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- Betterment is a robo-advisor offering automated investment and retirement management, checking accounts, cash reserve accounts, and human advisor access.
- Vanguard is an online brokerage specializing in investment and retirement services. The platform also provides automated investing, advisor-managed accounts, and college savings plans.
- Betterment is best for investors strictly looking for automated advice.
- Vanguard could be a good fit if you like trading on your own or want to pay less for advisor-managed portfolios.
- See Business Insider’s guide to the best online brokerages for every type of investor.
Betterment and Vanguard are top investing platforms that provide a wide range of wealth-building products at low costs. The two share similar features: automated investment offerings, human advisor access, IRA accounts, and socially responsible investment options.
But Betterment and Vanguard also have notable differences.
Recognized as the pioneer of the robo-advisor industry, Betterment uses computer algorithms and technology to deliver automated, and personalized, investment management. The company is slightly different from traditional brokerages, like Vanguard, that offer self-directed accounts and active trading opportunities.
Like most popular brokerages, Vanguard offers commission-free trading, retirement accounts, and investment research. But, like Betterment, Vanguard also gives you access to robo-advice. Keep reading to see how the two compare.
Betterment is a robo-advisor offering automated investment and retirement management services, so it’s a good choice for those who want to be more hands-off with their trading. With more than $18 billion in assets under management, the company currently provides individual and joint taxable accounts, retirement accounts, trust accounts, and checking and cash reserve accounts.
Betterment offers two subscription plans for investors: digital and premium. The digital plan has no minimum account size requirements and holds a 0.25% annual fee. You’ll need at least $100,000 to access Betterment’s premium plan (and you’ll have to pay a 0.40% annual fee).
Both plans offer tax-loss harvesting, goal-focused investing strategies, fractional share investing, dividend reinvesting, and socially responsible investing portfolio options (socially responsible investments represent companies that strive to improve society through environmental, social, and ethical means). But with premium, you get unlimited access to certified financial planners, and you can add Betterment’s checking and cash reserve for free.
The digital account doesn’t include unlimited financial advisor access, but Betterment offers one-time consultations for $199. And the company offers Betterment for Advisors, a platform that helps financial advisors offer more investing tools to their clients.
Formed in 1975, Vanguard is an online brokerage offering a vast collection of investing and retirement savings accounts to individuals and businesses. The company currently offers the following accounts: individual and joint accounts, retirement accounts, small business accounts, education savings accounts, and custodial (UGMA/UTMA) accounts.
On the investing front, Vanguard has a wide selection of commission-free stocks, ETFs, and options. You can also actively trade these investments without meeting any minimum account size requirements, but minimums for Vanguard’s mutual funds start at $1,000 and range up to $10,000.
Vanguard has about 160 of its own mutual funds, but you can also take advantage of more than 3,000 no-transaction-fee mutual funds from other companies. And if you’re thinking of investing in ETFs, you’ll have the choice of about 75 commission-free Vanguard ETFs plus 1800 ETFs from other companies.
The brokerage also has a couple of options for investors looking for hands-off and advisor-assisted investing. Its two robo-advisors – Vanguard Digital Advisor and Vanguard Personal Advisor Services — both allow you to sit back and watch your money grow, but you’ll need a $3,000 minimum for the former and a $50,000 minimum for the latter.
When it comes to retirement, Vanguard gives you a variety of options. You can currently utilize traditional IRAs, Roth IRAs, and 403(b). Businesses can open SEP IRAs, individual 401(k)s, and SIMPLE IRAs.
Betterment pros and cons
- No minimum account size requirements for digital plan
- Tax-loss harvesting, goal-focused investing strategies, charitable giving, and socially responsible investing available
- Mobile app with option to connect external bank accounts
- Certified financial planners available
- Only investments available are stock ETFs and bond ETFs
- It’ll cost more to consult a financial advisor, unless you’ve got the premium plan
Vanguard pros and cons
- Thousands of low-cost mutual funds available
- Self-directed, advisor-assisted, and automated investing accounts available
- Commission-free stocks, ETFs, and options
- Great customer service
- Options contract fee is higher than most brokerages
- No other trading platforms besides the Vanguard web and mobile apps
Automated investing accounts
As mentioned above, Betterment lets you choose between two different investing accounts: digital and premium. Whether you go with the digital or premium version, you’ll be asked to select specific investing goals when opening a new account.
