Betterment (bond, fund, trading, Fidelity)

[Rivertowntalk]

I have had a Betterment account since 2015 and have earned .5% (annual rate of return). Should I give up on it and move to something else? Where should I go for a hands off style with a low fee?

[Wells5]

I haven't seen the "Betterment" ad for a while. Just the pretentious name is enough to turn the cautious investor away.


Look into "Vanguard Personal Advisor Services." They charge 0.3% of your portfolio value per year for the service. Or you can invest in the Vanguard 500 Index Fund (VFINX). Fidelity also has a 500 index fund (FUSEX) and a personal advisor service.

[ShampooBanana]

Originally Posted by Rivertowntalk

I have had a Betterment account since 2015 and have earned .5% (annual rate of return). Should I give up on it and move to something else? Where should I go for a hands off style with a low fee?

What is your allocation? Are you all in on equities or heavy on bonds? It's really impossible to say anything without knowing your mix, which YOU decide and can adjust at any time. Have you made any adjustments to it since you started, also? Made any withdrawals?

[Rivertowntalk]

I have it at about 50/50 bonds and stock. Pretty much all Betterment invests in is Vanguard. No withdrawals yet.

[jdhpa]

Get SPY.

[Peasy973]

A few options for you.


1) Consider changing your allocation. 50/50 allocation is too low if you expecting great returns IMO.

2) Consider changing your provider. There's other providers out there for you to check out (Wealthfront, Acorn, etc.)

[rjm1cc]

What was the return on the equity part? Bond funds will lose money if longer term and interest rates increasing. Who picked the 50/50? If they did and the bonds are long term I would move on. 1/2% return is very very poor.

[Lovehound]

1/2% return? Hell, I'm getting 0.45% on my money market account! It's tiered and I don't even have that much money in it at the present. (mid 5-digits) I'm getting practically zip with my funds parked in my trading account.

At a half percent you're hardly better than sticking it in your mattress. Except for the lump of course.

I must not understand something here. You can get about 2.4% on T-bills. I'm guessing that will be up around 2.7% in January. If I can't find anything better I'm gonna adopt a rotating plan and park my money at the US Treasury.

[mathjak107]

Originally Posted by rjm1cc

What was the return on the equity part? Bond funds will lose money if longer term and interest rates increasing. Who picked the 50/50? If they did and the bonds are long term I would move on. 1/2% return is very very poor.

this is myth and not correct. it is not how you look at bond funds and compare .

High quality bond funds don't actually lose money if you hold them for the funds duration . ultimately you end up with around the return you got the day you bought that fund .

it is just that bond funds like a bunch of individual bonds have a time frame that you need to hold them . the rising rates offset the falling nav until you reach a point they equal what they were the day you bought them.

what people forget is that when looking at bond fund returns in rising rates is the fact that you need to go back at least as far as that funds duration to compare . .

so as an example a total bond bond (ftbfx) may be down 2.22% ytd but if you go back the 5 or 6 years to match the funds duration of 5.60 years , that fund actually returned over 2% which had you bought a 5 year cd back then is actually a better return , the bond fund did a bit better as they usually tend to . 5 year cd's at the time were 1.80% .

so everything is relative to what you were getting when you bought in .

for those buying in now , ftbfx has an sec yield of 3.38% . a five year cd is around 3% . 5-6 years from now the returns will be close . they both will be behind the curve if rates rise but both will get positive returns regardless close to what was offered the day they bought in .


so each high quality bond fund has a duration value and that value is your guide as to how long it will take to get around the rate you bought at .

you should be laddering bond funds the way you ladder cd's . you don't buy a total bond fund which typically has a 5-6 year duration for money you need in 3 years .

you buy a shorter duration fund for that money .

so as an example ,for someone living off their portfolio i would use a money market for this years money or an ultra short bond fund , a short term bond fund for the 1-3 year range , an intermediate term bond fund going out to 5 years and then a total bond fund or equal for 6 years or more .

so basically you ladder the funds and you won't lose . you may lag behind current rates if they rise but you won't get less then you were offered the day you bought .

[mathjak107]

so as an example:

you buy a fund for 10 bucks and it is paying 5% to make it easy . this fund has a 5 year duration value , meaning you need to stay at least 5 years or it is like selling a bond before maturity.

if rates shot up to 6% the fund nav would fall to 9.50 but instead of 5% interest you would get 6% . the fund is always replacing older bonds with higher paying new ones.

that extra 1% interest will eventually offset that 5% drop in nav over the 5 years .

you will get your 5% eventually but you are still behind the curve since current rates are 6%. if you sold before the funds 5 year duration you can see it would be like selling an individual bond before maturity and in rising rates you can get less then the day you bought as a return .