posted: Jan. 29, 2013 @ 11:09p
Although labeled a brokerage, the firm really offers a unique product which is a cheap way to hold a diversified, regularly rebalanced portfolio. They charge annual fees rather than commissions. On the $10,000 investment it is to be .25% per year (which is $25 per year, or $2.25 per month). Smaller accounts pay $3.00 per month.
For the bonus hunter, the $250 investment would appear to yield an extra 10% in value, which over 2 months is 60% per year. A slightly better way to look at it would be you get an extra $25, reduced by perhaps $6 in fees (I am figuring you will be there for 3 months, with the first month free). This reduces the profit to perhaps $19 and the annualized extra return to 30%.
However, for this small bonus the relevant question is the return on your time, and it is only $16 for the work of opening the account, funding it, and closing it. This is not very high unless you really need money, or do want to try out their service.
While not designed for traders, someone who thought they could decide when to be in equities and when not to, this could provide a very low cost trading vehicle.
One issue I see is extra work on taxes. Basically you move between a "Treasury Basket" and a "Stock Market" basket of ETFs. There are 8 securities here, and if each is reported separately, there might be a little work. Computationally, the total profit could be computed over a holding period (if there was no trading) and just reporting this as a short term gain or loss would create no problems. They say their tax statements can be automatically downloaded to TurboTax.
One minor complication in this this deal is that the lowest fee is based on having $10,000 in the account. With a market decline, you could have slightly less and not get the best .25% pricing. The pricing would then seem to be $3.00 per month, instead of $2.25 per month (not a disaster) or you could put a little more money in to keep the average balance over $10,000. With downloading the TurboTax, the taxation complexities would not seem high.
Another specialized use for this product would be as a low risk place to park spare funds. One would choose to stay invested in the "Treasury Portfolio" and then move money in and out from your bank. The fixed income ETF can be expected to yield more than bank deposits in saving accounts, and appear to be more liquid than CD's. While you could buy these ETF's (50% TIPS and 50%SHY) in a brokerage account, this may be a cheaper way than paying commissions in and out (and suffering from the spread).
From Hustler money I learned of this brokerage bonus plan (now gone).
The Hustler review is at http://www.hustlermoneyblog.com/betterment-100-brokerage-bonus-r...
and the Betterment $100 Offer can be found at at:
and the $25 offer at:
The bonus offers do not appear if you just use a Google search to go to Betterment's web site, where the only offer is a 30 day free trial.
Betterment stands out with two offers, for the high rates of return. They have a $25 bonus for $250 offer and a $100 for $10,000 one. Both appear to require leaving the money there for only 60 days. The result of the short required holding periods is a high rate of "added" return (over what the underlying investments yield).
If I took this offer I would probably go in for slightly over $10,000 (to increase the probability of getting the lower charges even if there was a market decline) and chose the 100% Stock Portfolio. This would then be just another index type equity holding in a much larger portfolio.
Note: I changed the title (and details), since the $100 bonus is no longer available. The emphasis is now on them as having a unique product useful for certain purposes.