Search results for: “index fund”

If you struggle to save, Clink is designed for you. Clink makes it easy to save regularly and invest automatically without having to break out a pencil and paper and create a budget.

The way it works is you link your bank account to your Clink mobile app. Then you simply set a savings schedule, such as $15 per week or 10% of the price of each fast food order you purchase, and you’re set to go.

Clink will automatically transfer money from your bank account to your Clink account and invest it on your behalf, so you can be hands-off when it comes to both saving and investing.

Like some other popular microsavings apps, Clink costs just $1 per month up to the first $5,000 managed and 0.25% of assets under management thereafter.

Clink Spotlight

Is Clink Right For You?

If you find it hard to save or invest and you are fee-conscious, Clink is worth checking out.

Clink was designed with Millennials in mind but the reality is anyone who wants a hands-off approach to saving and investing can benefit from the microsavings app.

If you are fee-sensitive, Clink is a perfect fit because it charges low monthly fees of $1 up to the first $5,000 managed and 0.25% thereafter, which is in line with the best money-saving apps.

No account minimum is stipulated either, so there is no reason not to download the app to see what all the fuss is about, and you can get started investing with as little as $5.

Clink is designed as a mobile app for those on-the-go, though you can sign up and get started in a web-based browser too.

How Clink Works

Download the Clink app, link to your bank account, specify your savings preferences, and Clink invests the money on your behalf. You can also link your credit card to Clink and you can save a percentage of each dining experience.

To get started with Clink, download the app from the App Store if you have an iPhone or Google Play if you use an Android device.

HOW TO SAVE CASH AUTOMATICALLY

After you set up your account, you will be asked for your social security number – a legal requirement for financial companies since the Patriot Act was enacted.

Next, link your bank account so that Clink can withdraw money to be saved.

You will be invited to specify how much you wish to save regularly. The minimum you can choose is $1 daily if you want continuous withdrawals to your Clink account.

HOW TO SAVE EACH TIME YOU BUY

Or by linking your credit card to Clink, you can specify that you want to save a percentage of each dining experience. For example, each time you buy tacos, you could decide you want to save 10% of the purchase price.

Once you have selected how you want to save, Clink does the rest so you can be hands-off – your savings will be invested automatically.

How Does Clink Invest Savings?

Clink relies on Modern Portfolio Theory to invest your money into a diversified portfolio of Vanguard funds.

Like most traditional financial advisors and robo-advisors who invest money on behalf of clients, Clink relies on Modern Portfolio Theory as the bedrock of its investing strategy.

Modern Portfolio Theory was developed in the 1950s when “beating the stock market” was a more popular aim than building a diversified portfolio.

The idea behind the approach is to maximize returns for a given level of risk. So, if you are a conservative investor, your returns will generally be lower than a risk-seeking investor who is more comfortable with larger portfolio swings.

To achieve the aim of building diversified portfolios, Clink relies on Vanguard funds with low expense ratios.

Vanguard is renowned for creating low-cost mutual funds and exchange-traded funds (ETFs) that prioritize clients’ interests.

By charging no monthly fees and partnering with Vanguard, Clink sends a shot across the bow to rival microsavings apps, such as Acorns and Stash, that it has a customer-centric business model, which should lead to greater loyalty.

The six Vanguard funds used by Clink include:

Fund Symbol	Description
VOO	Vanguard S&P 500 ETF
VWO	Vanguard FTSE Emerging Markets ETF
VCIT	Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares
VGK	Vanguard FTSE Europe ETF
VTIP	Vanguard Short-term Inflation Protected Securities ETF
BND	Vanguard Total Bond Market ETF

>> What Are The Best Vanguard Funds?

Clink Fees

Clink costs $1 monthly up to the first $5,000 in assets managed and 0.25% thereafter.

Although Clink charges a comparatively low monthly amount of just $1, keep in mind that this translates to a fairly hefty annual fee on small amounts.

Type	Fees
< $5,000	$1 (monthly)
$5,000+	0.25% (annually)
ACH Transfers	FREE
Returned ACH	$30

For example, if your balance was $1,000, then a $12 annual fee would translate to 1.2% of assets, which is more in line with traditional financial advisors than automated robo-advisors. By contrast, Betterment charges just 0.25% for a similar service level.

However, once your balance reaches $5,000, the annual charge is more in line with leading low-fee robo-advisors.

Open a Clink Account

Clink Pros and Cons

Clink automatically saves and invests your money in low expense ratio funds and charges low fees above $5,000 in deposits. However, you are not permitted to invest via retirement accounts nor will you enjoy advanced features provided by robo-advisors, such as tax-loss harvesting or automatic rebalancing.

Clink Pros	Clink Cons
✅ Low Monthly Cost: For just $1 monthly up to the first $5,000 or 0.25% thereafter, Clink automatically saves money for you and invests it on you behalf.	❌ Limited Account Types: If you have a retirement account, such as an IRA or Roth IRA, Clink does support it at this time.
✅ No Account Minimums: You don’t need to deposit a dime to open an account with Clink, however a minimum $5 is needed to get started investing.	❌ No Tax-Loss Harvesting: While many robo-advisors, such as Betterment and Wealthfront, who specialize in offering tax-loss harvesting services to boost after-tax returns, Clink does not provide this feature.
✅ Diversified Portfolio: Six exchange-traded funds feature in client portfolios and they include stock, bond, emerging market, european and inflation-protected funds.	❌ No Automatic Rebalancing: If a position in your portfolio drifts, Clink does not automatically rebalance your portfolio as some digital advisors sometimes do.
✅ Low Expense Ratio Funds: Low expense ratio funds from Vanguard are used for client portfolios.
✅ Automatic Savings: You can save automatically the cash you have in your existing bank account by setting a calendar date when transfers take place or by linking to your credit card and saving a percentage of each dining experience.
✅ Lump-Sum Investments: If you want to boost your nest-egg, you can make a lump sum deposit with a daily limit of $10,000.
✅ No Hidden Fees: ACH transfers are free and, other than a penalty fee for returned ACH transfers, no other fees beyond management fees apply.

How Secure Is Clink?

Clink uses bank level security to protect your personal information by using SSL and 256-bit encryption for mobile and web applications. Plus, any sensitive data, such as your social security number, is encrypted for maximum protection.

Clink doesn’t store any of your banking information. Your credentials are only used to authenticate your identity and verify that you are who you say you are.

If you link your credit card, ENVESTNET, which is a unified wealth management technology and services provider, will store its details.

Clink Accounts

Although Clink is an SEC Registered Investment Advisor, it only supports taxable accounts. If you have any retirement accounts that you want automatically managed, it is best to select from a list of the best robo-advisors.

Type	Capability
Individual non-retirement	YES
Roth IRA	NO
Traditional IRA	NO
Rollover IRA	NO
Trusts	NO
Custodial Accounts	NO

Clink Tax Strategy

Clink doesn’t support tax loss harvesting or automated account balancing strategies.

Type	Capability
Tax Loss Harvesting	NO
Free Account Rebalancing	NO

Clink Summary

Clink is a microsavings app designed for individuals who struggle to save or want to automate saving and investing.

It wins brownie points for keeping fees comparatively low and in line with rivals, featuring low expense ratio Vanguard funds in diversified portfolios, and in supporting both automated cash savings from bank accounts as well as a percentage of credit card transactions on dining experiences.

Where the app gets docked marks is by catering only to taxable accounts and charging relatively high percentage fees for low account balances – though no minimum account balance is required to get started.

