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M1 Finance vs Betterment: Great Options for Different Styles

How we manage our money is among the biggest decisions we make, and getting it right or wrong can have serious pay-off (or consequences) later in life. Generally, there are two different approaches that individuals can take to investing: being hands-on and engaging in active trading, or hands-off and letting a human advisor or robo-advisor mange our money. It should come as no surprise that there are plenty of platforms available for the hands-on approach, all of them looking for the business of active traders. For those looking to be more hands-off, there are financial advisors everywhere but many charge high management fees. But online robo-advisors offer a good option to have professional portfolio management without paying excessively for it. 

M1 Finance and Betterment are platforms that exemplify these different approaches to investing. For the active investor looking for a lot of control over their portfolio, M1 Finance is a highly compelling offering. If you prefer the comfort of knowing that things are on autopilot and being looked after by the experts, Betterment may be right for you. Before considering a more detailed breakdown of the two options, you should also take a closer look at the different types of accounts they offer as well as other features.

M1 Finance: High Flexibility and Low Fees

Nobody wants low flexibility and high fees, right? M1 Finance is a reputable company in operation since 2015, now with more than $5 billion under management. Fortunately for investors, it offers the flexibility to pick individual stocks and execute trades without any cost or management fees. The main way they achieve this is through what they call ‘pies’ – you can identify certain asset classes (such as stocks) as a pie within your portfolio, and then customize the individual ‘slices’ within the pie by picking the specific stocks you want to own. If you’d rather rely on their advice, they also offer expert-designed pies geared towards particular investment goals. 

Many investors are also impressed by the option to purchase fractional shares through M1 Finance. If you are interested in a stock with a high share price such as Tesla, you can own part of a share if you can’t afford the entire share price. 

They need to make money somehow, and that’s where their other offerings come into play. M1 Borrow is a credit service that allows you to borrow up to 35% of your portfolio’s value at a rate of 3.5%. M1 Spend is a checking and debit service. Taken together, this means that if you wanted to, you could handle almost every aspect of your finances through M1. Their premium service of M1 Plus costs a reasonable $125 a year, and it brings savings in a number of ways including reducing your cost of borrowing from 3.5% to 2% and offering reimbursements on ATM fees if you are using the checking service. With a special offer on now to get your first year free, it’s definitely worth trying M1 Plus if you’re interested in what you have read so far.

Betterment: For When Cruise Control is Better

Stock picking isn’t for everyone – some of us don’t have the time, expertise or risk tolerance to take on that responsibility when it comes to managing and growing our money. Betterment is a popular low-cost robo-advisor that lets you set parameters on how your investments are allotted and then does the rest for you. The service does, however, offer access to advisors by phone and email for those who still want to have a discussion as to how their money is being managed. It’s free for Premium users and available for a fee to Digital subscribers.

Betterment Digital requires no account minimum balance and has a management fee of 0.25%. Betterment Premium requires a $100,000 balance and carries a 0.4% management fee. Both management fees are excellent by industry standards, especially compared to human advisors. If the low fees alone are enough to make you want to learn more, consider signing up today.

If you become a Betterment user, you get access to several different portfolio options. Many of them are based around ETF’s, including their core and Goldman Sachs portfolios. There are also three options for those looking to invest responsibly, with Broad, Climate and Social Impact oriented portfolios. Their Target Income portfolio focuses on generating income through bonds, and there is an additional option to have a portfolio where you customize the ETF’s in it with Betterment’s advice and suggestions.

Beyond portfolio design and customization, Betterment users enjoy the benefit of several other ‘smart’ features to maximize their investments’ value. These include tax loss harvesting, re-investment of dividends and automatic re-balancing. SmartDeposit also allows you to automate deposits into your investment account when your bank account reaches a certain balance.

M1 Finance or Betterment: What’s the Right Call?

If you’re trying to decide between M1 Finance and Betterment, you’re starting from the good position of choosing between two excellent services. Another benefit is that the two have been compared before; the more comparisons you read, the stronger your understanding of what’s best for you will be.

At the end of the day, M1 Finance is great for low-to-no fee investing that gives you the option to either customize or automate your portfolio. Betterment is a strong option if you prefer to have your portfolio designed for you and reap the benefits of various smart features. The good news? It’s hard to go wrong with either.

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