Betterment currently offers five different goals: retirement savings, retirement income, safety net, major purchase, and general investing. After you select your goals, Betterment chooses a portfolio specific to your goals and target savings amount.
Portfolios typically consist of a mix of stock ETFs and bond ETFs, and you can adjust your investing goals (and target amount) at any time.
Keep in mind that — with only a 0.25% annual fee — the digital plan lets you start investing without any minimum account size requirements. And if you want additional access to financial advisors and investment research, you can upgrade to premium with a $100,000 account balance.
You can automate your savings with these accounts, meaning that Betterment will automatically deposit and rebalance your accounts earnings for you. Betterment also has 401(k)s for businesses.
Standard brokerage accounts
You can open an individual or joint brokerage account with Vanguard without any minimums or fees, in most cases. The company offers commission-free trading for stocks, ETFs, and options, but you’ll run into minimums for certain mutual funds and index funds. And options contracts cost $1 per contract.
Vanguard’s other investment choices include certificates of deposit (CDs), bonds, Admiral Share (low-cost) index funds, and money market funds. And you can also invest in socially responsible mutual funds and ETFs.
If you’re looking to enhance your investing prowess with a bit more research, you’ll have several sources and tools to choose from. Vanguard offers multiple tools and calculators for investment planning, retirement, and education savings planning.
Plus, the brokerage offers tons of downloadable documents on the latest investment research and expert analysis.
Managed investing accounts
Vanguard has two professionally managed portfolios: Vanguard Digital Advisor and Vanguard Personal Advisor Services. Vanguard Digital Advisor strictly offers robo-advice, meaning you won’t receive additional support from human financial advisors.
Instead, Vanguard Digital Advisor uses a computer algorithm to manage and invest your money for you. The account charges a 0.15% annual fee and requires a $3,000 account minimum.
Once you sign up, you’ll get a personalized mix of the following ETFs: Vanguard Total Stock Market ETF, Vanguard Total International Stock ETF, Vanguard Total Bond ETF, and Vanguard Total International Bond ETF.
Vanguard Personal Advisor Services, on the other hand, combines human advisor support with robo-advice. So you’ll work with a financial advisor to create personalized investment strategies, and Vanguard will then trade securities in accordance with those strategies.
You’ll need at least $50,000 in a Vanguard account to get started, and you’ll have to pay a 0.30% annual fee. Vanguard accounts that count toward the minimum requirement include individual taxable accounts, IRAs, trust accounts, and eligible employer-sponsored plan accounts.
Vanguard says it generally uses low-cost Vanguard ETFs and mutual funds for Personal Advisor Services accounts.
Vanguard offers traditional IRAs, Roth IRAs, and 403(b) plans for individuals. For businesses, the brokerage offers SIMPLE IRAs, SEP IRAs, and individual 401(k)s.
Vanguard’s IRA offerings have no minimum requirements, but you’ll need at least $1,000 if you decide to invest in the Vanguard Target Retirement Fund or the Vanguard STAR Fund. You’ll need a minimum of $3,000 for other Vanguard funds.
College savings plans
The Vanguard 529 plan lets you save for qualified education expenses and access perks such as tax deductions, tax-deferred growth, and tax-free withdrawals.
With Vanguard’s Target Enrollment Portfolios, you can also choose a portfolio based on the year closest to when your child or dependent will enter school.
Betterment could be right for you if you’re looking for a low-cost robo-advisor with an array goal-specific investment strategies and automated account features. And — if you want some human advisor support every now and then — you can either pay for a one-time consultation, or you can get unlimited access to certified financial planners with the premium account.
Vanguard is best for those looking for an all-around investing experience. For hands-on or DIY investors, the brokerage has thousands of mutual funds and offers commission-free trading for stocks, ETFs, and options. And if you’re more of a passive, or hands-off, investor, Vanguard offers you two options: Vanguard Digital Advisor or Vanguard Personal Advisor Services. Vanguard also provides a long list of retirement and investment research materials and resources.
Vanguard could be the better choice if you’re an active investor looking for access to a larger selection of low-cost investments. But this brokerage’s advisor-assisted and automated investing accounts could make it a good fit for hands-off investors, too. However, you should consider Betterment if you’re looking for inexpensive, goal-focused robo-advice. You can sign up for Betterment with a $0 account minimum, but you’ll need at least $3,000 for Vanguard’s robo-advisor.
Rickie Houston is a wealth-building reporter at Personal Finance Insider who covers investing, brokerage, and wealth-building products.