Open a Clink Account

Robo-advisors are a type of financial advisor who automatically manage your money by leveraging the power of technology to select investments for you that are designed to meet your financial goals, risk profile and time horizon.

Before robo-advisors came along, you either had to pay high fees to a human financial advisor to manage your money or spend countless hours researching investments that you made on your own.

In 2008, the first game-changing robo-advisors came on the scene and, since then, they have gathered billions of dollars in assets under management because of their low management fees and expense ratios.

Many robo-advisors optimize after-tax returns, offer excellent mobile apps, tools and calculators, and even make social impact investing easy. So with a myriad of robo-advisor choices available, which are the best robo-advisors?

#1 – Betterment

Betterment wins the top prize for best overall robo-advisor with its extensive range of tools, benefits and services. Low fees, access to human advice, a clear focus on tax-efficient investing, and easy access to socially responsible investing are just a handful of the reasons why Betterment is worth exploring for any serious-minded investor with an eye on retirement.

Betterment has two tiers of service, Digital and Premium. Betterment Digital is a purely automated investment management service while Betterment Premium includes human advice for a higher fee.

Unlike most traditional financial advisors, who often charge north of 1% annually to manage your money, Betterment Digital is available for just 0.25% while Betterment Premium costs 0.40% and includes unlimited access to Chartered Financial Professionals.

What you really care about at the end of the day is after-tax returns and Betterment pays close attention to tax-efficiency in two ways: tax-loss harvesting and tax-coordinated portfolios.

Tax-loss harvesting counts losing positions against winners to lower your overall tax bill while tax-coordinated portfolios is the method by which tax-inefficient assets are placed in tax-efficient accounts, such as an IRA, while tax-efficient assets are placed in less tax-efficient accounts. Betterment claims these allocations can boost your returns over the long-term.

>> Learn More About Betterment SRI Portfolios

#2 – Wealthfront

At around the same time Betterment launched in 2008, Wealthfront was founded also and the two companies have competed vigorously to win clients in the intervening years.

Unlike Betterment, which added an overlay of human advice to its service offerings in recent years, Wealthfront has stayed true to its roots by sticking with a purely digital money management solution.

You need to deposit just $500 to get started at Wealthfront, which will manage your money thereafter at an annual cost of 0.25% of assets under management.

A nice bonus at Wealthfront is you get your first $10,000 managed free.

Where Wealthfront really shines is its focus on tax-loss harvesting. It uses a method called Direct Indexing to lower your capital gains tax liabilities by investing in a range of individual securities that mimic a diversified portfolio of index funds.

This approach provides greater flexibility to sell losing positions against winners and replaces sold securities with similar ones to ensure portfolios remain diversified.

>> Learn More About Wealthfront

#3 – Schwab Intelligent Portfolios

Betterment and Wealthfront have enjoyed so much success that big name financial companies, such as Schwab, Fidelity and Vanguard, have launched their own robo-advisors. Schwab stands out from the pack with its robo-advisor service, called Schwab Intelligent Portfolios.

Schwab has a unique advantage compared to most of its rivals. Unlike other robo-advisors, who frequently use Vanguard funds when building client portfolios, Schwab has the luxury of constructing portfolios with its own proprietary index funds. This allows Schwab to make money from expense ratios – the fees charged for managing and operating the index funds.

Because Schwab can make money from expense ratios, it can drastically lower its management fees all the way to zero!

With no management fees and a reputation as one of the best financial firms in the industry, Schwab Intelligent Portfolios has amassed billions of dollars of assets; it even beat both Betterment and Wealthfront across the line to the first $10 billion in managed assets.

#4 – Blooom

Blooom is a different kind of robo-advisor service because it focuses heavily on retirement portfolios.

If you have a 401(k), Blooom links to it and for a low monthly fee will optimize the allocation of your holdings.

For most individuals, 401(k) portfolios are built haphazardly. You generally have a limited number of funds from which to choose and it is hard to know how much money you should put in each to align with your retirement objectives and risk profile.

Plus, it’s difficult to know which funds are charging high fees without rolling up your sleeves and spending a lot of time comparing expense ratios. That’s where Blooom comes in to save you time and possibly money too.

If you have just a few thousand dollars in your 401(k) then Blooom may end up costing you quite a bit on a percentage basis each year, but anything more than that and the $10 monthly fee is a real bargain.

>> View Top Robo-Advisor CEOs

#5 – Personal Capital

Personal Capital is the white-glove robo-advisor service. Management fees are higher than at many other robo-advisors but you also enjoy greater perks, such as a dedicated human financial advisor.

If you can pony up the $100,000 minimum to get started with Personal Capital and are willing to pay management fees of 0.89% up to the first million dollars deposited, you will have your very own financial advisor who can look holistically at all your financial accounts. So, you get the benefits of a technology-powered automated investment management solution as well as the hand-holding of human financial experts.

Personal Capital also provides one of the best mobile apps in the industry; it enables you to track spending, income, investments, and net worth.

Best of all, it is free to all users – not just clients. Simply link your credit card, bank and investment accounts, and Personal Capital provides a holistic view of your financial situation.

>> Compare: Personal Capital vs Betterment

#6 – Vanguard Personal Advisor Services

Vanguard is perhaps best known for pioneering low cost index funds and so it’s no surprise that its robo-advisor service, Vanguard Personal Advisor Services, competes well with Betterment and Wealthfront on fee charges.

For just 0.30% annually, Vanguard will manage your money digitally and make a team of live advisors accessible to you.

How does Vanguard make human advice available to you at a cost so much lower than most other robo-advisors? Like Schwab, Vanguard has its own proprietary index funds, and earns revenues from fees charged when it places those funds in your portfolios.

So, Vanguard gets to “double-dip” by making money from management fees and expense ratios.

Vanguard imposes a $50,000 account minimum, which is a significantly higher hurdle to get off the starting blocks than you will find at Betterment and Wealthfront.

But for those who meet the eligibility requirements, it’s hard to beat the value proposition Vanguard offers: low management fees, low expense ratios and access to human advice.

>> Compare Betterment Vs Vanguard

#7 – Fidelity Go

Like other industry goliaths, Fidelity entered the robo-advisor space after seeing the enormous success enjoyed by industry pioneers: Betterment, Wealthfront and Personal Capital.

Fidelity Go is the robo-advisor from Fidelity and it is unique in combining management fees and expense ratios in one overall fee.

Retirement accounts incur total fees of just 0.35% annually while taxable accounts are charged 0.45% of assets each year.

Fidelity Go has a $5,000 account minimum and does not currently provide tax-loss harvesting services, so it ranks lower on the list of best robo-advisors but it is well worth exploring for fee-conscious investors.

Some highlights at Fidelity Go include automatic portfolio rebalancing so no single holding dominates a portfolio’s allocation. And as expected from an industry bellwether, Fidelity Go caters to a wide range of account types, including traditional, Roth, SEP, and rollover IRAs.

>> Compare FutureAdvisor Vs Betterment

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FutureAdvisor and Betterment are like two peas in a pod when it comes to managing your money automatically.

After reviewing your unique financial profile – age, risk tolerance, time horizon, and so on – both robo-advisors allocate your money to align with your financial goals.

And both FutureAdvisor and Betterment view your financial circumstances holistically by taking into consideration your retirement and taxable accounts.

Each robo-advisor has an eye on tax-efficient investing and practices tax-loss harvesting, consistent monitoring, automatic rebalancing and connect you to human experts.

