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Betterment vs. Vanguard – Who Claims the Crown?

Betterment vs. Vanguard – Who Claims the Crown?

There are two ways in which to accumulate wealth: saving or investing. Which avenue you choose is entirely up to you, though investing yields greater returns and typically beats inflation. With a bull market the world over, more and more Americans are opting to invest in the stock market. In fact, Gallup finds 56% of Americans reporting that they own stock in 2021, not far off from all-time highs set in the early 2000s.

The COVID pandemic is partly responsible for this increase, as a need for passive income grew. Frankly, the cons of traditional ‘saving’ became all too glaring: a need for active income to save more money, and the loss of purchasing power due to inflation. Many families needed a way to generate income in a job market that was dwindling, if not altogether dying.

Another reason for the uptick in stock investing is the accessibility afforded by auto and robo-advisors. Robo-advisors present investors with a hassle-free solution to portfolio management by using a combination of investing algorithms and nifty artificial intelligence. And there is a robo-advisor out there for everyone, no matter if you are an involved, active trader, or someone who wants to simply invest their money, sit back, and watch it grow.

Betterment and Vanguard are two standouts in the field. Vanguard has been around since 1975, and has earned a reputation in investing circles as a white-haired stalwart, providing laymen with top quality investment opportunities, personalized financial advice, retirement tools, and market insights since its inception. Betterment, on the other hand, is a relative newcomer. Yet Betterment can make the claim that it was the very first robo-advisor, initiating the push to democratize the stock investing landscape.

Robo-advisors provide financial advice and the ability to invest in the stock market at a fraction of the cost of human advisors. We’ve been warned time and again of automation, but what if the robot simply does it better?

Anyhow, which is better for you? Betterment or Vanguard? Betterment vs. Vanguard is not an easy call. Let’s take a closer look at their respective features. 

 Betterment – Automatic Investing, Period.

Betterment asks users to fill out an onboard questionnaire concerning things like personal risk tolerance, annual income, years until retirement, and investing goals in order to determine a perfect asset allocation. Everything is easy, streamlined, and automatic.

What’s more, Betterment is driven by the tired adage “diversification is key”. Since the market can be volatile, Betterment splits your portfolio into 14 different asset classes. In addition, Betterment portfolios automatically rebalance and have tax-loss harvesting.

Features

  • Retirement Planning: Betterment helps you forecast the amount you’ll have to live on during your golden years. In addition to offering an at-a-glance look at all your retirement holdings, Betterment’s advanced algorithm will let you know whether you are on track to save enough for retirement or not. In case of the latter, Betterment will suggest ways to help you get on track.
  • Goal Setting: there are several different “goal types” which Betterment allows you to create. These are “retirement”, “major purchases”, “education”, “safety net”, and “general investing”. Each category comes with its own tailored sets of advice, and you can keep track of separate goals. 
  • Account Types: Betterment offers virtually all the popular account types, including traditional and Roth IRAs, SEP IRA, IRA transfer, Rollover 401(k), taxable brokerage, and cash accounts.

Vanguard – In With the New

An investment advisor based in Malvern, Pennsylvania, Vanguard has been doing business since 1975. Longevity is always a vote of confidence in our book, and the company has championed low-cost, DIY investing for decades now.

Vanguard is the largest provider of mutual funds in the nation, and just second in electronically traded funds (ETFs). Not quite a robo-advisor, Vanguard’s Personal Advisor Services is a kind of hybrid, wherein the best of both worlds collide. 

Features

  • Retirement Planning: like Betterment, Vanguard provides users with a variety of tools and calculators to plan retirement. There is also the added benefit of human advisors; there is only so much a robo-advisor can ask of and answer for you, whereas a human can field a variety of questions you may have about retirement and courses of action to take.
  • Goal Setting: Vanguard provides investors with a plethora of articles, worksheets, and interactive tools to help planning. While it may not be quite as automatic as Betterment, there is a greater wealth of material found on Vanguard. What’s more, there are human advisors ready to help if you have any questions the material does not cover.
  • Account Types: there are many account types associated with Vanguard, and even some lesser-known, albeit critical ones: traditional and Roth IRAs, 529 plans, Individual 401(k), SEP and SIMPLE IRA, 403(b), annuities, and individual/joint taxable accounts.

Betterment vs. Vanguard – Is There a Winner?

These types of analyses usually wind up at the same conclusion: there is no clear winner, as it depends on the needs of the individual investor. In other words, what are you looking for in an investment application?

Betterment is clearly the more automatic of the two, and thus requires less maintenance and account management. If you are a beginner investor without a ton of capital, Betterment is a perfect place to start. It has all the bells and whistles one expects from a modern robo-advisor, and it’s secure, safe, and established to boot.

Vanguard comes with a major perk: it’s Personal Advisor Service links you to a genuine, living, breathing representative. It’s a little more involved to use, and requires a wee more user knowledge in general.

Either way, Betterment vs. Vanguard is quite the showdown Whichever type of investor you may be, start investing today with either Betterment or Vanguard.

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