personal finance and budgeting

Sean Park is so excited about Betterment that he bought a stake in the company:

Betterment allows anyone to quickly, easily and without mystery manage asset allocation and risk budgeting using a simple, multi-asset class portfolio. No hassle, no time wasted, no blizzard of trade confirmations. The first time I saw it, I immediately wanted to be able to manage all my cash balances using their platform.

Except Sean Park is a sophisticated venture capitalist, and Betterment doesn’t manage cash balances. Instead, it manages investments. Basically, it provides an easy way of sweeping money out of your checking account and into your Betterment account, where it’s then invested across eight different ETFs. Betterment does most of the asset allocation; you just tell the company how much you want invested in Treasuries and how much in stocks, and they will do the rest.

This is a handy little service — but the amount that Betterment charges — 0.9% per year — is way too much, especially since it comes on top of the expense ratios of the underlying ETFs, which net out at 18.2bp for stocks and 17.5bp for bonds. In these days of ultra-low interest rates, buying a bond fund and then paying out 107.5bp per year in expenses is likely to leave you with a negative real return, and quite possibly could leave you with a negative nominal return as well. Or, to put it another way, right now it makes very little sense to have Betterment manage your bond funds and charge you a 90bp fee for the privilege: you might well be better off just keeping your money in a savings account, where there’s no risk of a nominal decline.

The idea behind Betterment — that investing should be very easy and simple at the front end, even if there’s lots of complicated stuff going on at the back end — is a good one. And I look forward to the time when banks offer Betterment-style services to their depositors, making it easy and painless to save money. I’m sure those banks could learn a lot from what Betterment is doing, and even maybe license some of their technology. But it only really becomes attractive when it’s free. And when, at the very least, it gives some kind of an option to invest internationally and in credit — two enormous asset classes that Betterment completely ignores. I’m pretty sure that Sean Park, for one, would never find it genuinely attractive in its current incarnation.

Update: Betterment’s CEO, Jon Stein, responds in the comments, and he sure knows the way to a blogger’s heart — by referencing an old blog entry which even I’d forgotten about:

I agree with you that we should offer our customers exposure to international stocks. Our users are all US-based, and so are naturally overweight US. We plan to add international exposure soon, and perhaps a real-estate component or credit component, as well. All of these asset classes are components of the “market portfolio” – and would be represented in the “everything bagel” that you talked about in a previous post. It’s that everything bagel that we’re working toward – it takes time to make it just right.

So thinking about starting 2011 with a new and fresh finance app for your new and fresh WP7 device?

You have the chance now! moBudget has just been released for Windows Phone 7.

moBudget is a user friendly budgeting and expense tracking application. It will help you drive and organize both your personal income and outcome budgeting. By doing so, moBudget will also hint you about possible budgeting and money saving opportunities. Its main screen features a summarized dashboard with a set of intelligent indicators which will tell you how you are doing depending on your budgets and on the current date.

Forget about grabbing a calculator each time you need to get any numbers or if worried about making it to the end of the month or not; moBudget will tell you all: what you have, what you will have, what you owe and more. It will either inform, alert or advice you when needed so you don’t need to worry.

By allowing stepping through months, allows you to whether look back to see how you did on previous months or how you will be doing in the upcoming months, so you can fine tune your budgets to the optimal.

Take it with you, record your data and you will see how money won’t cause you a headache anymore!

More after the break.

Key features

• Today Hub featuring a main dashboard with intelligent indicators


• Upcoming and overdue payments, incomes, bills


• Color-based and snapshot styled budget bar graphs for easy reading


• Easy and fast input for tracking either expenses, incomes or transfer between accounts


• Budget adjustment helper


• Actual balance and budget balance adhoc *


• Accounts and credit cards usage recording *


• Cash flow bar graphs and out of funds predictions *


• Credit card payment estimations and warnings


• Can create future operations and recurrent operations


• Multi currency support


• Easy month back and forth navigation


• Account balances reconcilation


• Password protection in two ways (partial and complete)


• Encrypted backups


• More…!

* Estimated. Does not pull your bank information, however you can sync balances up to a specific date and moBudget will estimate the current and future balance and cash flow according to the data you register day to day.

Screenshots

So give it a try! App has a 15 day free trial period and currently is at 50% sale for Christmas.

– or- direct download link for Zune.

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