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Old 11-07-2014, 09:39 AM   #21
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Yes, of course you do have to pay the expenses of the underlying funds. I'm fee-phobic too, but if you really look at what Betterment offers in detail they arguably do more than earn their .15% fee in many cases. Yes you get automatic rebalancing in a Vanguard Target Date fund, but those funds are very unsophisticated in their allocations compared to what Betterment and the other top robo-invest companies are offering. If you accept the basics of Modern Portfolio Theory and the work of Fama and French you'd expect at least a couple percent higher returns and a smoother ride getting there over the long term with these more complex, small cap and value tilted, global portfolios.

The tax loss harvesting is also much more sophisticated than anything Vanguard offers, plus they buy fractional shares and keep you fully invested at all times. I'm certainly not ready to make the leap myself, but hey one could do what Mr. Money Mustache did and put 100K into Betterment and compare the returns with DIY over time.
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Old 11-07-2014, 12:22 PM   #22
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The beauty of something like Betterment is that the clients will have no clue how to compare their returns to a benchmark. The kinds of clients that Betterment will attract are those that are afraid of math. They will have no easy way to figure out if Betterment is helping them or hurting them.

I read one anecdote about pages and pages of transactions which was hard to believe. Nevertheless, understanding what is going in one's account could be a real chore. That is, if one wants to keep tabs on it. I suspect clients will simply have to trust Betterment et al. to be doing what they say they are doing.
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Old 11-07-2014, 12:27 PM   #23
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I read one anecdote about pages and pages of transactions which was hard to believe. Nevertheless, understanding what is going in one's account could be a real chore. That is, if one wants to keep tabs on it. I suspect clients will simply have to trust Betterment et al. to be doing what they say they are doing.
It looks like a low cost easy access DFA.....that might be a nice thing. I just don't like to get too complicated, not too many funds and don't fiddle with them too often. I also like to understand exactly whats happening in my accounts and don't need to give my financial details to another faceless internet company.
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Old 11-07-2014, 01:02 PM   #24
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The kinds of clients that Betterment will attract are those that are afraid of math. They will have no easy way to figure out if Betterment is helping them or hurting them.
Exactly. These are the people who probably will benefit most from their service. Otherwise, they will keep their money in low yielding CD's or lose it on some goofy tip they get from a 'friend' who knows somebody.

Or, they are people who are willing to pay a bit extra for the service and to not have to do the math. Nothing wrong with that. The guy who fixes his own car and installs his own water heater may think those who pay a mechanic and plumber are just being foolish.

To each his own.

Note: I would love to see a rigorous academic comparison between a common AA (60/40 stocks/bonds) with yearly reallocation, and Betterment's system.
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Old 11-07-2014, 01:17 PM   #25
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Note: I would love to see a rigorous academic comparison between a common AA (60/40 stocks/bonds) with yearly reallocation, and Betterment's system.
Why not start a real-world actual experiment yourself? You can put $100K at Betterment and $100K in the Vanguard LifeStrategy Moderate Growth fund. Whenever you contribute/withdraw money to one, do the same to the other.
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Old 11-07-2014, 01:49 PM   #26
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Why not start a real-world actual experiment yourself? You can put $100K at Betterment and $100K in the Vanguard LifeStrategy Moderate Growth fund. Whenever you contribute/withdraw money to one, do the same to the other.

$100K here. $100K there. Pretty soon you're talking real money.
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Old 11-13-2014, 08:11 AM   #27
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Old 11-13-2014, 08:21 AM   #28
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@ironwaffle, it reads to me like you want some hand-holding and someone else to place the blame on if things go downhill. If you want an anonymous team for this purpose, then Bogleheads Investing Advice and Info will do the job for you for free.
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