Been with Betterment Since May this year. Looking at 2.2% .. And thats from dividends. In the red in regards to performance. Ill keep throwing money in there every month but not looking to see huge returns.
I'm somewhat baffled by their value proposition. They're all about index investing, which is good, but why pay extra and not just go with a Vanguard Target Date fund?
Are they actually providing value, or are they good at making it seem like they provide value? Take, for example, the betterment front page. There, they have investments in VTI (US Total Stock Market), but then also invest separately in US Large cap, US Mid cap, and US Small cap. Not to be Captain Obvious here, but VTI is pretty much a combination of the other three... there's no reason to invest in all those 4 funds.
They are big on their ability to do tax loss harvesting (for which you need to have a decently large minimum deposit)... which I don't understand in a long-term investment portfolio. First, you actually need to have a loss -- which is not that likely over longer periods. But more importantly, suppose you buy stocks at $100k and they lose 10% of their value, so you sell at $90k. Then, you have to wait 30 days before buying the stock again in order to claim the deduction on your taxes. Let's suppose that after 30 days, the value is unchanged at $90k. Now, you make some gains and sell at $110k.
Without tax loss harvesting: bought at $100k, sold at $110k -> pay taxes on $10k
With tax loss harvesting: bought at $100k, sold at $90k, bought at $90k, sold at $110k. -> 20k gains, offset by 10k losses -> pay taxes on $10k.
What am I missing here? You can play around with the timing of when you get taxed. But as long as your income is between 37k and 405k for an individual or 74k and 460k for a married couple, your long-term capital gain tax rate is the same at 15%. If your income is below that, your long-term capital gain rate is 0 so this is a non-issue. So the only way this makes sense is if your income is above this range right now and you expect it to be less down the road, so that you can take a larger deduction than you would pay in taxes in the future. If, however, you think capital gains tax rates would increase in the future, then you would NOT want to do tax loss harvesting -- in fact, you'd want to do the opposite and pay capital gains tax sooner.
Is this like donating to charity for the tax deduction?