Betterment vs. Vanguard

The choice between Betterment vs. Vanguard has more to do with your investment strategy than the features offered by each product. Since Betterment is a robo-advisor service, users invest in a series of funds automatically managed by the brokerage. Therefore, they cannot use the platform to invest in securities like individual stocks, bonds and options. In contrast, Vanguard is a trading platform, so users can trade most mainstream securities. To determine which is the best choice for you, this is what to know about Betterment vs. Vanguard.

Consider working with a financial advisor who can help you develop the best investment strategy to manage your investments.

Betterment vs. Vanguard: Fees

you invest through Betterment, you primarily pay via commission. Betterment offers both a basic and Premium plan based on the volume of your investment. Its basic plan charges $4 a month for balances under $20,000, while accounts that pay $250 and make monthly recurring deposits, or have balances between $20,000 and $1 million, pay a 0.25% annual fee. So, for example, if you put $10,000 in your Betterment account, you would pay $25 per year for the service. The company also offers a no-fee high-yield checking and savings account option.

For investors who would like to manage their own assets, Vanguard offers a price structure based primarily on trading. The Vanguard platform charges no fee to trade stocks and exchange-traded funds (ETF) unless you make a broker-assisted trade for $25. It costs up to $1.00 per contract to trade options contracts. Vanguard mutual funds, the core of this firm’s service, are free to all investors on the platform.

Vanguard also offers reduced price options for high-net-worth accounts starting at $1 million in assets. It doesn’t charge inactivity fees, nor does it charge users for most ordinary transactions, such as depositing or withdrawing money.

Betterment vs. Vanguard: Services and Features

While services vary between Betterment vs. Vanguard, both companies are closer in practice than they initially appear. Specifically, both of these firms are organized around fund-based investing.

While Vanguard offers a full-service trading platform, the firm’s core brand has always been the management of mutual funds. Its investment platform emphasizes that through a comprehensive design that incorporates the assets on offer, data available to investors and even the design choices behind its interface.

Vanguard offers one of the broadest ranges of mutual funds at the lowest prices of just about any trading platform on the market. Investors on its platform will easily find information and analysis to support fund-based investing. Investors who want to pursue active portfolios or higher-risk assets generally will choose other investment platforms.

Betterment is a robo-advisor service, so users cannot invest directly in any assets. For example, you cannot invest in stocks through a Betterment portfolio. Instead, as an investor, you use your Betterment account to select a series of options that will direct your investment strategy. You can set the time horizon for your investment or choose the level of risk you are comfortable with.

Based on these choices, Betterment will invest your money across different asset classes in one of its several portfolios. For example, investors looking for higher returns and comfortable with higher risks will see their portfolios distributed more heavily in equities. As with all fund-based investing, you do not get to control which specific assets make up each portfolio. These are selected according to Betterment’s investment formula.

The upshot is that both Vanguard and Betterment serve investors looking for fund-based investments. The difference is that through Vanguard’s trading platform, you will build your own portfolio. As an investor, you will do the research to choose which mutual funds you want to buy and will choose whether or not to supplement those funds with other assets. Through Betterment’s platform, the firm’s algorithms will do the investing. You specify the parameters, such as your financial goals and risk tolerance. Then the actual investment is done by AI.

Finally, Betterment Premium adds personal financial advising, although not quite as varied, given Vanguard’s retail and in-person advising services. However, Betterment still makes expert support available to Premium users who can ask financial planners questions to get advice on investments, long-term strategy and other matters. There is also a free one-time setup session for qualifying accounts.

Betterment vs. Vanguard: Online & Mobile Experience

If the idea of using a robo-advisor appeals to you, Betterment is a relatively safe, comprehensive platform for both efficiency and design. Betterment’s interface is clean and easy to use. While it does not necessarily explain the concepts behind robo-advising all that well, most investors approach the platform already having a solid understanding of at least the basics..

However, Betterment still has a very user-friendly design. When you open a brokerage account, Betterment asks a few basic questions, such as age and income. This is used to help create your investment profile and recommend personalized investments. You can easily link your bank accounts to your Betterment account to receive detailed graphs that break down not only your investments but also your financial situation as a whole.

Primarily designed to be used via app, Betterment makes it very easy to use the system even if you are just getting started with investing.

