Am I Crazy Or Is This Investment Site A Bad Idea?

Monday, May 24, 2010 19:33
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Am I Crazy Or Is This Investment Site A Bad Idea?

A new investment site launched yesterday at the TechCrunch Disrupt conference seems like a really crazy idea.  Betterment.com bills itself as a “replacement for the traditional savings account,” and it claims to be a “Better way to save money.”  But it looks to me like a better way for consumer to lose their savings! 

This Website Is For Financial Professionals Only


“Deposits are invested seamlessly in a user’s chosen blend of Betterment’s two investment options—a diverse basket of stocks and a portfolio of ultra-safe bonds,” says Betterment’s marketing copy. ”Users can easily change their allocation between these two options, and all transactions are free.”

Call me crazy, but why would you want to put your savings—your emergency fund—in stocks?

Yet the site sounds like a consumer’s wet dream.

“Opening an account takes just five minutes, there’s no minimum balance, and transfers are free and easy,” says Betterment’s marketing copy.”Everything is included in an annual advisory fee of 0.9% and securities in customer accounts are protected up to $500,000.”

The site features an endorsement from Bruce Greenwald, a Professor of Finance & Asset Management at Columbia University. So maybe I am missing something because Greenwald is no slouch.

To me, however, marketing a combination stock and bond fund as a replacement for a traditional savings vehicle, while saying that the bonds are “ultra-safe” and making it sound like you’re investment will be insured against loss is asking setting up a bunch of suckers for losses.

What do you think?


 

 

Comments (1)

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agluck
I've been told by compliance officers that you simply cannot use the term "safe" in marketing copy for an advisor. FINRA would ask it to be chanegd, they said. So I don't understand how the term "safe" can be used in many places on betterment.com.

And your point about the chart at https://www.betterment.com/safer/ is ruiught on the money. They're usaing a 30% allocation to stocks on a saviongs account to show you the historical performance. If you're allocating 30% of your savings to stocks and the market declines by 30%, 40% or 50%, then your emegerency fund will be ravaged right when you probably need it the most--in the middle of an economic storm.

I don't understand how companies can get away with marketing tactics like this.
agluck , May 25, 2010

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