Where they diverge is on fees, minimums, and custody of assets. So in the FutureAdvisor vs Betterment battle, which robo-advisor is best?

FutureAdvisor Vs Betterment Spotlight

To make an apples-to-apples comparison of FutureAdvisor vs Betterment, it is best to compare Betterment Premium with FutureAdvisor.

Betterment Premium is the higher tier service offered by Betterment, which includes access to human advice, and costs 0.40% of assets annually.

A purely automated money management solution is also offered, called Betterment Digital, which costs 0.25% annually.

FutureAdvisor also has different tiers of service, called Retirement Advice and Investment Management.

Retirement Advice is 100% free. FutureAdvisor will analyze your funds and make recommendations to improve your asset allocation and expense ratios.

Investment management is a fee-paying service that costs 0.50% annually whereby FutureAdvisor manages your money on your behalf to help you hit your financial retirement targets.

But management fees are just one aspect of total fees you pay a robo-advisor, so how do they compare on overall fees?

FutureAdvisor Fees
Vs Betterment Fees

Betterment has a purely digital money management solution with no account minimum for hands-off investors. It imposes a $100,000 minimum for higher tier service that includes access to Chartered Financial Professionals. FutureAdvisor is more expensive for account holders with more than $100,000 available to invest but is the only choice if you want access to human advice and have less than $100,000 to invest.

Robo-advisors compete fiercely on fees, so these days investors get a lot more for their money than used to be the case with traditional financial advisors.

Where the average traditional financial advisor historically charged north of 1% annually to manage your money, robo-advisors typically charge a lot less.

There are exceptions to the rule. For example, Personal Capital charges fees that are more in line with traditional financial advisory fees.

But for the most part, fees are low and the 0.25% annual fee Betterment charges for pure robo-advice is right in line with industry norms.

Robo-advisor	$5,000	$10,000	$50,000	$100,000	Open Account
Betterment Digital 1 2 3 4 5 REVIEW	0.25%	0.25%	0.25%	0.25%	Open a Account
Betterment Premium 1 2 3 4 5 REVIEW	–	–	–	0.40%	Open a Account
1 2 3 4 5 REVIEW	–	0.50%	0.50%	0.50%	Open a Account

Most robo-advisors offer a basic tier of service that features digital money management.

Few include access to live experts as part of their basic service but SoFi and FutureAdvisor are exceptions to the rule.

So, the Investment Management service offered by FutureAdvisor is more akin to Betterment Premium.

For investors who are content with a hands-off approach and have no need to connect with live financial experts, Betterment Digital is the better choice.

If you have a smaller account size and want to connect to a real person, FutureAdvisor is the best option because it imposes a $10,000 account minimum whereas Betterment requires you to pony up $100,000 for a similar type of service.

To give you an idea of what the fees translate to in real dollars, view this comparison chart.

Robo-advisor	$5,000	$10,000	$50,000	$100,000	Open Account
Betterment Digital Management Fees	$2.50	$25	$125	$250	Open a Account
Betterment Premium Management Fees	N/A	N/A	N/A	$400	Open a Account
Management Fees	N/A	$50	$250	$500	Open a Account

For larger account sizes of $100,000 or more, Betterment charges lower annual fees compared to FutureAdvisor.

Betterment Vs FutureAdvisor: Fees & Account Minimums: If you want access to real people and have an account size under $100,000, FutureAdvisor is your only choice. If you have a larger account size or you don’t care about human advice, Betterment is cheaper.

Betterment Vs FutureAdvisor
Investment Method

Both FutureAdvisor and Betterment use Modern Portfolio Theory to build investment portfolios. FutureAdvisor also takes into account your pre-existing portfolio and tax situation to build a unique, customized portfolio.

FutureAdvisor and Betterment both follow an investment philosophy that believes the best results are achieved by building fully diversified portfolios focused on the long-term.

They each incorporate Nobel-prize winning academic research, called Modern Portfolio Theory, which is based on the idea that risk-averse investors can build portfolios to optimize expected returns based on given levels of risk.

FutureAdvisor incorporates the Black-Litterman model and Fama-French Five Factor model in its investing approach.

A portfolio at FutureAdvisor may look something like this for a conservative, 27 year old investor:

Index investing is another core tenet that both companies rely upon to build low-fee portfolios.

When Jack Bogle, who founded Vanguard, conceived and launched the first index fund, he was mocked by Wall Street aficionados, who believed stock picking was a better investment method to beat the market.

Over time, Bogle has been proven right as it turns out few investors can beat the market long term by timing buys and sells successfully.

So, low-cost ETFs with low expense ratios are a better choice for most investors. At FutureAdvisor, expense ratios are as low as 0.04% – which is approximately an order of magnitude or more lower than you might find in the average 401(k).

Investing Tip: If you are not sure what fees you are paying in your 401(k), check out Blooom, which specializes in analyzing and optimizing retirement accounts.

ETFs are selected by Betterment too because they tend to be lower cost and more tax-efficient than mutual funds.

Research from Morningstar shows that higher-fee funds consistently underperform the market, so a digital money manager who does the research for you can pay for itself over the long term just by helping you side-step these costs.

HOW BETTERMENT & FUTUREADVISOR DIFFER

Where FutureAdvisor and Betterment diverge is in factoring in your prior financial circumstances.

If you already have a portfolio of stocks and bonds, you may incur some hefty tax bills by selling stocks so FutureAdvisor adds a lot of value by considering this liability.

FutureAdvisor stands apart by using Dynamic Fund Selection to build a customized portfolio that factors in your tax situation and pre-existing portfolio.

A dynamic cost analysis is performed to ensure your portfolio is designed to take account of your portfolio size, number and type of accounts held, as well as the bid-ask spread on ETFs.

FutureAdvisor will also calculate the tradeoff of mutual fund expense ratios versus ETF fees.

Betterment Vs FutureAdvisor: Investment Strategy: You can expect to receive low-cost, diversified portfolios at both Betterment and FutureAdvisor, but FutureAdvisor alone will take into account your pre-existing portfolio and tax situation when building a unique, customized portfolio.

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Betterment Vs FutureAdvisor
Tax Strategy

Betterment and FutureAdvisor automate tax-loss harvesting to minimize your tax bill, but Betterment goes the extra mile by allocating assets across accounts to optimize for tax-efficiency.

When it comes to tax-advantaged investing, Betterment is hard to beat. Not only does Betterment practice standard tax-loss harvesting techniques but it also builds tax-coordinated portfolios.

Standard tax-loss harvesting is the practice of selling losing positions against winning positions to lower your tax bill in taxable accounts.

Where Betterment distinguishes itself from FutureAdvisor, which also offers tax-loss harvesting, is by placing tax-efficient assets in non-tax-efficient accounts and tax-inefficient assets in tax-efficient accounts.

For example, municipal bonds already enjoy a tax-advantaged status so there is no reason to place them in a 401(k) or IRA.

Betterment Vs FutureAdvisor: Tax-Advantaged Investing: Although both robo-advisors practice tax-loss investing, Betterment earns more brownie points for also optimizing for taxes across accounts using tax-coordinated portfolios rather than just within taxable accounts.

FutureAdvisor Vs Betterment
Human Advice

Betterment and FutureAdvisor make human advice available to clients via Chartered Financial Professionals and financial experts respectively.

If you can overcome the high account minimum hurdle at Betterment, Chartered Financial Professionals are available to you virtually on-demand.

At Betterment, you enjoy unlimited access to human advice via phone, text, and email.

