In a financial landscape where individuals seek greater control over their investments, self-directed investing has gained significant traction. Surveys indicate that approximately 75% of Betterment’s users participate in some form of self-directed investing. This trend underscores a critical point: while automated investing tools facilitate wealth accumulation, many investors still value the ability to make independent investment decisions.
Betterment recognized this need and aimed to enhance the self-directed investing experience while retaining the benefits of its award-winning platform.
The solution combines intuitive technology with a strong emphasis on customer satisfaction, allowing users to buy and sell thousands of stocks and exchange-traded funds (ETFs) without incurring commissions.
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Understanding the appeal of self-directed investing
Investors are motivated by various factors when engaging in self-directed investing. Some seek to support companies that reflect their values, while others enjoy the intellectual challenge of tracking market trends and executing trades. Many simply appreciate the control that comes with managing their own investment portfolios.
With Betterment’s self-directed investing feature, users can enjoy this flexibility while maintaining a comprehensive view of their financial landscape. The platform enables users to manage automated portfolios alongside cash accounts and self-directed trades, offering a holistic perspective on their investments.
Tax implications of self-directed trading
What distinguishes Betterment from traditional stock trading platforms is its proactive approach to tax management. Self-directed trading often involves frequent buying and selling, which can lead to unexpected tax liabilities at year-end. Users have expressed concerns about tax implications, identifying them as a primary challenge when using other investment applications.
To address this issue, Betterment introduced a feature that allows users to view a tax impact preview before finalizing a sale of stocks or ETFs. This preview illustrates how a transaction could affect taxes, including potential wash sales. A wash sale occurs when an investor sells a security at a loss and subsequently rebuys the same or a similar asset within a 30-day window, negating the tax deduction for that loss.
By providing these insights, the platform eliminates surprises and empowers users to make informed investment decisions with a clear understanding of their tax situation.
Getting started with Betterment’s self-directed investing
For those interested in self-directed investing, Betterment offers a straightforward process to get started. Here are three essential steps to begin your investing journey:
- Open an account:Set up a self-directed investing account on the Betterment platform, enabling you to trade individual securities alongside your managed portfolios.
- Transfer funds:Fund your self-directed account by linking a bank account, moving money from your Betterment Cash Reserve, or transferring eligible securities from another brokerage via theAutomated Customer Account Transfer (ACAT)system.
- Start trading:With thousands of stocks and ETFs available, you can begin buying and selling investments that align with your financial goals.
Additional considerations
It is important to note that while you can transfer assets from other brokerages, the minimum transfer amount is $10. Additionally, mutual funds can only be transferred in and sold, not purchased, within self-directed investing accounts.
Betterment’s self-directed investing platform supports trading in U.S.-listed stocks from the S&P 500 and Russell 1000 indices, along with a diverse selection of ETFs. If a specific ticker is unavailable, it may be due to liquidity standards or ongoing review processes.
Betterment recognized this need and aimed to enhance the self-directed investing experience while retaining the benefits of its award-winning platform. The solution combines intuitive technology with a strong emphasis on customer satisfaction, allowing users to buy and sell thousands of stocks and exchange-traded funds (ETFs) without incurring commissions.0
