Unfortunately every idea cannot be a winner and it is time for me to cut ties with some of my previous investments.
Goodbye Betterment
I have enjoyed my time with Betterment which was my first dive into robo-investing. I think it is a great platform, especially for anyone that is not interested in investing in general. The ability for the portfolio to automatically balance along with the perks of no trading fees and tax loss harvesting are great for any person looking for a long term investing account. Sadly there are enough reasons for me to close my account with Betterment.
First and most important is that there is no way for me to direct my investments towards producing income which is the goal of my investments. My second goal is to minimize the amount of administration necessary for my retirement and having Betterment as another broker adds additional administrative overhead. Finally for smaller accounts Betterment requires a $100 deposit per month to avoid their larger fee. Perhaps I would have left my account intact to watch as it progressed if this fee were not in place but with it there is a large incentive for me to close the account out.
I am going to keep my eyes open in case Betterment or their rival Wealthfront move towards an income model for retirement. Wealthfront in particular does have one that is focused on bonds however I would like to see a broader option holding more stock and REITs.
First and most important is that there is no way for me to direct my investments towards producing income which is the goal of my investments. My second goal is to minimize the amount of administration necessary for my retirement and having Betterment as another broker adds additional administrative overhead. Finally for smaller accounts Betterment requires a $100 deposit per month to avoid their larger fee. Perhaps I would have left my account intact to watch as it progressed if this fee were not in place but with it there is a large incentive for me to close the account out.
I am going to keep my eyes open in case Betterment or their rival Wealthfront move towards an income model for retirement. Wealthfront in particular does have one that is focused on bonds however I would like to see a broader option holding more stock and REITs.
Later Lending Club
Peer to Peer lending perked my interest early in its emergence. As Lending Club and Prosper started to gain traction I decided to jump on board as well. It makes sense to me that if we removed the bank and instead lent the money directly from person to person, the lender would harvest much more of the profit and the borrower would get a lower interest rate.
Unfortunately the concept put into practice did not pan out as I thought it would. As my account aged more borrowers stared to default on their loans. These loans or notes as Lending Club calls them, are all unsecured meaning that the borrower can default on them and I did not have the option to repossess something to regain any of the lost value. I started to have negative return months even though the Lending Club dashboard claimed I was still making a 3% profit. At the end I decided that the idea was good but not sustainable. I had several loans that went default before the first payment. People are learning that they can take these loans right before bankruptcy, blow the cash, and then write the debt off. I can no longer suggest Lending Club as an investment option and I am taking all of my funds out as they become available.
New Opportunities Around The Corner
It isn't all bad news though. Often a door will open as another closes. There are some new investment platforms hitting the market that I am very interested in and I will be diving into them and sharing my experiences with everyone. More to come on those.
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