Betterment vs 3 Fund Portfolio--Are 10 ETFs Better Than 3?

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As robo-advisors go, Betterment is one of the best in my opinion. It offers excellent features (e.g., automatic rebalancing, tax loss harvesting, excellent planning tools) at a reasonable price. But how does Betterment's Core Portfolio of 10 ETFs stack up to the simple, humble 3-fund portfolio?
We put both to the test in this video.
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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
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8 мар 2022

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Комментарии : 78

@wd3574 2 года назад

I'm periodically investing some of my taxable funds with Betterment. I began doing this before I knew about the 3 fund portfolio. I'm happy you found the two portfolios to perform very similarly (well, close enough for me). The fact that Betterment also automatically does tax loss harvesting as well as portfolio rebalancing makes it worth the .25% fee they charge, IMO. All I have to do is continue to contribute money to it!

@HB-yq8gy Год назад

Yes, maybe a good deal in a taxable account. But I think Robinhood does tax loss harvesting with zero fees? Our IRAs, Roths & Cash acct is Vanguard might switch cash acct to Robinhood.

@theretrospectivegamer Год назад

This is exactly what I was looking for for some research. Thanks!

@lifeisgood070 2 года назад

The only reason betterment contains value etfs is because they plan to sell the total Stock market or the S&P 500 fund and put the proceeds in large cap value to tax loss harvest. It’s a good strategy and value would be the way to tax loss harvest efficiently. Bndx is probably the worst fund i’ve ever seen

@samsmusichub 2 года назад

Thanks for this info!

@sonnybanga9006 2 года назад

Rob did it!!! The sub-10 min video :)

@bradwright7333 Год назад

Great information

@jamesconkle9158 Год назад

I would recommend comparing these two strategies in a Monte Carlo simulation. In my tests Betterment Core outperforms including fees.

@Michaeldotcom33 Год назад

Ya a test over 8 years when growth vastly outperformed value is not the best test.

@NoName-ql1wk 2 года назад

Like your stuff my man.

@supersteve8305 2 года назад

Scammer be fishing

@zdrum01 11 дней назад

Another great video! Thanks

@noway2708 2 года назад

Betterments portfolio reminds me of James Stacks Model portfolio where safety is the name of the game. being able to control the losses is what its about, Rob could include derivatives

@JayCalderon211 Год назад

Thank you!

@OnCashFlow 2 года назад

Very helpful. I always like to listen to what you have to say, Rob. I can see why the platform can be great for beginners, but it still hurts to see any fees paid when stupidly simple portfolios exist and do very well!

@supersteve8305 2 года назад

Scammer be fishing

@ferchanguitoable 2 года назад

Hello Rob! Thank you for making time on creating amazing content! I really enjoy your videos. Could you do a video about mid caps? I often find videos on large and small cap, but there is rarely a mid cap video.

@supersteve8305 2 года назад

Scam alert to previous comment

@IndexInvestingWithCole 2 года назад

@@supersteve8305 oh really?

@unitedstateser 2 года назад

Can you please look at the fund GUT. What do you think of using that? Another fund that is similar is CLM. Over 25 years it hasn't done well, but in the last five years it has done awesome. What do you think about income funds and CEFs?

@vjay_michigan9158 2 года назад

Great video Rob. Simple, easy and insightful. Your videos and Mark Zoril’s financial advise made my investments easy and worry free. Thanks.

@supersteve8305 2 года назад

Scammer be fishing

@jalexander63 2 года назад

Hey, Rob. Nice video. I am curious, though, why you did not elect to extend the available time period for comparing the two portfolios by substituting VTIFX for BNDX, as Portfolio Visualizer suggested? Thanks.

@supersteve8305 2 года назад

Scammer be fishing

@RenoTexas 2 года назад

Question about 3-Fund Portfolio (or 5-fund in my case): When making periodic/monthly contributions, should I follow the original percentage allocation (30%/30%/15%/15%/10%), or should the contributions re-balance the portfolio. Easy example: my bond ETF values are falling - should I increase the monthly allocation to the bond ETF investment to rebalance for the lost value? Thx in advance.

@BaltazarGarcia 2 года назад

Updated question in the title "Was 10 ETFs better than 3 for the past 8 years?"

