Back on December 28th, 2020, I published one of my first posts on FinanceThrottle.com. It was titled “How much did I make after 5 years with a Betterment Roth IRA?” I started my Roth IRA at 25 years old after I had just finished paying off my student loans. At the time I was already a real estate investor renting out each bedroom in my house. After some research, I decided to open my account with Betterment. Betterment is a long term focused automated wealth management service. They offer Roth IRA’s, 401k’s, Safety Net Investment Accounts, Cash Reserve Savings Accounts, HSA’s, and even crypto investments. My Roth IRA recurring contribution was set to $300 per month.
As I progressed in my career and moved around I never increased my investment contributions. This is one aspect of my life that I regret. In my last update, I said that I have invested $20,400 and have made just over $7,000, giving me an annualized internal rate of return of 9.4% and an annualized time-weighted return of 7.92%.
What Happened In The Past Year
In 2021, I opened another Roth IRA with M1 Finance and my wife opened a Roth IRA with Wealthfront. We both decided to maximize our Roth IRA contributions for the first time by contributing $500 per month each. I continued the $300 per month with Betterment, but contributed $200 towards my M1 Finance Roth IRA. With M1 Finance, I was able to choose my own ETF or stock to invest in. It was much more customizable and was completely free. I wanted to see if I could beat the performance of my automated Betterment Roth IRA with limited investment options. The result? Betterment’s AI is the smarter investor. Towards the second half of 2021, I switched gears and contributed the full $500 per month towards my Betterment Roth IRA. In order to contribute the extra $200 per month towards my Roth IRA without affecting our budget, I worked part time for Door Dash. My entire Door Dash income went into my Roth IRA.
Many things have happened in the past year. The market skyrocketed. Crypto skyrocketed. The market collapsed. Crypto collapsed. Inflation Skyrocketed. Interest Rates Plummeted. Interest Rates went back up 0.25%. Real Estate skyrocketed. With everything going on, my Betterment Roth IRA internal rate of return went from 9.4% to 8.70% and my annualized time-weighted return went from 7.92 to 8.02%. In total, I have earned just over $10,000 with an investment of $27,100.
In comparison, my M1 Finance Roth IRA portfolio has lost 1.58% in value. I have not made any return on my investments. My M1 Finance portfolio includes top performing companies in the tech, industrial, consumer, and energy sectors including Google, Block, Apple, Amazon, NVIDIA, Tesla, ABB, Trane Technologies, Proctor & Gamble, Shell, TAN ETF, and FAN ETF. TAN is a solar power focused ETF while FAN is a wind energy focused ETF. You would expect the stock price of these companies to constantly go up but that was not the case in the past year.
Going Forward
My wife and I are working hard to earn money with our career jobs and side hustles so we can maximize our Roth IRA’s each year. In addition, I am regularly contributing to my Roth 401k so that I can do the Mega Backdoor Roth Conversion at least twice a year. This allows me to rollover my Roth contributions from a 401k to a Roth IRA without affecting the Roth IRA $6,000 limit. This strategy also allows me to rollover my Roth 401k earnings into a Traditional IRA to defer my taxes.
We don’t let the state of the stock market affect us. It is important to dollar cost average and continually invest in the market. Time in the market beats timing the market. I think Betterment is doing a good job at managing my Roth IRA. If you are interested, sign up with Betterment using my link and have $5000 managed free for a year. If you want to try the fully customizable M1 Finance, join here and get $50 when you fund your account with $100 within 30 days.
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