Vanguard’s mobile app has come a long way over the years, and the company continues to make improvements. Meanwhile, functionality is well-rounded. Users can review investment options and place trades for ETFs and mutual funds. Then, you can check your portfolio’s performance over time, even if you have assets outside Vanguard. You can also make deposits, including withdrawals and mobile check deposits.

Vanguard’s web platform is very well designed. Features and tools are laid out clearly, with tabs for additional information. It is easy to research different assets and just as easy to trade them. The type of investments the trading options are limited compared to other platforms. For example, Vanguard does not support conditional trades or other complex orders. This reflects that platform’s identity as a venue primarily built for the slower world of mutual fund investing.

Betterment vs. Vanguard: Account Types and Minimums

Man uses his Betterment product at home.

When comparing Betterment vs. Vanguard, it is important to consider not just investment fees and features but also the types of accounts each platform supports. This determines how well they can fit into your overall financial plan.

Betterment offers taxable brokerage accounts for both individual and joint investors, along with individual retirement accounts (IRAs), including traditional IRAs, Roth IRAs, SEP IRAs and rollover IRAs. Also available are 401(k)s, bonds, trusts and cryptocurrency, as well as a checking account and a high-yield Cash Reserve account.

This makes it a flexible choice for both long-term savers and those seeking investments beyond just retirement accounts. Betterment does not require a minimum balance to open its investment accounts. However, its Premium plan requires a $100,000 minimum investing balance.

Vanguard also offers many account types, including individual and joint taxable accounts, a full suite of retirement accounts (including traditional and Roth IRAs), 529 college savings plans, trust accounts and custodial accounts. Vanguard typically requires higher minimum investments for its mutual funds (typically $1,000 to $3,000), although its brokerage platform allows you to invest in ETFs with no minimum beyond the cost of the investment.

The differences in account availability and minimums highlight each platform’s focus. Betterment is built for accessibility, with low barriers to entry and automated guidance, making it ideal for new investors and passive investors. Vanguard, on the other hand, is structured for investors who may want more account flexibility and are comfortable meeting fund minimums to access the broad range of mutual funds.

Betterment vs. Vanguard: Who Should Use It

Active investors should generally avoid both of these services. If you are someone who wants to make regular trades, invest in complex or higher-risk assets and actively invest, then it is likely that neither Betterment nor Vanguard will be right for you. Betterment is limited in its options here,. Meanwhile, Vanguard’s trading platform offers a clunkier design and higher minimums than other competing firms like Robinhood and Webull.

However, the truth is that most retail investors should focus their money on funds. Long-term investing and well-managed funds are overwhelmingly the best strategies for growing your portfolio. Indeed, most active investors tend to underperform the market, a statistic as true for professionals as amateurs. Both Betterment and Vanguard are excellent choices for an investor who wants to focus on long-term, fund-based investing.

Beyond that, the question boils down to how hands-on you want to be. If you would like to research and select your own investments, then Vanguard is the service for you. It is particularly recommended if you want to maintain a speculative portfolio of individual equities and other higher-risk assets. Its fund-forward design supports individual trading so you can build your own portfolio, according to your own investment strategy.

However, many other investors prefer a passive strategy. If you simply want to set a series of goals and leave the actual investment in the hands of professionals, then Betterment is the right choice. Its interface is clean and easy, and its robo-advising model will let you establish your comfort zone and then you can relax without having to do an in-depth comparison between a mutual fund and an ETF.

Bottom Line

When comparing Betterment vs. Vanguard, both are services designed for investors focused on fund-based investing. If you want to take a hands-off approach, Betterment will take care of investing your money for you so you do not need a ton of experience in mutual funds and ETFs to get started. If you want better control over your money, Vanguard offers one of the best trading platforms on the market for investors focused on mutual funds. You can also consider talking to a financial advisor about the best investments for your portfolio based on your long-term goals, financial strategy and risk tolerance.

Tips for Investing

Whoever builds your portfolio, the most important thing is to have a clear strategy for your money. A financial advisor can help manage your assets and create the right investment strategy for your long-term financial goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s matching tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Whichever platform or approach you chose, be sure to run your numbers through a free investment calculator to find out how well your investment plan will help you reach your financial goals.