If you have questions about your portfolio no matter how eclectic, such as queries about foreign equity investment theory, FutureAdvisor also makes licensed advisors and specialists available to you.

The minimum at FutureAdvisor is lower to get access to human advice so if you don’t have $100,000+ to invest, FutureAdvisor is your best bet.

Betterment Vs FutureAdvisor: Human Advice: Unlimited phone, email and text access gives Betterment the nod in this category, but for those with less than $100,000 to invest, FutureAdvisor is your only option and a good one.

Betterment Vs FutureAdvisor
Overall Winner

Betterment wins on fees, tax strategy, human advice and social impact portfolios. It also takes custody of your assets, so you don’t have to worry about extra fees charged by custodians, like Fidelity, which house FutureAdvisor client assets. FutureAdvisor beats Betterment on expense ratios at the low-end, account minimums on top tier service, and investment strategy by considering pre-existing portfolios and tax circumstances of individuals.

Betterment Wins	FutureAdvisor Wins
✅ Portfolio Management Fees: Betterment Digital costs 0.25% annually while Betterment Premium costs 0.40% annually, both of which compare well to FutureAdvisor’s annual fee of 0.50%.	✅ Expense Ratios: Expense ratios at Betterment range from 0.09% to 0.17%, which are exceptionally low, but slightly beaten by FutureAdvisor on the low-end, which includes funds with expense ratios as low as 0.04%.
✅ Tax Strategy: Both Betterment and FutureAdvisor provide tax-loss harvesting services but Betterment takes a broader tax-advantaged perspective by placing tax inefficient assets in tax-efficient accounts.	✅ Account Minimums: Betterment wins for its pure robo-advisor service with no minimum account balance stipulated but for an apples-to-apples comparison that includes access to human financial experts, we give the nod to FutureAdvisor which has a $10,000 minimum versus $100,000 at Betterment.
✅ Human Advice: Betterment wins this category by making Chartered Financial Professionals available with unlimited access via phone, email and text.	✅ Investment Strategy: For investors with pre-existing portfolios, FutureAdvisor is the better choice because it will factor in your portfolio and tax situation before  building customized portfolios that are unique to your circumstances.
✅ Social Impact Portfolio: Betterment offers socially responsible investing portfolios to those who care about aligning their investment dollars with their values.

Which Robo-Advisor Is Best For You:
FutureAdvisor or Betterment?

Betterment and FutureAdvisor offer digital money management that features automatic rebalancing, tax-loss harvesting, global diversification and low fee ETFs, so the choice between them is as much a matter of individual preferences and financial circumstances as it is about objectively ranked criteria.

If you have less than $100,000 and want access to human advice as well as an automated investment management solution, FutureAdvisor is your only choice.

On the other hand, if you don’t care so much about getting access to Chartered Financial Professionals, but do care about an optimal tax-advantaged strategy after signing up, then Betterment is the way to go.

The caveat when it comes to tax is if you have pre-existing portfolios, FutureAdvisor will consider them as well as your tax situation before building customized portfolios.

Betterment has some extra bells and whistles, such as socially responsible investing portfolios and retirement guides that earn it a top position among all robo-advisors, so if you are on the fence Betterment is the way to go and it doesn’t hurt that fees are slightly lower too.

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If you’re looking for stock tips, take a moment to think about this astonishing fact from the Wall Street Journal before hitting the Buy Order button in your brokerage account.

Statistic: Between 1926 and 2015, one third of the cumulative wealth created by the U.S. stock market was attributable to just 30 stocks.

The sobering reality is hot stock tips that produce Google or Amazon-like percentage gains are rare.

If you are on the hunt for stock tips, your ultimate financial goal is to build wealth and robo-advisors may well be a better option to achieve your retirement nest-egg goals.

What % Of Stocks Are Superstocks?

If you were to hazard a guess at the percentage return Amazon generated since it went public in 1997, what number would you pick?

Did Amazon share price gain 100%, 1,000%, or 10,000%? From its $1.96 IPO price (adjusted for stock splits), Amazon gained a whopping 49,000% over the subsequent two decades.

By all measures, Amazon falls into the rare category of being labeled as a superstock.

The holy grail as an investor is to find superstocks and hold on to them for the long term. But what is the likelihood that you will discover them before their share prices skyrocket?

Out of 25,782 companies publicly traded between 1926 and 2015, a full one third of the cumulative wealth generated by the U.S. stock market was attributable to just 30 stocks according to Jason Zweig of the Wall Street Journal.

When investors visit a financial advisor, they are often shown a graph of average stock market returns. But the returns of the average stock are vastly different from the average return of the market.

Half of all the wealth generated for investors over the nine decade period was attributable to just 0.33% of companies according to Professor Hendrik Bessembinder of Arizona State University.

If you were to pick a stock at random to buy, it turns out that there is more than a 50:50 chance the company you buy will lose money over its lifetime in the public markets.

In fact, the 1,000 top performing stocks account for all the stock market’s gains over this period, meaning that only 4% of stocks produced 100% of the wealth.

Strip those top performers out and the stock market wouldn’t have been worth owning at all.

Even superstocks are hard to hold at times. Even though Amazon grew by 49,000% twenty years after its IPO, it fell by 95% during the 1999 – 2001 stock market crash.

The reality is the likelihood of a hot stock tip turning into a superstock is so rare, it is akin to the proverbial hunt for the needle in the haystack.

Even classic advice to diversify into a portfolio of 15 to 30 stocks risks underperformance. Professor Bessembinder found that a portfolio of 25 stocks still has a 64% chance of underperforming the market.

Is it any wonder why one of billionaire investor Warren Buffett’s most famous investing quotes is to simply buy the S&P 500?

What Are The Top 20 Superstocks?

Only 20 stocks accounted for 25% of the wealth creation in the U.S. stock market between 1926 and 2015.

The wealth creation contribution percentages (as measured by capital investment and rates of return in excess of the yield of 1-month U.S. Treasury bills) of the top 20 stocks were as follows:

Company	% Contribution to Wealth Creation in U.S. Stock Market Between 1926-2015
Exxon	2.96
Apple	2.13
General Electric	1.88
Microsoft	1.79
IBM	1.53
Altria Group	1.41
General Motors	1.24
Johnson & Johnson	1.21
Wal Mart Stores	1.06
Procter & Gamble	1.06
Chevron	1.04
Coca Cola	1.03
AT&T	0.95
Amazon	0.94
du Pont	0.94
Alphabet	0.87
Merck	0.84
Wells Fargo	0.79
Intel	0.77
Home Depot	0.71

Source: Professor Hendrik Bessembinder, Arizona State University

Pick A Robo-Advisor

The astonishing percentage gains from superstocks make them alluring but they are so rare that a better approach for most investors is to buy low-fee index funds.

If you prefer a hands-off approach to investing in low-fee index funds, consider a robo-advisor.

BETTERMENT

Betterment has staked its claim as one of the leading robo-advisors by offering an extensive range of services, including both purely digital advice and a premium version that provides access to human advice.

Betterment imposes no account minimum to get started with its basic service, Betterment Digital, for which it charges 0.25% of AUM annually.

Its higher tier service, Betterment Premium comes at a slightly higher cost of 0.40% annually but includes unlimited phone and email access to CFP professionals.

Prospective clients concerned about how challenging it is to pick stocks that outperform can rest easy because Betterment applies Modern Portfolio Theory to build diversified stock and bond portfolios.

For investors concerned about the social impact of how they allocate their dollars, Betterment also offers Socially Responsible Investing portfolios that align investments with values.

