Betterment is a popular investing app available today.
Specifically, this is a robo-advisor that invests and manages your money on your behalf. Through the use of algorithms instead of people, costs associated with this type of asset management are significantly lower than a traditional financial advisor.
If you plan on investing with Betterment, you might be wondering how you will earn money as a result.
There are four main ways to make money with Betterment:
Let's go into detail about each one a bit more!
For your daily spending, Betterment has cash management products including checking accounts and cash reserve, a high-yield savings account.
If you choose to, you can make more money in interest from cash reserve than the average savings account out there.
So, the very first way to make money with Betterment is using their checking/savings accounts to earn a higher rate of interest as well as cutting down on fees.
Betterment will personalize a portfolio based on your long-term financial goals.
Its investment strategy is built on low-cost exchange traded funds (ETFs). They also take into account the amount of risk you’re willing to take and how long you plan to invest.
The majority of your gains from the stock market are usually from asset appreciation, or buying low and selling high. However, you do need to sell the underlying asset in order to actually recognize the gain.
So, you basically make the most money from Betterment though prices of ETFs going up over time. Keep in mind, though, prices can go down as well resulting in potential losses.
The funds that Betterment invests your money into also pay dividends in most cases.
These dividends are paid out on a quarterly basis. Betterment automatically reinvests dividends without your active involvement.
This serves two important purposes:
Betterment will use that dividend to then purchase whatever assets you are low in. Each fund will have a percentage allocation of your overall portfolio, however they will all move up and down in price individually.
Rebalancing returns you back to your target allocations as closely as possible, ensuring you are taking on the amount of risk you started with and not more or less.
Lastly, Betterment offers tax loss harvesting on all accounts.
Essentially, they realize losses by selling one ETF and buying a similar or near identical ETF. These losses can be used to offset capital gains from other investment activity.
By lowering your tax bill, Betterment is keeping more money in your pocket.