human advice later.

Vanguard Digital Advisor

Vanguard charges ~0.20% for automated investing using Vanguard funds. Slightly cheaper than Betterment with access to Vanguard’s legendary low-cost funds. The platform is less polished, and tax-loss harvesting is less sophisticated. Good for Vanguard loyalists who want some automation. Both platforms offer similar core features at the same price point.

DIY Three-Fund Portfolio

The cheapest option: buy a total U.S. stock fund, total international fund, and total bond fund yourself. Total cost: 0.03-0.05% in ETF expense ratios. You’ll need to rebalance manually, harvest losses yourself, and maintain discipline through crashes. If you’ll actually do this, you’ll save money. Most people won’t.

Composer

For investors who want to build and automate custom strategies, Composer offers a different approach. You create algorithmic strategies that execute automatically. More complex than Betterment, but more customizable.

Final Verdict: Should You Use Betterment?

Betterment is worth it for investors who value automation over optimization. The 0.25% fee isn’t free money—but neither is the cost of your own behavioral mistakes.

If you have significant taxable investments, the tax-loss harvesting can pay for itself. If you’ve struggled to stay disciplined through market volatility, the structure provides guardrails. If you simply want to invest without thinking about it, Betterment delivers.

The investors who shouldn’t use Betterment are the disciplined DIYers who will actually rebalance, harvest losses, and hold through crashes on their own. If that’s you, save the fee and buy index funds directly.

For everyone else—the busy professionals, the overwhelmed beginners, the reformed traders who know they need guardrails—Betterment offers something valuable: a system that works even when you don’t.

With over $65 billion under management and nearly two decades of operation, Betterment has proven the model works. The question isn’t whether Betterment is good. It’s whether you’re the investor who needs it.

Not sure Betterment is the right fit? Explore all your options in our guide to the best stock research websites.

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Frequently Asked Questions

Is Betterment worth the money?

Yes, for hands-off investors with taxable accounts. At 0.25% annually, Betterment’s automated tax-loss harvesting can offset or exceed the fee in taxable accounts—the company reports nearly 70% of users covered their fees through tax savings in 2022. The value diminishes if your investments are primarily in tax-advantaged accounts like IRAs and 401(k)s, where tax-loss harvesting doesn’t apply. DIY investors who will actually rebalance and harvest losses themselves can save the fee.

What are the best alternatives to Betterment?

Wealthfront is the closest competitor with the same 0.25% fee and similar tax-loss harvesting. Vanguard Digital Advisor offers automation at ~0.20% with less sophisticated tax optimization. DIY investing with a three-fund portfolio costs just 0.03-0.05% in ETF fees but requires manual rebalancing and discipline. For investors who want stock-picking rather than passive automation, services like Motley Fool Stock Advisor offer a different approach entirely.

Betterment vs Wealthfront: Which is better?

Both charge 0.25% with automated tax-loss harvesting. Choose Wealthfront if you want direct indexing (available at $100K+) or prefer their interface. Choose Betterment if you might want CFP® advisor access later (Premium plan), want a high-yield checking account, or prefer their goal-based organization. For most investors, the differences are marginal—pick whichever interface you prefer.

How do I cancel Betterment?

You can cancel Betterment anytime through your account settings with no cancellation fee. To close your account, you’ll need to withdraw your funds to a linked bank account first. Note that selling investments may trigger capital gains taxes. There’s also a $75 outbound transfer fee if you move investments to another brokerage instead of liquidating.

Does Betterment actually beat the market?

No, and it doesn’t claim to. Betterment uses passive index funds that track the market. Their stated 9%+ composite annual returns reflect market performance, not stock-picking skill. You’re paying for the automation, tax optimization, and behavioral guardrails—not for alpha. If you want to beat the market, you need an active stock-picking approach, which Betterment explicitly doesn’t offer.

What’s the minimum to open a Betterment account?

$0 for the Digital plan. You can start investing with any amount. However, if your balance is under $24,000 and you don’t set up recurring monthly deposits of $250+, you’ll pay a $5/month flat fee instead of the 0.25% annual rate. For Premium access (CFP® advisors, Solo 401(k)), you need $100,000 in eligible investing accounts.

Is Betterment safe and SIPC insured?

Yes, Betterment Securities LLC is a registered broker-dealer and member of SIPC. Your investments are protected up to $500,000 (including $250,000 for cash claims) if Betterment were to fail—this covers the securities themselves, not market losses. Betterment also uses bank-level 256-bit encryption, two-factor authentication, and works with partner banks that provide FDIC insurance on cash holdings up to $2 million through their multi-bank cash sweep program. The company has operated since 2008 and manages over $65 billion in assets with no major security incidents.

How much does Betterment cost on a $100,000 portfolio?

$250 per year at the 0.25% Digital rate, or $650 per year at the 0.65% Premium rate. The Digital fee covers automated investing, rebalancing, tax-loss harvesting, and dividend reinvestment. Premium adds unlimited access to CFP® advisors, a Solo 401(k) with no annual fee, and a slightly higher cash reserve APY (3.75% vs 3.50%). For taxable accounts, tax-loss harvesting can potentially offset $500-$1,000+ in annual tax savings during volatile markets, meaning the Digital plan may effectively pay for itself.

Can I transfer my existing brokerage account to Betterment?

Yes, Betterment accepts ACAT transfers from most brokerages at no incoming fee. The transfer process takes 5-7 business days for full account transfers. Betterment will liquidate transferred holdings and reinvest in their ETF portfolios, which may trigger capital gains taxes on appreciated positions—request a tax impact preview before transferring. They support transfers of IRAs (Traditional, Roth, SEP), taxable brokerage accounts, and 401(k) rollovers. Note there’s a $75 outbound ACAT fee if you later transfer out to another brokerage.