If you are looking for a beginner-friendly brokerage to invest your money, M1 Finance and Betterment are two good options. They both offer expert-crafted portfolios and helpful automated investing features. They also each offer integrated banking services.
These two services are distinct from one another in many significant ways. Most notably, M1 Finance lets you create your portfolios from 6,000 stocks and ETFs. In contrast, Betterment limits you to choose among its pre-made portfolios.
So, which investment platform is right for you? Let’s dive into a complete comparison of M1 Finance vs. Betterment to help you decide.
Get Started Immediately By Getting Your Free Gold Investors Kit
M1 Finance And Betterment
M1 Finance was founded in 2015. It is a service that helps you invest your money. The service combines the aspects of traditional stockbrokers, Robo-advising platforms, and banks. M1 Finance has grown to more than 500,000 users and over $2 billion in assets under management.
Betterment was founded in 2008 and was one of the first platforms that allowed people to invest their money using a computer. The company now offers checking and savings accounts too. Betterment has about 500,000 users, which is about the same as M1 Finance. But Betterment manages over $22 billion in assets, which is more than M1 Finance.
M1 Finance vs. Betterment: Account Types
M1 Finance and Betterment are companies that allow you to open an account to invest your money. With M1 Finance, you can choose between a standard investing account, a joint account, an IRA (Roth or traditional), or a trust account. Betterment offers more options, including children’s 401(k) plans and education savings accounts. However, Betterment only offers checking accounts, while M1 Finance provides checking and savings accounts.
M1 Finance vs. Betterment: Investments
M1 Finance and Betterment are different because of what they allow you to invest in. With M1 Finance, you can invest in more than 6,000 individual stocks and ETFs. You can also access nearly 100 expert-curated portfolios you can invest in with a single trade. You can combine multiple portfolios or mix them with individual stocks or ETFs for more customization. M1 Finance lets you buy fractional shares for as little as one dollar.
Betterment provides a single portfolio with only six other investment choices. Among the several alternative portfolios are options for investing exclusively in cash, bonds, or sustainable companies. You can modify the proportion of your portfolio allocated to each asset class. For example, change the fraction of small-cap US stocks in your holdings from 5% to 10% – but you cannot invest in individual stocks or ETFs.
M1 Finance vs. Betterment: Auto-Investing Features
M1 Finance and Betterment have some features in common that can help you automatically invest your money. For example, you can easily set up recurring transfers from your bank account to either platform. The platforms will then automatically allocate the funds to your existing portfolio.
With Betterment, you can have multiple investing goals within one account. It means you can save different amounts each month for other things, like buying a home or saving for retirement. And each plan can have its customized portfolio so your money can grow as you want it to.
M1 Finance lets you invest in different stocks like a regular investment account. However, it’s not as easy to have multiple accounts like this. And you also can’t predict how much money you’ll have in 10 or 20 years. Another thing to note is that M1 Finance automatically uses your money to invest in stocks that aren’t doing well. It keeps your investments balanced and means that your money goes into bad stocks instead of good ones.
M1 Finance vs. Betterment: Banking
M1 Finance and Betterment both offer checking accounts without a minimum balance. With M1 Finance, you get features like interest and rewards on your purchases if you have a paid Plus account. You only get one free ATM withdrawal monthly if you have a free account. With Betterment, all checking accounts come with 1% APY interest and four free ATM withdrawals monthly.
Betterment’s checking account doesn’t charge any fees. There’s no need to be concerned about being charged for things like overdrafts. Additionally, there is no interest on your deposits. However, Betterment offers rewards for purchases which vary depending on the merchant. Typically, these rewards are 2% to 5% cashback for popular brands or 0% for local stores. Betterment also offers fee-free savings account with no minimum balance requirement. This account offers 0.40% APY on your deposited funds.
M1 Finance enables you to borrow money from your investment portfolio. You can borrow up to 35% of your account value, and there is no paperwork or credit check. M1 Finance charges interest rates of 3.5% APR for free users and 2% APR for Plus users.
Be very cautious when borrowing money from your investment portfolio. If the value of your investments drops, you could be forced to repay some of the loans immediately or sell off your assets.
