Betterment vs Robinhood isn’t so much an apples to apples as it is an apples to oranges comparison.
While both platforms will give you exposure to the stock market, they do so in very different ways. Betterment is best for hands-off customers who don’t have aspirations to “beat the market” while Robinhood is a platform tailored to more active traders.
If you’re long-term oriented and don’t want the hassle of picking stocks, Betterment is the way to go – portfolios are built to be diversified and track the stock market.
On the other hand, if choosing where to allocate your money and which stocks to pick sounds like fun, you’ll be better matched to the Robinhood app.
There’s much more to know beyond the first glimpse comparison so if you’re uncertain where to invest your money, this Betterment vs Robinhood review compares fees, investment minimums, tax strategy, and more to help you decide which service best matches your financial needs.
Table of Contents
- Robinhood vs Betterment Features
- What Is Betterment?
- What Is Robinhood?
- Betterment Fees vs Robinhood Fees
- Robinhood Vs Betterment Investment Minimums
- Robinhood vs Betterment Tax Strategy
- Betterment vs Robinhood Account Types
- Betterment Vs Robinhood Investment Strategy
- Betterment vs Robinhood Overall Winner
- Which Robo-Advisor Is Best For You: Robinhood or Betterment?
Robinhood vs Betterment Features
What Is Betterment?
Betterment has two levels of service: a basic robo-advisor (Betterment Digital) and a robo-advisor with access to unlimited human advice (Betterment Premium).
Want your portfolio managed by a 5-star roboadvisor? Betterment is virtually unmatched and includes behavioral finance methods to support goal-setting and encourages more rational decision-making.
To ensure you don’t miss out on the upside with a big cash balance that drags down returns, Betterment caters to the purchase of fractional shares.
Betterment also offers an automated charitable giving service and socially responsible portfolios to allow clients align their investments with their values by allocating money to social-driven causes.
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What Is Robinhood?
Robinhood made its name as the “free trading platform” because commissions to buy and sell stocks were $0 right from the get-go.
Commission-free stock, ETF, and cryptocurrency trading is available through its mobile app.
Robinhood unabashedly targets a younger demographic with its snazzy mobile app, easy to use platform, and focus on free trading.
You might be wondering if the Robinhood mobile app is free and commissions are zero, how does Robinhood make money?
One income stream is from Robinhood Gold, a service tier that enables users to borrow money to invest (also called margin trading). A flat monthly rate is charged to boost customers’ “buying power” as Robinhood calls it.
Robinhood Gold is aimed at risk-seeking investors who want to goose returns. Beware when borrowing to invest that risks when trading on margin are magnified.
Betterment Fees vs Robinhood Fees
Betterment Management Fees
|Betterment Digital||0.25%||Digital service: in-app messaging to financial advisors|
|Betterment Premium||0.40%||Unlimited phone + email access to financial advisors plus portfolio monitoring|
Betterment Digital is the basic service of money management offered to clients. It is primarily a robo-advisor service in which computer algorithms allocate money based on client risk profiles and goals.
It also includes limited access to financial experts who can advise clients, as well as in-app messaging on-the-go.
Betterment Premium costs clients 0.40% annually on managed assets. For the extra fees, clients receive unlimited phone and email access to financial consultants, as well as in-app messaging.
No commissions and no fees at Robinhood. Surely there’s a catch? Nope!
What makes Robinhood so special is it actually delivers on its promise of no fees and no commissions.
When you sign up you won’t be surprised by hidden fees that crop up out of nowhere, they simply do not exist.
Only users who wish to borrow money using Robinhood Gold will need to pay to trade on margin but that is to be expected.
|Investormint Verdict: You can’t beat free! Robinhood wins hands-down on cost.|
Robinhood Vs Betterment
Betterment Account Minimum
|Service Type||Account Minimum|
No investment minimum is required to sign up to Betterment Digital, however a steep $100,000 minimum is in place to get started at Betterment Premium.
Robinhood Account Minimum
The Robinhood account minimum is zero for basic service but traders who want access to Robinhood Gold will need to deposit at least $2,000.
|Investormint Verdict: Robinhood and Betterment are tied when it comes to account minimums for basic service.|
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Robinhood vs Betterment
Betterment Tax Strategy
Daily tax-loss harvesting on all taxable accounts and tax-coordinated portfolios are two primary tax strategies.
Tax-loss harvesting is a system of selling losing positions to offset capital gains taxes.
Tax-coordinated portfolios place tax-efficient funds in taxable accounts and tax-inefficient funds in tax-advantaged retirement accounts.
According to Betterment, performance returns on average are as much as 2.66% higher as a result of its tax strategies.
Robinhood Tax Strategy
Robinhood caters to individual taxable accounts only.
For investors with IRA or Roth IRA accounts, Betterment is the better choice while blooom is best for automated management of 401(k) accounts.
|Investormint Verdict: Betterment comes out well ahead of Robinhood on tax strategy.|
Betterment vs Robinhood
|Account Types||Betterment||Robinhood Invest|
|Investormint Verdict: Betterment offers a wide variety of account types whereas Robinhood only features individual taxable accounts.|
Betterment Vs Robinhood
Diversification is key to the Betterment investment method. Whereas at Robinhood you could invest all your money in one stock, Betterment will take control of spreading capital across up to 12 asset classes.
Digital users have no control over the allocation percentages however Premium users can modify amounts.
Robinhood offers stocks, exchange-traded funds, and cryptocurrencies. The responsibility is on traders to make investment decisions.
|Investormint Verdict: Betterment manages portfolios on behalf of users and adheres to strict rules of diversification. Robinhood users pick their own positions so performance returns may vary more widely.|
Betterment vs Robinhood
|Robinhood Wins||Betterment Wins|
|✅ Fees & Commissions: Nothing beats free! Robinhood’s no-commissions policy easily beats the competition.||✅ Hands-Off Management: Investors who prefer to hand over portfolio management to a financial advisor should look to Betterment over Robinhood.|
|✅ Investment Minimum: While neither Betterment nor Robinhood impose minimums for basic service, the six-figure minimum for Betterment Premium gives Robinhood the victory.||✅ Tax Strategy: Each day Betterment checks to see if tax savings opportunities exist and offers two strategies to keep more money in your pocket and less in Uncle Sam’s.|
|✅ Active Investors: Investors who want control over their portfolio selections will fare best at Robinhood.||✅ Account Selection: A wide variety of accounts are offered including taxable, retirement, and trust.|
|✅ Cryptocurrencies: Between the two services, only Robinhood offers cryptocurrency trading.||✅ Tools & Services: Retirement tools, charitable giving services, socially responsible portfolios, and more are all available to all users.|
Which Robo-Advisor Is Best For You:
Robinhood or Betterment?
The decision to choose Betterment or Robinhood is largely a question of preferences. If you like to control your own portfolio selections then Robinhood is ideal. For hands-off investors, Betterment can place your portfolio on auto-pilot.
On cost, nothing beats Robinhood. It simply cannot be beaten thanks to its commission-free and no hidden fees policies.
Betterment is best for investors who care about after-tax returns or have more complicated financial situations requiring numerous types of accounts, whether taxable, retirement or trust.
The bottom line is Betterment and Robinhood offer two very different services. Investors who want the comfort of oversight and long-term planning should look first to Betterment while Robinhood is a low cost service for DIY traders.