>> Related: What Is A Betterment Tax-Coordinated Portfolio?

PERSONAL CAPITAL

Another leading robo-advisor, Personal Capital, includes access to financial advisors in its basic automated investment management service offering, albeit at slightly higher fee levels and a higher account minimum of $100,000.

Fees range from 0.49% to 0.89% depending on the size of your account. Up to the first $1 million, fees are at the high end of the range.

Over and above its white-glove advisory service, Personal Capital shines when it comes to its mobile app.

The mobile app is best in class with features that let you track your cash flow, budgeting, portfolio holdings, allocation or get access research & insights.

>> Related: Compare Personal Capital Vs SoFi

WEALTHFRONT

Like Betterment, Wealthfront launched in 2008 and quickly became a leader in the robo-advisor industry under the leadership of Andy Rachleff.

The account minimum at Wealthfront of $500 is a lot lower than it is at Personal Capital and the fees charged are also quite a bit lower.

Wealthfront is laser-focused on delivering a purely automated investment management service for 0.25% annually and shines when it comes to tax-optimized portfolios.

Wealthfront claims its tax-loss harvesting and tax-optimized services can enhance after-tax returns by up to 2% annually.

>> Related: Betterment Vs Wealthfront Review

Have you traded hot stock tips? How did they work out for you? Share your trading stories and experiences in the comments below. We would love to hear from you.

>> Compare SoFi Vs Wealthfront Robo-Advisors

>> What You Need To Know Before Selling A Stock

>> What Are The Best Online Stock Brokers For New Traders?

No doubt you have read over the years about companies who employ child labor, provide poor working conditions for employees, or destroy local habitats to make money. Investors who struggle ethically with the idea of investing in these types of companies now have a choice to allocate their money to “socially responsible” firms.

The idea behind socially responsible investing, or SRI, is to consider both the financial return and social good when making investments. The factors raised by asset managers who favor SRI investing include environmental, social justice and corporate governance, or ESG.

It is not just major asset managers, such as Generation Investment Management, who are guided by socially responsible investing principles but casual investors too. With ever growing demand from ordinary investors, leading robo-advisors, such as Betterment, have expanded their automated investment management services by catering to client preferences via socially responsible investments.

What Is Socially Responsible Investing (SRI)?

At a high level, socially responsible investing encompasses the practices of impact investing, shareholder advocacy, and community investing. More colloquially, it can be thought of as seeking to avoid harm when investing.

Asset managers who practice socially responsible investing often avoid the following areas:

• Weapons manufacturers
• Fossil fuel producers
• Alcohol and tobacco producers
• Casino and gambling companies
• Fast food restaurants
• Manufacturers of military products

Some asset managers look to avoid negative consequences that may not be obvious at first glance. For example, some soda companies may tick a lot of boxes for value investors. But an SRI asset manager may take a pass, not because the financials aren’t compelling or the business case isn’t attractive but because of concerns over possible negative externalities – sugar consumption might lead to health consequences for consumers over the long term.

>> More: Compare Betterment Vs Vanguard

What Is A Betterment SRI Portfolio?

As a leading robo-advisor, Betterment has embraced the idea of socially responsible investing and responded to customer requests to better align their investments with their values.

Betterment looks to create portfolios that reduce exposure to companies that are seen to have a negative social impact. This may span a wide gamut from environmental destruction to poor labor standards. Equally, Betterment aims to increase exposure to companies supporting social good, such as promoting environmental sustainability.

The big idea at Betterment is to cater to socially responsible investing consumer demands while still offering low fee, diversified portfolios that are automatically managed via technology as part of its basic service (and provide access to human advice in its higher tier service).

>> More: What Is The Betterment Minimum?

What Is Betterment’s
Socially Responsible Investing Method?

Although socially responsible investing has been around as far back as 1758 when Quakers were prohibited from participating in the slave trade, it has not been accessible to the general public until much more recently, and even then the costs have been prohibitive.

The challenge facing Betterment has been to provide customers access to low-fee and highly liquid funds while maintaining portfolio diversity. It turns out that SRI alternatives for small cap, value stocks, international stocks and bonds do not, at this time, meet Betterment’s cost or liquidity requirements so only large cap SRI alternatives are offered.

Due to their focus on fossil fuels companies like Exxon and Chevron may be excluded from SRI portfolios at Betterment. Other companies that may not make the cut include Walmart, Wells Fargo, Pfizer and Philip Morris.

On the other hand, companies deemed to have strong SRI practices, such as Disney, IBM, Intel, Procter & Gamble, Alphabet, Microsoft and Cisco may comprise a larger part of an SRI portfolio.

As a Betterment client, when you choose an SRI portfolio, you are in effect voting with your dollars for low cost, diversified, socially responsible funds – a rarity in the investing world.

>> More: What You Need To Know About Betterment Securities

How Betterment Defines
Socially Responsible Investing

Asset managers define socially responsible investing in different ways. At Betterment, the SRI approach falls into two broad definitions:

1. Reduce exposure to companies involved in non-socially responsible activities and environmental, social, or governmental controversies.

2. Increase investments in companies that work to address solutions for core environmental and social challenges in measurable ways.

Environmental, Social and Governance (ESG) criteria are used to define the Betterment SRI approach.

ESG seeks to quantify the aspects of socially responsible investing along each of the three dimensions. Betterment uses these ESG factors to score and define the extent to which a portfolio is socially responsible.

>> More: What Is A Betterment Tax-Coordinated Portfolio?

How Are ESG Factors Used In
Betterment’s SRI Approach?

Companies that sell tobacco, civilian firearms, or military weapons may be excluded. So too companies involved in controversies that relate to corporate governance standards may be excluded, such as:

Company	Controversy Example
BP	Deepwater Horizon oil spill in 2010
Wells Fargo	3.5 million fraudulent accounts set up
Yahoo	Data breach of 500 million user accounts
Sterling Jewelers	Gender discrimination lawsuit

Beyond controversies, Betterment looks to leverage the MSCI framework for a socially responsible investment approach:

Pillars	Themes	ESG Issues
Environment	Climate Change	Carbon Emissions Energy Efficiency Product Carbon Footprint
	Natural Resources	Water Stress Biodiversity & Land Use
	Pollution & Waste	Toxic Emissions & Waste Electronic Waste Packaging Material & Waste
	Environmental Opportunities	Opportunities in Clean Technology Opportunities in Renewable Energy Opportunities in Green Building
Social	Human Capital	Labor Management Human Capital Development Health & Safety Supply Chain Labor Standards
	Product Liability	Product Safety & Quality Privacy & Data Security Chemical Safety Responsible Investment Financial Product Safety Health & Demographic Risk
	Stakeholder Opposition	Controversial Sourcing
	Social Opportunities	Access to Communications Access to Health Care Access to Finance Opportunities in Nutrition & Health
Governance	Corporate Governance	Board Ownership Pay Accounting
	Corporate Behavior	Business Ethics Corruption & Instability Anti-Competitive Practices Financial System Instability

Source: MSCI

Limitations Of
Socially Responsible Investing

For Betterment, the limitations to building a socially responsible investing portfolio include:

1. Poor quality data
2. Shortcomings in SRI products
3. Liquidity in SRI ETFs

The challenge in gathering ESG data is that some companies don’t disclose ESG metrics. Betterment relies on MSCI, which in turn gathers data from company disclosures and media sources.