@JohnFlud 2 года назад

I'm considering betterment vs fidelity go for a Roth and would be curious how they compare. I like betterments user interface and feel the fee is worth the automation but fidelity go has no fee for up to 10,000 dollars and only 3 bucks a month up to 50,000 dollars. But their user interface isn't as freindly. Then again m1 finance could do the boglehead route but I hear their customer service isn't as good as betterment and Fidelity. With lots of money on the line I like the comfort of having access to good customer service and worth the fees.

@yanbu000 2 года назад

@Rob Berger Hi - I've been playing around with the tool you suggested, Personal Capital. I've made automatic links to my VANGUARD, CHASE, WELLS FARGO accounts. Note, that I only have 3 VANGUARD funds for my retirement investing. I have been using my homegrown XLS to calculate the time value of my investments/spending given market appreciation percentages, and in my XLS I was able to include my traditional to Roth conversion strategy. I can't see how to enter that same or a similar ROTH conversion strategy into the personal capital app. Is that possible?

@grantmagner5786 2 года назад

What ratio of US to International do you think is ideal for the 3 fund portfolio? I can't decide between 80/20 (US:INT) or 70/30 (US:INT). Maybe I'll just split the difference and go 75/25.

@365vacay 2 года назад

That's a high allocation of international... a bit too much for me.

@HamiltonRb 2 года назад

I would be curious to see how Warren Buffett's suggestion of 90% S&P with 10% treasuries does against both funds you outlined, over the same period.

@supersteve8305 2 года назад

Scammer be fishing

@ronbiggers1045 2 года назад

Thanks for your videos. If I may, why did you select VTSMX, VGTSX & VBMFX over VTI, VXUS & BDN for your Three Fund portfolio and why the ratios you have?

@Omar-et7sb 2 года назад

I think he was sticking with the Betterment picks...

@WakeUpAmerican000s 2 года назад

Rob will prefer Mutual Funds over ETFs if given the choice (he's made videos as to why ...). Or perhaps he tried a few different combinations of other choices before settling on those three funds that beat the Betterment Core portfolio.

@alextjb 2 года назад

He’s just doing that in order to go back further in time. Some ETFs didn’t exist back then so you use the equivalent ETF in order to back test and run a comparison. It’s just for the purposes of back testing

@kevink7777 Год назад

Rob... why the International stock exposure ? I ran Portfolio Visualizer's tool to get the Efficient Frontier curve, i.e. the optimal portfolio for each level of risk, using the Betterment 10 funds and your 3 funds. In no case was there ANY international stock exposure in any of the Efficient Frontier portfolios. Not even a smidgeon !! Adding International stocks only dilutes the returns. I know the concept is to diversify, but since the sales of the S&P 500 are 45% from overseas operations, just owning VOO or VTI should take care of the stock exposure. And then there's the currency risk of stocks denominated in foreign currencies. Am I missing something ?

@peterd9940 Год назад

What are the 3 funds?

@joshuamays854 2 года назад

Hi Rob, thanks for all of your material! Why do you elect not to have mid cap exposure beyond the total market etf weights like Betterment? I’ve always wondered why most of these tilted portfolios, or more than 3 fund portfolios forgo mid cap exposure other than what the very small total market weights give them.

@rob_berger 2 года назад

For me it's a question of portfolio management. My total stock market fund gives me mid-cap exposure. I chose to add small cap because of their long-term performance and diversity. One could certainly overweight mid-cap as well. For me, I didn't want to add more funds to my portfolio.

@joshuamays854 2 года назад

@@rob_berger Thanks for that! I have a workplace Roth 457 but can transfer it all to Schwab and have more options. That will create a bit more work with rebalancing and monthly transfers. I am willing to do the work if it makes a difference. This account only has 30k in it and I am maxing out my annual contribution of 20, 500 via 12 monthly payments. Right now, to mimic the total stock market, I have money in Large (50), mid (30) and small cap (20%). I can also use my workplace account and achieve international exposure through the index fund that tracks MSCI ACWI Ex US. Does this fund provide enough exposure to EM, in your opinion? If so, I would reallocate my funds to 30 Large, 20 Mid, 20 Small and 30 International. Or should I move to Schwab and create the 6 fund portfolio? I have a great pension that will support me very well into retirement, hence the no bond allocation. Thanks for any insight, I trust your opinion. With much gratitude, Josh

@stevenbernstein2328 2 года назад

I'm surprised you didn't use the ETFs rather than the mutual funds for the vanguard funds. I believe the ETFs performed better.

