I’ve worked for myself since my senior year of college. As a self-employed freelancer, I never started a 401(k) and starting an IRA seemed overly complicated. However, by 26 I realized I was late to the game and I sat down with Schwab broker. He explained some choices and we picked a ‘safe’ mutual fund, so I could start my first long-term savings plan, an IRA. I set up a monthly deposit and breathed a sigh of relief: I was on-track to retirement.
A few years later, when Stocks for the Week released it’s free Wealth Calculator, I typed in my numbers—I smugly assumed all was perfectly on track—and I was surprised to see that I needed to double my current monthly investing numbers to even come close to my long-term goals.
Gah. What a blow. What to do next? Though I’ve been researching and studying the stock market, and I’ve taken most of these steps, I still wasn’t quite ready to invest in the undervalued stocks recommended by the MPI algorithm, nor did I have a sum from which I could do this. Instead, I needed an interim step, which is when I looked into the automated online investing world.
And boy were there a lot of choices. Three immediately became the front-runners in my online research:
In researching though, I discovered that Wealthfront has strong reviews and usability, but is a better option for investors who already have significant cash they’re ready to tie up in investments. And Acorns is also a solid option, but perhaps for someone very, very new to investments (this is a slow-trickle savings platform if you can’t commit moderate monthly amounts to your long-term savings). I fell somewhere in the middle; I wanted to invest little upfront cash but still have full automation and strong investment options.
Betterment was that Goldilocks combination of “just right.”
Betterment allows you to create a few goals and then leads you through the decision making process for each one you so you can effectively split the money between stocks and bonds. The interface was seamless for me, and I created two goals that align with my current situation. For many, consider something like this as your initial goals:
Build Wealth: In this goal basket, you should consider setting up a monthly deposit and set your shorter-term goals. It’s this fund that you can later pull from for individual stock investments and other long-term goals. For now, the money is split between stocks and bonds depending on how many years you plan to leave the money in the account before striking out on your own. If you’ve been studying the stock market and are thinking using MPI and investing in individual stocks, consider 2-10 years as your goals for this account.
Safety Net: I had my six-month fallback money sitting in my savings account, even though I have read for years that there are more effective places for that fund. Once I signed up for Betterment, I realized I could choose a low-risk split between stocks and bonds (they’ll give a default recommendation) and maximize my chance to grow my safety net fund. But, being a safety net, the funds are also instantly accessible if I need the money—you can transfer the funds to your bank account within just a few business days.
The last step: Sit back and don’t get antsy! It’s a little overwhelming to check and see the daily fluctuations when you’re new to investing, but each of these accounts are optimized for a specific length of time, so don’t worry about the daily changes—you’re in this for the long-haul!
Why not check out Betterment and see if it’s the right next investing step for your long-term wealth goals.