Product shortcomings include lack of diversification, a core philosophy upon which Betterment portfolios are built. Also, ETFs that may promote say gender diversity can fall short when it comes to environmental issues. Betterment strives to avoid these contradictory SRI issues in its portfolio holdings.

Another limitation is cost and liquidity concerns. Expense ratios can seriously hinder client returns over the long-term, which is why Betterment aims to keep costs low. But low expense ratio ETFs often lack the liquidity needed to feature in Betterment SRI portfolios.

>> More: Compare Betterment Vs SoFi

Compare Betterment SRI Portfolio
Vs Betterment Core Portfolio

The main change between Betterment core and SRI portfolios (taxable and tax-deferred, such as traditional IRAs) is the composition of large cap holdings.

In SRI portfolios, Betterment allocates to a U.S. ESG exchange-traded fund, DSI, which is the ticker symbol for the iShares MSCI KLD 400 Social Index Fund ETF, and secondarily to KLD for tax-loss harvesting.

These ETFs track a benchmark that includes companies that score highly against ESG benchmarks and excludes companies involved in activities, such as:

• Nuclear power
• GMOs
• Adult entertainment
• Tobacco
• Military weapons
• Civilian firearms

An example of a Betterment SRI portfolio for an IRA account is shown below:

>> More: Compare Betterment Vs Wealthfront

Do Betterment SRI Portfolios
Score Highly?

To evaluate how well a portfolio scores on socially responsible investment criteria, the MSCI Quality Score Scale quantifies ESG criteria:

Scale	0-10 Score
8-10	Very high ESG quality — underlying holdings largely rank best in class globally based on their exposure to and management of key ESG risks and opportunities
6-8	High ESG quality — underlying holdings largely rank above average globally based on their exposure to and management of key ESG risks and opportunities
4-6	Average ESG quality — underlying holdings rank near the global peer average, or ESG quality of underlying holdings is mixed
2-4	Low ESG quality — underlying holdings largely rank below average globally based on their exposure to and management of key risks and opportunities
0-2	Very low ESG quality — underlying holdings largely rank worst in class globally based on their exposure to and management of key ESG risks and opportunities

>> More: Compare Betterment Vs Acorns

What Are The Risks Choosing A
Betterment SRI Portfolio?

Betterment has conducted historical back-testing showing that SRI portfolios have tracked core portfolios with a correlation of 0.9979, so while past history cannot be used to predict future returns, the quantitative studies may provide investors some comfort.

Factoring in expense ratios had no significant change either on total net returns of core portfolios vs SRI portfolios.

However, dividends may be lower by selecting a Betterment SRI portfolio vs a Betterment core portfolio. Although future dividends are random variables, past results show that income returns from Betterment SRI portfolios have been lower than core portfolios.

Summary: Betterment SRI Portfolios

Betterment SRI portfolios are a way for you to better align your social and environmental preferences, as well as your values overall with your investments.

Although limitations with respect to liquidity and fee schedules of funds remain, you can still build a globally diversified SRI portfolio that rivals a core portfolio on costs and performance returns – with the caveat that dividends may be lower.

The more clients who choose SRI portfolios the greater the demand for socially responsible investments and the more likely it is over time that costs will come down and liquidity concerns will fall to the wayside.

What can a bodybuilder teach you about setting financial goals to live a better retirement?

Not much, you might think… but hang tight a moment because famed bodybuilder, Dorian Yates, shared the secret to his success and it can be used to achieve financial goals too.

In his prime as a bodybuilder, Dorian wrote down his goals each week and kept track of every workout session. He set goals over short time spans, even if they seemed small – for example, “add 5 pounds to my bench press this week.”

He knew that small incremental progress every week would translate into huge gains over the long term. And he was right. He sculpted his body as he envisioned, and took home one of the most prized bodybuilding crowns, the title of Mr. Olympia.

His secret to realizing his ambitions stemmed from making the commitment to himself each week what he would do and created a plan to do it on paper. Like a captain on a ship, he didn’t leave harbor without knowing how he was going to arrive at his destination, and he had a map of how to get there.

His approach to bodybuilding can be applied to saving for retirement:

1. Create your financial goals
2. Write down your goals
3. Create a plan for how you will achieve your goals
4. Track your financial goals every step of the way

But what financial goals should you set?

Financial Goal #1:
Lower Commissions Paid To Brokers

When you turn on a financial news network, do you notice something about how you feel after a few minutes? Are you more emotional? Do you feel like buying stock or selling stock? Are you more eager to login to your brokerage account and trade?

At the end of each month and certainly each year, you might be surprised how much you actually pay in commissions costs. When you pay so much in commissions that your profits are eaten up by them, it’s called churning your account.

Instead, set the financial goal to lower the commissions paid to your broker so that you don’t churn your account, or simply overpay for the price of order entry. Write down how much you spend monthly in trading commissions. What percentage of your profits went to pay commissions?

Top brokers like TastyWorks have highly competitive commissions rates. Some like Robinhood even allow you trade stocks without paying a dime in commissions costs.

Financial Goal #2:
Pay Less In Fees

Fees are nasty little critters. The problem with them is they seem innocuous. What’s 1.25% a year after all?

It doesn’t seem like a lot and when your financial advisor shows you historical financial stock market returns. The “paltry” fees seem to pale in comparison to the lofty returns. But those fees slowly eat away at your account each and every day, each and every week, each and every year. And they compound over time, hurting your overall wealth.

A smart way to pay less in fees is to choose one of the top robo-advisors. Many robo-advisors have earned stellar reputations for keeping management fees low, delivering top notch customer service, and making it easy to set specific financial goals.

At Betterment and Ellevest, for example, you can virtually “bucket” your goals so if you are saving for a new home, buying a new car, or paying college tuition, you can target your specific goals and track your progress towards them easily.

Financial Goal #3:
Reduce Expense Ratios

Paying too much in management fees is fairly easy to spot because each month or quarter you receive from your financial advisor a financial statement, which reports how much you forked over in fees. Expense ratios are a whole other ballgame because they are largely hidden from view.

When you pay a financial advisor to invest your money, they will often favor mutual funds. Mutual funds have expense ratios that are charged at the fund level, so you rarely see them unless you go hunting for them.

Although hidden from obvious view, expense ratios when combined with management fees can add up to a hefty sum at the end of the year.

For example, if the total cost of management fees plus expense ratios was 2% annually for you, yet just 0.5% annually for your neighbor, and both your portfolios grew at the rate of 8% annually over 30 years, did you know that your neighbor would be about $300,000 better off than you?