M1 Finance vs. Betterment: Pricing
M1 Finance lets you open investment and checking accounts for free. Suppose you want a 1% interest rate and cashback on your checking account or a lower rate when borrowing money against your portfolio. In that case, you can sign up for M1 Plus for $125 per year.
Betterment lets you open a checking or savings account for free. If you invest with Betterment, the platform charges 0.25% of your total portfolio value (not including money in checking and savings accounts) as a management fee. You can upgrade to a Premium Investing account if you have at least $100,000 in total assets with Betterment. It carries a 0.40% management fee and unlimited access to a team of financial planners who can help you make the most of your money.
Which Service Is Better?
If you want to make it easy to create a portfolio, Betterment is a good option. You can start investing in the Core portfolio with just a few clicks. And you don’t have to worry about customizing it or adding individual stocks. If you set up recurring investments when you create your account, you can go years without checking in on your portfolio.
If you don’t mind more complexity, M1 Finance offers a better service. You can choose from 100 pre-made portfolios ready for you to invest in and forget about. You also have the freedom to build your portfolio or to mix and match a pre-made portfolio with individual stocks and ETFs. This service is significantly cheaper than Betterment in the long run for many users who can take advantage of M1 Finance’s free account.
M1 Finance And Betterment Alternatives
Stash and Wealthfront compete closely with M1 Finance and Betterment, where Wealthfront is identical in many ways. The only downplay is that it lacks goals-based portfolios compared to its Competitor. When it comes to Stash, very similar Again but has a more narrowing miss out on free investing stocks and ETFs to choose from. Although not as fond of the three., We think, ultimately, M1 finance came to be the best choice for the average investor.
M1 Finance and Betterment: A Complete Comparison
There has been a trend of late among digital Robo advisor platforms. These formerly industry-disrupting, cutting-edge business-to-consumer sites have grown tired of staying within their little market niches and are ready to expand.
M1 Finance and Betterment are two companies competing aggressively for customers in the traditional banking marketplace. Betterment has also been expanding into the business-to-business sector, a new area for them.
M1 Finance was a big success last year when it funded its 100,000th account. Shortly afterward, it launched a new checking account and a cash management feature. M1 Finance also created a new option called M1 Borrow. It allows you to borrow against your investment portfolio when you need money quickly.
Betterment has been working on its checking and savings account products. Around the same time, M1 Finance launched theirs; the government approved Betterment’s product after undergoing extra scrutiny.
Ultimately, Betterment successfully launched and survived without needing venture capital funding. It then rolled out a new B2B service for registered investment advisors.
Betterment is now in a solid position to compete effectively in all three of these industries: Robo-advisory, fintech, and traditional banking, as a result of its decision to serve professional advisors who have traditionally served end users.
M1’s Other Features
Free Basic Account
M1’s basic account is free of charge. You won’t be charged for trades or rebalancing a portfolio. Still, some features are only available with M1 Plus, which costs $125 annually.
With M1 Plus, you get more rewards and perks. For example, intelligent transfers can give you more flexibility, automation, and account control. You also get an exclusive afternoon trade window.
You can also take advantage of the M1 Plus credit line. This line of credit has a 5.00% APR, which is lower than the APR on a standard account.
You will also have access to M1 Spend, a reward-based checking account. Money in your checking account earns a yearly percentage yield of 2.50%, and you can get 1% cash back on debit card purchases that meet specific criteria.
Betterment’s Other Features
Low Fee Account
If you’re looking for a more tailored way to manage your investments, we suggest using Betterment. Although there is an annual fee of 0.25% on invested balances, this will cover all trading costs down the line.
Betterment allows you to open a Cash Reserve account, and there are no fees on your balance. Betterment checking accounts have no monthly account fees, monthly maintenance costs, or withdrawal fees. You’ll also earn interest on your deposits.
People who use Betterment LLC’s services have access to Cash Reserve. Although it is not a bank, cash transfers to program banks are made through Betterment Securities clients’ brokerage accounts.
