Charles H. Miller
There are quite a few online services offering investment management. Some of them work great, and some are, well, “worth” avoiding. What you want is a smart system that takes into account a multitude of factors to help you achieve your investment goal. Whether you are looking to save for a new/second home, retirement or just proactively invest — you should go with the service that passes this 6-question test. Or so we think. Here are the questions to ask…
1. Does It Beat The Market?
The first thing you want to know is whether some investment service can beat the market. If it can’t — well, you should look elsewhere, or get a dull index fund. Or Do It Yourself (DIY). The best services can easily beat your DIY efforts and can also outperform the market. And by the market, we mean S&P 500, for instance.
2. Does It Support Tax Loss Harvesting?
For those who don’t know, tax loss harvesting is the practice of selling a security that has experienced a loss. By realizing, or “harvesting” a loss, investors are able to offset taxes on both gains and income. The sold security is replaced by a similar one, maintaining the optimal asset allocation and expected returns. The investment service of your choice should incorporate this feature.
3. Can It Manage Your Existing Accounts?
This may not be a must but it’s useful when available (and if you already have some investment account). The top online services out there will be able to connect to your existing investment accounts to provide you with that much better advice. Also, by syncing all of your investments, you will get a complete picture of where your money is going, what are the fees involved, how can you improve investments across accounts based on your goal(s), and so on.
4. What Kind of Automation is Supported?
You want smart automation which means you’ll get one less thing to think about. The best online investment services can place (schedule) deposits on a regular basis, automatically invest your excess cash, and rebalance your portfolio every time you make a deposit or receive dividends.
5. Is It Mobile-Enabled?
If it’s not — well, just don’t get it. Luckily, most of today’s online investment services have companion apps that allow you to see how your portfolio is performing while on the go. Also look for other details — what else can you do with a mobile app? How does it look? Is it easy to use? Can you use it to further invest (if that’s what you want)? Is it available on your phone?
6. Who’s in Charge?
We like geeks (I consider myself a geek) and like how they are changing the world, but… When it comes to money I like to see a real person behind the algorithm. Better yet, I want to see their references including where they’ve worked before, how savvy with financial markets they are, and other details that could help ME reach MY financial goal (no matter what it is).
So where to go?
My heart (and money) goes to Betterment. They easily check all of the above boxes, and then some. For one thing, Betterment portfolios are completely liquid, and you can access your money at any time. Also, signing up is easy. You start by answering your age, work status (retired / not retired), how much money you currently make (so they could determine how much you could invest), and they take you from there. Check it out.