		Expense Ratio
Year	Annual Gain (8%)	0.50%	1.00%	1.50%	2.00%
0	$100,000	$100,000	$100,000	$100,000	$100,000
1	$108,000	$107,500	$107,000	$106,500	$106,000
2	$116,640	$115,560	$114,485	$113,415	$112,350
3	$125,971	$124,222	$122,488	$120,771	$119,070
4	$136,049	$133,529	$131,045	$128,595	$126,180
5	$146,933	$143,532	$140,193	$136,917	$133,702
6	$158,687	$154,279	$149,974	$145,768	$141,660
7	$171,382	$165,828	$160,429	$155,180	$150,078
8	$185,093	$178,238	$171,605	$165,187	$158,980
9	$199,900	$191,571	$183,551	$175,828	$168,395
10	$215,892	$205,897	$196,319	$187,141	$178,350
11	$233,164	$221,290	$209,965	$199,168	$188,875
12	$251,817	$237,827	$224,550	$211,952	$200,002
13	$271,962	$255,594	$240,136	$225,540	$211,763
14	$293,719	$274,682	$256,790	$239,981	$224,193
15	$317,217	$295,188	$274,587	$255,328	$237,329
16	$342,594	$317,217	$293,602	$271,635	$251,209
17	$370,002	$340,881	$313,918	$288,962	$265,873
18	$399,602	$366,302	$335,622	$307,370	$281,363
19	$431,570	$393,608	$358,809	$326,925	$297,725
20	$466,096	$422,939	$383,578	$347,697	$315,004
21	$503,383	$454,443	$410,035	$369,759	$333,251
22	$543,654	$488,282	$438,293	$393,189	$352,516
23	$587,146	$524,626	$468,474	$418,070	$372,853
24	$634,118	$563,661	$500,705	$444,489	$394,320
25	$684,848	$605,583	$535,125	$472,537	$416,976
26	$739,635	$650,605	$571,879	$502,313	$440,883
27	$798,806	$698,955	$611,124	$533,920	$466,108
28	$862,711	$750,878	$653,024	$567,467	$492,718
29	$931,727	$806,634	$697,757	$603,069	$520,786
30	$1,006,266	$866,507	$745,511	$640,848	$550,388

Financial Goal #4:
Build A Diversified Portfolio

How did Warren Buffett get so rich? It wasn’t by building a diversified portfolio but by building a concentrated portfolio of stocks that beat the market. So, if a concentrated portfolio is the way to get super rich, why build a diversified portfolio?

The answer lies in the advice Buffett gives to non-professional investors, which is to buy an index fund that tracks the benchmark S&P 500 and leave it be for the long-term. He advocates diversifying even though he practices otherwise because he knows that few investors can beat the market over the long term.

To beat the market requires extreme rationality, buying the troughs and selling the peaks. It is so much easier emotionally to buy the peaks and sell the dips. That’s precisely why most people don’t end up wealthy.

Even professional investors find it hard to consistently beat the market. In fact, Buffett was so convinced hedge fund managers charging hefty fees couldn’t beat the S&P 500 over a ten year period that he placed a big wager on it with the winner’s proceeds going to charity. Ten years later, he was proven to be correct. After fees, it’s very hard to outperform the general market indices.

If you are not sure how to build a diversified portfolio, consider advisors like Personal Capital who offer not only an automated investment approach but also human advice so you get the best of both worlds.

Financial Goal #5:
Max Out Your Retirement Accounts

Got a 401(k), IRA or Roth IRA, then if at all possible, look to max out your contributions. The obvious reason is that your earnings grow tax free until retirement. But you also get the dual benefit of lowering your tax bill right away.

If you earn $100,000 annually and put the maximum contribution of $18,000 (if under the age of 50) into your 401(k), your taxable income is lowered to $82,000. So not only do you get to enjoy tax free portfolio growth until withdrawals are taken but you get to pay less to Uncle Sam right away too.

>> Related: How To Lower Your Tax Bill

If you are not sure how your 401(k) is performing, analyze your holdings free of charge using a company such as Blooom, which specializes in optimizing retirement account allocations.

Financial Goal #6:
Save Every Time You Buy

Saving more every month is a nice idea, but making it happen is not always easy. The extra $100 or $1,000 you save this month is worth a lot more than those amounts in the future because of the magic of compounding.

If you could invest $1,000 today and let it grow at an annual rate of 8% for the next 30 years, the final sum would be 10x more, or $10,000. What if every $1 you saved turned into 10 times that amount in the future?

All of a sudden, when you spend an extra $100 instead of investing it, think about it as spending $1,000 future dollars as opposed to “just” $100.

When you think about things you buy in future dollars, it helps to clarify whether it’s really worth it to spend the money today.

Still, saving regularly takes a commitment to the financial goals. And to simplify the process, Acorns lets you round up each dollar you spend and invests it automatically on your behalf. Simply connect your bank accounts or credit cards to Acorns and away you go.

Financial Goal #7:
Lower Your Interest Rate Payments

Most Americans are saddled with some combination of student loan debt, mortgage debt, auto loan debt or credit card debt. So how do you pay off those debt faster?

The most important factor is the interest rate you are charged. If you have a student loan, look to some of the new lenders on the scene who have grown rapidly in recent years after building loyal communities by offering highly competitive rates and community perks too, such as SoFi.

A big killer of financial health is credit card debt because interest rates can quickly skyrocket. If you have $10,000 of credit card debt and paid 15% in annual interest rate charges that amounts to $1,500 a year of costs that gets you absolutely nothing in return – because it isn’t paying down the debt.

A person earning $50,000 a year who can save $2,000 annually will find it hard to escape credit card debt unless the interest rate is lowered. So, the #1 priority is to transfer the balance to a new card or negotiate with your existing credit card issuer.

Summary:
Set Financial Goals You Can Achieve

The most important first step in setting financial goals is to write them down and keep track of them.

Jot down on pen and paper the 7 financial goals below along with any others which you know will help you live a better retirement, and most importantly, keep track them of them regularly.

1. Lower commissions paid to brokers
2. Pay less in fees
3. Reduce expense ratios
4. Build a diversified portfolio
5. Max out your retirement account contributions
6. Save every time you buy – automatically
7. Lower your interest rate payments and pay off debt

What financial goals have you set? How are your savings and retirement planning tracking compared to your financial goals?

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Believe it or not, Jack Bogle, was a lone voice advocating for the benefits of low cost, diversified index fund investing when he founded The Vanguard Group in 1975. Since then, a choir of voices have echoed his message and mission to keep fees low and diversify risk.

Exchange-traded funds, or ETFs, are a form of index fund because both strive to produce benchmark returns at low cost. ETFs compare favorably to index funds because so many ETFs are commission-free.

ETFs have grown in popularity as a way to inexpensively build a diversified portfolio. Whether you want exposure to the U.S. stock market, a specific sector, such as healthcare, or international markets, ETFs are available to meet your investing needs.

How To Select An Online Broker For ETF Investing

Trading costs, ongoing operating costs, and investment selection are among the three most important criteria to consider when selecting a broker for ETF trading.

Unlike a mutual fund, which is actively managed, and designed to beat the market, an exchange-traded fund is passively managed so that it tracks a benchmark. The idea behind ETFs is not to beat the market but rather to match it no matter which way it swings, up or down.

Although mutual funds and ETFs differ in their objectives, similar factors apply when selecting a broker:

No-commissions: Competition among brokers is so fierce these days that they compete vigorously on fees, which works to your advantage.

Over the years, online brokers have dropped commissions costs to enter and exit ETFs so low that in some cases they are free. Many top brokers for ETF trading offer an extensive lineup of commission-free ETFs.

Expense ratios: The ongoing costs to manage and operate an ETF can vary significantly. Although ETFs are widely regarded as low-fee investment vehicles, not all funds stack up to expectations.

ETF Lineup: Generally, you will have access to the same stocks irrespective of which broker you choose. But ETFs are another ball game because the lineup of ETFs at one broker may differ from those available at another.

Most brokers offer ETFs by the largest issuers (Blackrock iShares, Vanguard, State Street SPDRs, Invesco and Charles Schwab) while some brokers, such as Schwab, provide a selection of proprietary ETFs too.

Tools: A broad selection of low-cost ETFs is a good starting point but how do you build a portfolio of ETFs that align with your risk profile and financial goals?

As it turns out, top ETF brokers provide tools to help you build a portfolio that matches your preferences.

Overall Best Online Brokers For ETF Investing

Vanguard and Schwab lead the pack of best online brokers for ETF traders with the best combination of low cost ETFs, tools, and investment selection.

