Query: Retirement Funds: Betterment vs Vanguard Life strategy vs Target Retirement

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 <=SEP=> "First, congratulations on choosing to invest in low cost passively managed plans. If you choose any one of these options and stick with it, you will already be well ahead of most individual investors. Almost all plans will allow you to re-balance between asset classes. With some companies, sales agents will encourage you to sell your overweighted assets and buy underweighted assets as this generates brokerage commissions for them, but when you only need to make minor adjustments, you can simply change the allocation of the new money going into your account until you are back to your target weights. Most plans will let you do this for free, and in general, you will only need to do this every few years at most. I don't see much reason for you to be in the Target funds. The main feature of these plans is that they gradually shift you to a more conservative asset allocation over time, and are designed to prevent people who are close to retirement from being too aggressive and risking a major loss just before retirement. It's very likely that at your age, most plans will have very similar recommendations for your allocation, with equities at 80% or more, and this is unlikely to change for the next few decades. The main benefits of betterment seems to be simplicity and ease of use, but there is one concern I would have for you with betterment. Precisely because it is so easy to tweak your allocation, I'm concerned that you might hurt your long-term results by reacting to short-term market conditions: I know I said I wanted a hands off account, but what if the stock market crashes and I want to allocate more to bonds??? One of the biggest reasons that stock returns are better than bond returns on average is that you are being paid to accept additional risk, and living with significant ups and downs is part of what it means to be in the stock market. If you are tempted to take money out of an asset class when it has been ""losing/feels dangerous"" and put more in when it is ""winning/feels safe"", my concerns is that you will end up buying high and selling low. I'd recommend taking a look at this article on the emotional cycle of investing. My point is simply that it's very likely that if you are moving money in and out of stocks based on volatility, you're much less likely to get the full market return over the long term, and might be better off putting more weight in asset classes with lower volatility. Either way, I'd recommend taking one or more risk tolerance assessments online and making sure you're committed to sticking with a long-term plan that doesn't involve more risk than you can really live with. I tend to lean toward Vanguard Life Strategy simply because Vanguard as a company has been around longer, but betterment does seem very accessible to a new investor. Best of luck with your decision!"

 <=SEP=> Katherine from Betterment here.  I wanted to address your inquiry and another comment regarding our services.  I agree with JAGAnalyst - it's detrimental to your returns and potential for growth if you try to time the market.  That's why Betterment offers customized asset allocation for each portfolio based on the nature of your goal, time horizon, and how much you are able to put towards your investments.  We do this so regardless of what's happening in the markets, you can feel comfortable that your asset allocation plus other determining factors will get you where you need to go, without having to time your investing.  We also put out quite a bit of content regarding market timing and why we think it's an unwise practice.  We believe continuously depositing to your goal, especially through auto-deposits, compounding returns, tax-efficient auto-rebalancing, and reinvesting dividends are the best ways to grow your assets. Let me know if you would like additional information regarding Betterment accounts and our best practices.  I am available at buck@betterment.com and am always happy to speak about Betterment's services. Katherine Buck, Betterment Community Manager

 <=SEP=> Life Strategy funds are more appropriate if you want to maintain a specific allocation between stocks and bonds that doesn't automatically adjustment like the Target Retirement funds which have a specific date.  Thus, it may make more sense to take whichever Life Strategy fund seems the most appropriate and ride with it for a while unless you know when you plan to retire and access those funds. In theory, you could use Vanguard's Total Market funds,i.e. Total Stock Market, Total International, and Total Bond, and have your own allocations between stocks and bonds be managed pretty easily and don't forget that the fees can come in a couple of flavors as betterment doesn't specify where the transaction fees for buying the ETFs are coming out just as something to consider.