@supersteve8305 2 года назад

Scammer be fishing

@GilreathDental 2 года назад

@Rob Berger Thanks for doing this one so quickly after your reply to your last video today. So as I watched, one thing came to mind. As you showed their 10 fund, it reminded me of my current +15 fund made by my advisor. I can't get to a three fund because of capital gains. Well, maybe I could sell somethings now that the market is off, but what a pain. Most of the funds he has me in a great funds except for a couple that are too high cost wise....So that situation, where you're kind of stuck with a large number of funds, might be where Betterment could shine. I could do the math to rebalance all this, but with that many funds... yuck. I assume they will rebalance over multiple accounts (qualified and non qualified) and know what works best where?

@brian..t 2 года назад

Hi Rob. Thanks!. You showed in Portfolio Viz you were able to model fees. I don't see that option on my screen. Is it because you are logged in and subscribe to it or am I missing something ?

@rob_berger 2 года назад

I believe it's a feature of the paid version.

@brian..t 2 года назад

@@rob_berger Thank you for the reply. Enjoy your channel.

@LX450_Adventure 2 года назад

I never saw that before either and had to do a double take and check Portfolio Viz again to see if I missed it. It is a feature of the Pro version at $39/month. Neat feature but mighty expensive considering the answer is always VTSAX and I can spend that money on more VTSAX. 😁

@danh2716 2 года назад

Does Betterment change their fund allocations over time? If so this analysis would seem a little pointless. (If not then Betterment would seem a little pointless.)

@rudycriss935 2 года назад

Hey Rob, Why not leave out VGTSX and go with 2 funds? I don't see any time period 5-10-20 years where the 3 funds have better results? Thanks

@geoffgordon9569 2 года назад

Same thought. Sold my foreign mutual fund and added to total stock market. These prices are to good to pass up as I'm dollar cost averaging.

@nickdoyle-achievefinancial2464 2 года назад

How about the last 60-70 years? I am concerned about a 60-70 investment horizon, since I'm 34 and statistics show there is a >20% chance my wife or I live past age 100.

@Michaeldotcom33 Год назад

That’s only 8 years and during a time when value did a lot worse than growth. I believe the betterment one will do better over 20 and 30 years.

@lifeisgood070 2 года назад

Is there any anti-socially responsible etf? I’m trying to invest in those companies

@supersteve8305 2 года назад

I haven't found one, but I have collected lots of dividends in DEO, PM, MO. I have switched to ETF's for future contributions, but will be keeping these three for life. Sin stocks pay nice dividends. DEO only pays two times per year, but I'm a patient person.

@scottspiro4876 2 года назад

Rob, great video. I'm a big fan of the Boglehead 3 fund portfolio, however if the investor can take full advantage of the tax loss harvesting feature in Betterment, wouldn't that more than offset their fees ($3K per year)? Thanks!

@supersteve8305 2 года назад

Hi Rob. Do you feel like utilities and REITS have enough exposure with a three fund portfolio? Asking for a retirement portfolio. Thanks for your content.

@Omar-et7sb 2 года назад

Not Rob, but I can say if you go to his website he has a 4, 5 and 6 fund portfolios. The 6-fund one include REITs... It's a super diversify, yet still simple, portfolio IMO. It just doesn't work on taxable accounts.

@supersteve8305 2 года назад

@@Omar-et7sb thanks for the info. While I watch all his videos, I have never been to his website. I will check it out.

@byronexaporriton318 2 года назад

What would be your opinion for a 28 years old to invest the first 10 years exclusively on the FTSE All World UCITS ETF? Is it too risky? Thank you in advance!

@alextjb 2 года назад

Definitely not too risky. You are young enough that you have plenty of time to absorb and recover from a recession. But you should have more diversification. Having US and non U.S. stocks is good. But you also want a little TIPS, some REITs, some commodities, some physical precious metals. Even a percent or two of crypto. With that diversification you will be good to go!

