Betterment vs M1 Finance: Which Robo-Advisor Is Best?

TL;DR

Betterment is ideal for beginners seeking a hands-off investing approach with personalized portfolios and tax loss harvesting, charging a small annual fee. In contrast, M1 Finance offers a free, flexible platform for more hands-on investors but lacks certain features like tax loss harvesting and does not provide cash savings options.

Transcript

• So in this video today we are going to be comparing the two robo-investing platforms out there known as Betterment, and M1 Finance. And at the end of this video, if you guys do decide that you want to sign up for an account with either Betterment or M1 Finance, I am affiliated with both of them, which means if you do decide to use my links in the... Read More

Key Insights

• 🈶 Betterment charges a small annual fee, while M1 Finance is completely free to use.
• ⚾ Betterment creates custom portfolios based on personal investing needs, while M1 Finance offers a do-it-yourself or portfolio-based approach.
• 🌸 Betterment offers tax loss harvesting, a feature not provided by M1 Finance.
• ❓ Betterment has no minimum amount required to get started, while M1 Finance has a $100 minimum for traditional accounts and $500 for retirement accounts.
• 🛟 Betterment offers a cash reserve option, while M1 Finance does not have a product for cash savings.
• 👻 Betterment focuses on a passive investing approach with ETFs, while M1 Finance allows for both passive and active investing.
• 😒 Betterment is more beginner-friendly and simpler to use, while M1 Finance is better for those who want to be more involved in their investments.

Questions & Answers

Q: What are the main differences in fees between Betterment and M1 Finance?

Betterment charges a small annual asset management fee, while M1 Finance is completely free to use. Betterment's fee is 0.25% for most customers and 0.4% for higher net worth investors. M1 Finance makes money through other means, such as their checking account and debit card fees.

Q: Can I buy individual stocks on both Betterment and M1 Finance?

No, you can only buy ETFs (exchange-traded funds) on Betterment. However, M1 Finance offers the option to buy individual stocks if you prefer a more active approach.

Q: Does Betterment offer tax loss harvesting?

Yes, Betterment offers a feature called tax loss harvesting, which allows them to sell investments and recognize artificial tax losses. This can help reduce your tax bill at the end of the year. M1 Finance does not offer this feature.

Q: Which platform is more beginner-friendly?

Betterment is considered more beginner-friendly because it offers a 100% hands-off approach. They handle all the guidance and portfolio management for you. M1 Finance is better for those who want to be more involved and have the option to select their own portfolios or individual stocks.

Summary & Key Takeaways

• Betterment charges a small fee for its services, while M1 Finance is completely free.

• Betterment creates a custom portfolio based on your investing needs, while M1 Finance offers a do-it-yourself or portfolio-based approach.

• Betterment offers tax loss harvesting, a feature that M1 Finance does not provide.