Betterment VS S&P 500: Get a Full Comparison (2024)

FAQs

Is Betterment better than S&P 500? ›

Many Betterment portfolios are globally-diversified, making the MSCI All Country World Index (ACWI) a better benchmark than the S&P 500. The ACWI covers 47 global markets in both developed and emerging economies, representing 99% of the investable global equity market.

One of the biggest downsides to using Betterment is that you can't pick your own investments, as the only option is to use the automated investing services. And while Betterment's fees are quite reasonable, there are other platforms with lower fees.

In the last 30 Years, the Betterment Robo Advisor 100 Portfolio obtained a 8.52% compound annual return, with a 15.76% standard deviation.

Don't simply look at the S&P 500 Index

And for a diversified portfolio that might include international investments and other asset classes such as bonds, commodities and cash, it provides little guidance. An appropriate benchmark should reflect your portfolio's risk level and allocation.

Robo-advisors often build portfolios using a mix of various index funds. But depending on the asset class mix and the particular index funds selected, a robo-advisor may underperform or outperform a broad equity index like the S&P 500.

Do robo-advisors outperform the S&P 500? Robo-advisors can outperform the S&P 500 or they can underperform it. It depends on the timing and what they have you invested in. Many robo-advisors will put a percentage of your portfolio in an index fund or a variety of funds intended to track the S&P 500.

Betterment's alleged failures were related to “tax-loss harvesting,” a technique common among financial planners whereby taxes on investment profits are reduced or eliminated by offsetting them with losses from other investments.

SIPC membership: Betterment provides Securities Investor Protection Corporation (SIPC) insurance, like any investment broker. This insurance covers your portfolio and uninvested cash in case Betterment goes bankrupt. Your portfolio is insured up to $500,000, with up to $250,000 maximum for uninvested cash.

We do not charge any trading fees or assess penalties for requested withdrawals or account closures. It's your money and is always accessible to you.

Betterment offers tax-loss harvesting for users with taxable accounts. Fidelity Go doesn't offer tax-loss harvesting but does provide tax-advantaged funds (i.e. municipal bonds) to reduce your tax burden over time. Betterment is not a licensed tax advisor.

Is Betterment better than Wealthfront? ›

Additionally, both companies are among the winners in our list of the best robo-advisors of 2023, with Wealthfront winning best overall, best for goal planning, best for portfolio construction, and best for portfolio management, while Betterment is best for beginners and cash management.

The Bottom Line. Betterment has become arguably the most popular robo-advisor for good reason: It offers a wide selection of portfolios, an excellent user experience, high-quality automated portfolio management, and competitive fees.

“In my view, for most people, the best thing to do is own the S&P 500 index fund,” Buffett said at Berkshire's 2020 annual meeting. Buffett's thinking here is straightforward. Most non-professional investors (and even many professional stock-pickers) have very little chance of outperforming the market.

Nasdaq 100 has significantly outperformed S&P 500 in terms of performance.

For investors with small-cap exposure elsewhere in their portfolios, the large- and mid-cap S&P 500 fund may suffice. But for a broader, one-stop-shopping fund, the total market index offers maximum diversification within the U.S. equity universe.

Can I invest in an individual stock or fund (ie., S&P 500 index or Apple)? No, you cannot invest in an individual stock or fund at Betterment. We aim to invest in a globally-diversified portfolio (which includes over 5,000 companies) made up of low-cost and liquid ETFs.

Is Betterment Worth It? Betterment can be worth it if you want to help build and manage your investment portfolio without paying the full cost of a human financial advisor. A human advisor could charge 1% or more per year, roughly four times Betterment's robo-advisor fee.

The S&P 500 weighting system gives a small number of companies major influence, which could have an undue negative effect on the index if one or a few of them run into trouble. The index does not expose investors to small or emerging companies with the potential for market-beating growth.

The bottom line: Betterment is a clear leader among robo-advisors, offering two service options: Betterment Digital provides automated portfolio management at $10 to start an account; Betterment Premium provides unlimited phone access to certified financial planners for a $100,000 account minimum.