This is a headline fight if there ever was one. Digital investors must have come across Betterment, an easy-to-use online platform that helps you manage your money and investments. When you’re looking up what best to do with your money, mutual funds will have definitely also come up. Both Betterment and mutual funds work to optimize your finances, but which is a better platform for your hard-earned cash?
What Are Mutual Funds?
Mutual Funds VS Betterment is really a battle of the titans, but let’s start with mutual funds first. Mutual funds are a great way to diversify your profile without a big commitment and give you holdings in stocks, bonds and others types of assets. Since mutual funds are professionally managed, you best be sure that there are fees involved. In fact, some mutual funds may leave you with very little gains after deducting all the fees.
Mutual funds are also more suited to long-term investors, ones with a more passive approach, and ones who are more risk-aversive. Not only that, but not all mutual funds are as diversified as they could be. Another unfortunate point about these funds is investors are required to have a high minimum to open a mutual funds account. Sometimes these numbers can run as high as $10,000.
- A very popular investment choice
- Portfolio management
- Dividend reinvestment
- Reduced risk
- Easy investment option
- High fees
- Requires trust in the financial manager
- High minimums
What is Betterment?
Betterment uses robo-advisors, so you won’t need to pay a financial manager unless you choose to (more money in your pocket – yay!). Betterment also prides itself on being a low-cost and easy tool for investors of all experience levels. The platform also features automatic rebalancing and tax-loss harvesting.
The benefits don’t stop there. There is no account minimum for the basic Betterment Digital plan and the fees only cost 0.25%. If you decide to commit all the way with the Betterment Premium Plan, there is a minimum threshold of $100,000 and annual fees will cost 0.40% – but guess what? There are no account fees.
Investors can also gain access to custom portfolios and the robo-advisor gives FREE advice on bonds, mutual funds, and ETFs. One more feature investors are raving about are the fractional shares. You would get a piece of the pie even without the means to buy a whole share. It also means that all of your money is invested and put to good use.
- 2 plans available
- No account fees
- Low management fees
- Tax-coordinated portfolio
- Automatic rebalancing
- Get up to 1 year for free
- Diverse portfolio options
- Cash management
- Helpful customer support
- Offers human advisors for an additional price
- No access to real estate investing
- Limited portfolio customization
Just scanning the pros and cons list alone gives us a clear winner in this epic battle. However, does this mean that mutual funds are never the way to go when Betterment is involved? While Betterment does compare favorably to mutual funds and to the likes of Wealthsimple and Stash, we’re not going to write off mutual funds just yet.
Which One Should You Go For?
Betterment is the clear choice for investors who want diversity, no minimum balance (for the basic plan), and low annual fees. You have the option to hire human advisors if you want, but most find the robo-advisors more than adequate – so you save some bucks here as well.
Betterment’s automatic rebalancing feature can also save on capital gains. The platform also makes socially responsible investing within your grasp whether it’s for retirement or something of a shorter focus. In short, Betterment is our recommendation for individuals looking for an easy way into the investment market with a platform ripe with features to help you create the best profile (also great for those who don’t have much capital).
As we said, we shouldn’t write off mutual funds just yet, because they do have their advantages – why else would they be so popular?
You have a real hands-on human professional managing your funds. Advanced portfolio management may cost you more, but you won’t have to do too much due diligence on your own.
A major benefit of mutual funds is dividend reinvestments. With this feature, investors can steadily grow their portfolio – you can make your money work for you.
Mutual funds are also an investment method recommended for risk-aversive investors. Because your money is diversified, your portfolio won’t crash just because one particular industry takes a hit.
Betterment wins this competition by a knockout. While mutual funds are K.O’ed in this round, they still offer their fair share of benefits if it suits your profile. It’s just that Betterment is the overall better choice. No minimums, low fees, advanced features, and robo plus human advisors, Betterment almost seems too good to be true. Luckily, it IS true and the greatness doesn’t stop there. You can get up to 1 year for FREE – check your eligibility now.