How to Use Betterment: Automated Investing That Manages Your Portfolio for You

Betterment is a "robo-advisor" — a service that uses software to build and manage your investment portfolio automatically. Instead of choosing individual stocks or funds yourself, you answer questions about your goals, timeline, and comfort with risk, and Betterment selects a mix of low-cost exchange-traded funds suited to your situation. The portfolio then rebalances itself automatically over time.

This approach is designed for people who want their money invested appropriately without spending time researching investments or monitoring the market. Once you set up your account and connect your bank, the system handles the rest. You can check in on your progress whenever you like, but you do not have to make active investment decisions.

Betterment charges an annual management fee of 0.25% of your account balance per year — on a $10,000 account, that is $25 per year. There is no minimum balance for the standard plan. In addition to that fee, the underlying ETFs in your portfolio carry their own small expense ratios, which Betterment discloses on its website.

One feature Betterment is known for is "tax-loss harvesting" — a technique where the system automatically sells investments that have declined in value to offset taxes on gains elsewhere in your portfolio. This feature is included at no extra cost for standard accounts and can meaningfully improve after-tax returns over time.

Betterment supports multiple account types: regular taxable brokerage accounts, Roth IRAs, traditional IRAs, and rollover IRAs for money moved from an old 401(k). You can set different goals for different accounts — for example, "retirement in 25 years" for your IRA and "down payment in 5 years" for your taxable account — and Betterment will manage each with an appropriate strategy.