@byronexaporriton318 2 года назад

@@alextjb thank you for your reply!

@auricgoldfinger8478 2 года назад

Now compare to a Boglehead 2 fund portfolio ( no international)

@supersteve8305 2 года назад

Scammer be fishing

@Metaris 2 года назад

They both got smoked by my 100% VIGAX portfolio.

@stagecoach1502 2 года назад

With Betterment (and a taxable account) how would you evaluate the benefit of tax loss harvesting?

@tmh44 2 года назад

Also interested in this question. TLH is the main reason I have accounts with Wealthfront. I've used them for a number of years, and so far the Tax-Loss savings in my taxable account have more than covered the 0.25% fee, so there's a lot of value there IMO, and it's a net-win. That being said, I'm considering transferring my Wealthfront 401k and SEP IRA accounts since they do not benefit from TLH, and I'm effectively paying a 0.25% fee for nothing.

@WakeUpAmerican000s 2 года назад

To really benefit from Tax Loss harvesting, you have to invest enough to permit the purchase of a number of individual stocks. That minimum is usually $100k. One can't "split up" an index ETF or Mutual Fund to sell off the losers for a tax deduction. TLH can help a larger portfolio's performance if that portfolio is in a taxable account and the investor is in at least a 20% marginal tax bracket. Remember, Long-Term Cap Gains are taxed at a lower rate (15%) anyway. tmh44 - a Wealthfront account will automate handling of asset allocation and portfolio re-balancing, so even without TLH, your 25 basis-point fee isn't going for "nothing", unless you see no value in Wealthfront's help with keeping your asset allocations aligned with your investment plan. And of course, as the account holder, you have to be comfortable with (frequently in the case of some robos) pruning your "winners" rather then letting them keep growing. That's the price of re-balancing any portfolio.

@tmh44 2 года назад

@@WakeUpAmerican000s Thanks for the input! Yep, that's exactly my point. I'm keeping my taxable account with Wealthfront as it's $500k+, so the TLH more than pays for the .25% fee. However, the non-taxable accounts don't get the benefit of TLH of course, and haven't needed rebalancing from Wealthfront at all, so I'm effectively paying a .25% fee on those for nothing, and since they also have substantial balances those fees aren't insignificant.

@nickdoyle-achievefinancial2464 2 года назад

Just make sure you don't end up with wash sales if they tax loss and you own a "substantially identical" fund in your 401k, HSA, etc that has auto-reinvest. Even if you have some assets with a robo, you still need to pay attention to some of these details.

@tmh44 2 года назад

@@nickdoyle-achievefinancial2464 thanks, this is interesting. Can you provide me with a potential example, and explain the "wash sale" situation if I'm holding multiple taxable and non-taxable accounts at the same firm? I appreciate it!

@inout804 2 года назад

Could u compare Goldman robo investment portfolio?

@bridgecross 2 года назад

I like the sound of the automatic rebalancing Betterment offers, but I can't get over that 25 basis points. For a large(ish) retirement fund, that ends up being quite a chunk of change.

@JosephDickson 2 года назад

A person could do a lot worse than either portfolio. 😉

@IndexInvestingWithCole 2 года назад

Are 10 ETFs better than 3? Seems obvious, if 3 was better than nobody would use the 10.

@LX450_Adventure 2 года назад

I added a 3rd portfolio to Portfolio Visualizer: VTSAX and Chill. Guess what? Not even close: $73,746 It is easy to over complicate things when it comes to investing, but it really is not needed. KISS. 😁

@Omar-et7sb 2 года назад

I am a fan of simplicity... That said, there ARE some risks with all-stocks. That's why even Warren hedges 10% of his portfolio (and he is the best ever at this). During financial downturns, it can help keep withdrawals afloat until recovery. We have to come to terms that the last 10 years of growth are likely over and were a bit of an anomaly.

@WakeUpAmerican000s 2 года назад

@@Omar-et7sb - also recall that Warren Buffet is not depending on his portfolio to fund his retirement. Ninety-percent stocks is risky in any market if you don't have some protection on the downside.