(Update: Betterment has a new promo for a $100 bonus with $10,000 investment held for at least 60 days. This is a bigger bonus with bigger requirement than the previous $25 bonus for a $250 investment. In case you wanted to know, my $1,000 experimental Betterment portfolio has been fully converted to the new asset allocation already, and is currently worth $964.)
Betterment.com is an investment service that started up last year, where simplicity and ease of use is the focus. Back in May, I opened an account for myself and wrote a review of Betterment. Right now if you open an account with at least $250, you will get a $25 bonus.
My primary gripe at the time was their asset allocation for stocks. (I actually liked the simply bond allocation.) However, I recently received an e-mail that they are making some changes in September. Before:
- 20% Vanguard Total Stock Market ETF (VTI)
- 20% iShares S&P 500 Value Index ETF (IVE)
- 20% iShares S&P 1000 Value Index ETF (IWD)
- 15% iShares Russell 2000 Value Index ETF (IWN)
- 15% iShares Russell Midcap Value Index ETF (IWS)
- 10% SPDR Dow Jones Industrial Average ETF (DIA)
- 25% Vanguard Total Stock Market (VTI)
- 25% iShares S&P 500 Value (IVE)
- 25% Vanguard Europe Pacific (VEA)
- 10% Vanguard Emerging Markets (VWO)
- 8% iShares Russell Midcap Value (IWS)
- 7% iShares Russell 2000 Value (IWN)
The major change is that they are adding international stock exposure, which is nice since about 55% of the world’s publicly traded market value is outside the US. They have landed on a conservative 35%/65% international/US split. You may also notice that they got rid of the Dow Jones ETF, which I complained about as well since the Dow Jones is simply not a very good index. The iShares S&P 1000 Value Index ETF is gone as well, most likely because it had so many overlapping holdings with the S&P 500 Value index.
How will the change occur? From the same e-mail:
Starting in September, your account will automatically begin transitioning to the new portfolio, and will be phased in over a period of two months to take advantage of average pricing over time.
Such a change to their portfolio and the subsequent buying/selling will unfortunately mean some extra tax bills for investors, but this is how it goes with internet startups. In the long-term, I feel the changes make Betterment a better product.