Mr. Money Mustache posted about Betterment last month that even though there is a 0.25% management fee, due to the efficient "tax-related features" it was worthwhile to hold (a portion of) his portfolio in Betterment because that would make up for the 0.25% fee vs what he would be able to effectively due manually.
The tax loss harvesting system, which has sliced several thousand dollars from my income tax bill so far. (Note – this feature is generally most useful only at higher income levels, and I got extra benefit from having other capital gains to offset) Tax Coordinated Portfolio Allocation, which automatically shields more your of dividend-paying index funds in your IRA instead of your taxable account. I just enabled this last month and am enjoying watching the results.
I calculated that the tax-related features were easily increasing my return by over 1% per year, which easily covered Betterment’s 0.15% annual management fee. I still see many criticisms* popping up around the internet, accusing me of being a “shill” for Betterment and that everyone should just manually run a Three Fund Portfolio in Vanguard. But so far none of them have correctly accounted for these tax savings in their calculations – they underestimated TLH. It’s an easy oversight to make without holding a Betterment account yourself and watching the results
Do you tend to agree that Betterment's performance will beat its fee compared to a similarly constructed low-cost ETF portfolio which I already have in a brokerage but don't plan to actively rebalance more than once a year and won't have as much potential insight regarding tax harvesting and would be done automatically by Betterment?
Submitted March 14, 2017 at 08:24AM by switchonlight http://ift.tt/2mnBd8n
