2026-02-03
investing | automated | tax | betterment | portfolios | portfolio | returns | market | fintech | individuals |
Three ways it can pay to automate your investing Our managed offering adds value beyond a DIY approach. Here’s how. 6 min read
Unlocking the Full Potential of Automated Investing
In the world of fintech, automated investing has become a game-changer for individuals seeking to manage their portfolios efficiently. Betterment, a pioneer in this space, has been at the forefront of providing innovative solutions that cater to diverse investor needs. With the introduction of self-directed investing, users can now choose from thousands of individual stocks and ETFs, raising the question: why pay for managed portfolios when you can invest on your own? The answer lies in the comprehensive benefits of automated investing, which extend far beyond portfolio construction.
The Value of Ongoing Optimization
Betterment's automated investing is designed to deliver value in three key areas: tax savings, navigation, and calm. By leveraging advanced trading algorithms and tax optimization strategies, users can minimize their tax liabilities and maximize returns. The Tax Coordination feature, for instance, strategically locates assets across different account types to reduce tax burdens. Additionally, tax-loss harvesting helps to free up money that would otherwise be lost to taxes, with nearly $60 million in losses harvested for customers during a period of market volatility.
Navigating the Investing Landscape with Ease
Automated investing also helps users stay on track with their investment goals. By automatically rebalancing portfolios and adjusting risk levels, Betterment's technology ensures that investors remain focused on their long-term objectives. The "glide path" feature, which gradually reduces risk as investment goals near, provides an added layer of protection. Furthermore, recurring deposits enable users to take advantage of dollar-cost averaging, a strategy that has been shown to generate higher returns over time. According to Morningstar research, investors who adopted this approach earned nearly 4% higher annual returns, demonstrating the value of Betterment's automated investing capabilities.
Finding Peace of Mind in a Volatile Market
In today's fast-paced and often unpredictable market environment, automated investing can be a valuable tool for reducing stress and anxiety. By outsourcing portfolio management to a team of experts, users can free up time and mental energy to focus on other aspects of their lives. Betterment's automation can save users up to two hours per rebalance, but the true value lies in the peace of mind that comes with knowing their investments are being managed with care and expertise. With the upcoming introduction of direct indexing and securities lending, users can expect even more innovative solutions to help their money work harder.
In conclusion, the benefits of automated investing extend far beyond portfolio construction. By providing tax savings, navigation, and calm, Betterment's automated investing platform offers a comprehensive solution for individuals seeking to manage their investments efficiently. Whether you're a seasoned investor or just starting out, automated investing can help you achieve your financial goals with confidence and ease. Follow Pacsquare for more fintech insights and stay ahead of the curve in the ever-evolving world of financial technology.
Insights
Q#1: What is the main advantage of using automated investing platforms like Betterment?
Answer: The main advantage of using automated investing platforms like Betterment is that they provide comprehensive benefits beyond portfolio construction, including tax savings, navigation, and calm, to help users achieve their investment goals. This is achieved through advanced trading algorithms and tax optimization strategies. By leveraging these features, users can minimize their tax liabilities and maximize returns.
Q#2: How does Betterment's Tax Coordination feature help users reduce their tax burdens?
Answer: Betterment's Tax Coordination feature strategically locates assets across different account types to reduce tax burdens, helping users to minimize their tax liabilities. This feature, combined with tax-loss harvesting, can help users free up money that would otherwise be lost to taxes. For example, Betterment has harvested nearly $60 million in losses for its customers during a period of market volatility.
Q#3: What is the "glide path" feature in Betterment's automated investing, and how does it help users?
Answer: The "glide path" feature in Betterment's automated investing is a mechanism that gradually reduces risk as investment goals near, providing an added layer of protection for users. This feature helps users stay on track with their long-term objectives by automatically adjusting their portfolio's risk level. By doing so, it ensures that investors remain focused on their goals and avoid taking on excessive risk.
Q#4: What is dollar-cost averaging, and how can it benefit investors using Betterment's automated investing?
Answer: Dollar-cost averaging is a strategy that involves investing a fixed amount of money at regular intervals, regardless of the market's performance. According to Morningstar research, investors who adopted this approach earned nearly 4% higher annual returns. Betterment's automated investing enables users to take advantage of dollar-cost averaging through recurring deposits, which can help generate higher returns over time.
Q#5: Why might an investor choose to use Betterment's automated investing over self-directed investing?
Answer: An investor might choose to use Betterment's automated investing over self-directed investing because of the comprehensive benefits it provides, including tax savings, navigation, and calm. While self-directed investing offers flexibility, automated investing provides a hassle-free experience, ongoing optimization, and professional management, which can be particularly valuable for investors who lack the time or expertise to manage their portfolios effectively.