VANGUARD

As the pioneer of index fund investing, it is no surprise that Vanguard is among the best online brokers for ETF investors and traders.

When Jack Bogle launched the first index fund, Wall Street labeled it “Bogle’s Folly” because tracking the market – as opposed to beating it – was considered to be a foolish bet.

Time has proven Bogle had the foresight to realize few professional money managers can ‘beat the street’ and passive investing produces better results for most casual investors.

Over the years, Vanguard has become famous for its rock bottom fees. So much so, that almost all the leading robo-advisors include Vanguard funds in their portfolio selections.

Commissions: The founding philosophy at Vanguard to keep costs low and hold for the long term is reflected in its commission structure.

Unlike most brokers who discount commissions based on volume, Vanguard charges low commissions of just $7 for the first 25 trades, and then hikes the cost to $20 for additional trades. So, Vanguard penalizes you for trading more.

Another nice feature at Vanguard is its broad selection of no-commission ETFs on offer. Over 50+ commission-free ETFs are available to trade.

Account Balance Minimum: Another core philosophy at Vanguard is to make it easy and inexpensive to invest. Vanguard lives up to its goals by stipulating no account balance minimums; you can open an account with zero dollars. Of course, to invest you will need to fund the account but to get started the cost is zilch.

Expense Ratios: Expense ratios are generally low at Vanguard. At the low end is the Vanguard Total Stock Market Fund (VTI) which has an expense ratio of 0.05% and 0.17% for the Vanguard Total Stock Market Fund Investor Share Class (VTSMX).

SCHWAB

Like Jack Bogle, Charles Schwab has earned almost mythical status in the financial world for pioneering low cost access to financial markets for retail investors.

In 1975, Schwab forged a path for discount sales of equities and, in the ensuing years, built Schwab to become the largest discount securities dealer in the United States.

Commissions: Schwab offers one of the most extensive selections of commission-free ETFs – over 200 are available to customers.

The cost to purchase other ETFs is just $4.95 per trade.

Account Balance Minimum: The account minimum is low at Schwab, but not zero as at Vanguard. Schwab requires customers to either:

• Fund an account with $1,000; or
• Commit to $100 monthly automatic deposits

Best Online Brokers For
ETF Passive Investors

Betterment and Schwab Intelligent Portfolios standout from the pack of top robo-advisors. Beyond low fees, Betterment offers tax-loss harvesting, financial calculators, and retirement guides while Schwab Intelligent Portfolios has extensive research and a broad range of asset classes with zero management fees.

If the idea of picking your own ETFs seems intimidating or you don’t have the time to research exchange-traded funds that match your risk profile and financial objectives, robo-advisors are a good option.

Robo-advisors automate investment management so you don’t need to be involved in ETF selections. After answering a few questions and depositing your funds, the robo-advisor will do the rest without you having to lift a finger.

Among the best robo advisors are Betterment and Schwab Intelligent Portfolios.

BETTERMENT

Along with Wealthfront, Betterment was one of the earliest robo-advisors and remains one of the best.

Like most other robo-advisors, Betterment builds portfolios with low-cost index funds and ETFs. Management fees range from 0.25% to 0.40% depending on whether you want a 100% automated portfolio management solution or want access to a hybrid service that includes human advice too.

Expense ratios are low at Betterment, ranging from 0.09% to 0.17%. When you compare these costs to mutual fund expense ratios that can be as much as 5x higher and more, the value Betterment provides is compelling.

SCHWAB INTELLIGENT PORTFOLIOS

Schwab has a unique advantage compared to most robo-advisors. Because Schwab has its own proprietary ETFs, it competes aggressively on price with leading robo advisors, such as Personal Capital, via its own robo-advisor, Schwab Intelligent Portfolios.

Management fees are zero because Schwab makes money from the expense ratios of its proprietary funds held in client portfolios. By offering free portfolio management, Schwab has amassed one of the largest holdings of assets under management of any robo-advisor.

Schwab Intelligent Portfolios stands out as having the broadest range of asset classes of any robo-advisor as well as extensive research.

Expense ratios are mostly in line with those charged by Betterment, ranging from 0.08% to 0.24%.

>> More: Compare The Best Robo Advisors For Fees

>> Related: Compare Wealthfront Vs Betterment

Best Online Brokers
For ETF Active Traders

Interactive Brokers and Fidelity have higher account balance minimums than some rivals but offer highly capable platforms with tools, charts, real-time streaming data and watchlists for active traders.

INTERACTIVE BROKERS

Interactive Brokers is renowned as a leading platform for experienced and active traders. Low commissions costs, low margin rates and over 3,000 no-transaction-fee mutual funds have earned Interactive Brokers a reputation as a go-to platform for high volume, fee-conscious traders.

Active ETF traders will find a home at Interactive Brokers, which has an extensive suite of tools, including its Volatility Lab, Strategy Scanner, and Risk Navigator, plus advanced charting and streaming live data.

A minimum $1 commissions cost is charged and a maximum of 0.50% of the trade value, or $0.005 per share.

The downside of Interactive Brokers is the high account balance minimum of $10,000 – though at the end of month 8, total commissions are subtracted from the $10,000 deposit to reach the required commission minimum.

FIDELITY

You probably know Fidelity best as an administrator of retirement plans but Fidelity has much more to offer the discerning active trader.

If you can get past the account balance minimum of $2,500, Fidelity has a suite of tools and research to rival the best brokers in the industry.

Active Trader Pro is a downloadable desktop and web-based platform that is easy to navigate and Wealth Lab Pro enables traders to customize strategies.

Whether you are looking for real-time data, price alerts, watchlists or a mobile solution, Fidelity has got you covered.

A bonus at Fidelity is if you want to allocate some of your portfolio to an automated investing solution you can do so via the Fidelity Go robo advisor.

Best Online Brokers For
ETF Traders Using Tools

E-Trade and thinkorswim offer a nice stepping stone between active ETF trading and the automated, hands-off investing approach offered by robo advisors.

thinkorswim

The thinkorswim trading platform is about as close to trading nirvana as any platform when it comes to tools.

Whether you are looking for advanced technical chart studies to view ETFs, or you want to conduct extensive back-testing or strategy scanning, thinkorswim has a robust offering that deserves its loyal following among active traders.

thinkorswim has extensive educational resources, low commissions costs of just $6.95, and supports mobile trading too.

For ETF investors who want to add the dimension of options trading, thinkorswim supports simple and advanced strategies, including:

• Covered call options strategy
• Married put options strategy
• Collar Trade options strategy
• Bull put spread options strategy
• Bear call spread options strategy
• Credit spreads options strategy
• Debit spreads options strategy
• Bull call spread options strategy
• Bear put spread options strategy
• Ratio put backspread options strategy
• Ratio call backspread options strategy
• Iron butterfly options strategy
• Iron condor options strategy
• Straddle options strategy
• Strangle options strategy
• Combination trades options strategy

E-TRADE

E-Trade offers a happy medium between an active ETF trading approach and an automated investing solution offered by robo advisors.

Over 100 commission-free ETFs are available at E-Trade and you can use its tools to build portfolios that match your risk profile and financial goals.

E-Trade’s My Virtual Advisor recommends the best way to allocate assets to ensure you don’t put all your eggs into one basket. For example, if you want to build a balanced portfolio of bond funds, equity funds, and emerging market funds, E-Trade helps you walk step-by-step through the process.

Summary: Best Online Brokers For ETFs

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