As of 09/26/2022, the annual percentage yield (variable) is 2.25%. The Cash Reserve is exclusively available to Betterment LLC clients; Betterment LLC is not a bank. Cash payments to program banks are made through Betterment Securities’ brokerage accounts.
NBC bank, a member of the FDIC, provides and issues your checking account and Betterment Visa Debit Card. Betterment Financial LLC manages your checking account. Betterment Financial LLC and its affiliates are not banks. Betterment Financial LLC will cover ATM fees and the Visa® 1% foreign transaction fee anywhere Visa accepts.
Access to CFPs
To get the best advice on your investments, they charge a fee of 0.40% per year for unlimited access to phone calls with your team of CFP professionals. Customers on the Digital plan can also access CFP professionals for an additional fee.
M1 vs. Betterment Pros
- Individual stock picking – M1 lets you choose stocks to invest in. You don’t need to buy the entire share, but you own a portion. It is more customizable than some other Robo-advisors.
- Expertly curated portfolio options – M1 lets you choose from over 80 expert-created portfolios. These portfolios have different strategies and risk tolerances. If you do not want to pick individual stocks, you can select a pre-made portfolio that is right for you.
- Multiple account types – M1 offers different accounts, including Roth and traditional IRAs, joint accounts, taxable accounts, and trusts.
- Dynamic rebalancing – M1 will automatically adjust how much of your money is in stocks. It is based on how much risk you’re willing to take and how you want your money invested.
- Little to no cost – The M1 basic account allows you to do practically anything you need for free, if not everything. There are no commissions on stock purchases. And upgrading your account to the M1 Plus account only costs $125 per yearbook can access more features with the Plus account s than with the primary account.
- Passive investing – Betterment enables you to invest in a sedentary manner. It means that if you deposit money, your investments will be managed for you. Betterment takes care of all the work, like rebalancing and adding and removing new funds, so it’s a passive approach to investing.
- Tax-loss harvesting – If you have a taxable investment account, Betterment can help you save money on your taxes. Betterment buys and sells funds at the correct times to ensure that your portfolio is set up in the most tax-efficient way. Usually, this is a manual process, but Betterment handles it automatically.
- SRI – Betterment offers the ability to invest in socially responsible companies. There are three different portfolios to choose from, each tailored to fit a different risk tolerance. You can feel confident that your money is being used to help companies that follow socially responsible guidelines.
- You have reduced decision fatigue – Betterment is a company that helps you invest your money. They make it easy for you by choosing the best investments and ensuring everything is automated. Betterment is a good alternative if you don’t want to spend a lot of time selecting investments.
M1 vs. Betterment Cons
- Limited trading windows – M1 has a downside because you can only trade during certain times of the day. If you have a basic account, you can only trade during one time period. And if you have a Plus account, you can trade for two periods. If you want to take advantage of quick price changes, you might not be able to do that on M1 because there are only two trading windows daily.
- Your freedom is limited – You can pick stocks and funds to invest in with M1. However, you can’t trade every stock or fund. There are only about 6,000 securities available. And you can’t trade options or cryptocurrency. If you want to invest in a company that is not large, it will be available to you. But if there are smaller companies that you want to invest in, an online broker might be better for you because it will give you more control.
- Lack of control – If you want total control over your investments, you will not be able to use M1. It is because it is a mix between an online brokerage and a Robo-advisor. With this service, you give up some of that control to have more time to focus on other things.
- You will learn nothing about investing – This could be good or bad. People who like to relax and not worry about their investments might consider this a good thing. But other people might think they are missing important information by not picking their investments. Betterment takes care of all of this for you, which is nice, but some people might not like this aspect.
- Fees – Betterment charges 0.25% of your total invested balance each year. It may not seem like a lot initially, but it can add up over time. For instance, if your credit is $10,000, you will pay $25 a year in fees.
Why Choose M1?
A Fantastic Alternative to Individual Investments and a Full Robo-Advisor
M1 does a great job of finding the right balance between an online brokerage. It is where you are responsible for choosing your investments and a full-fledged Robo-advisor that does everything for you. They give you some customization by letting you pick individual stocks and funds. They also help you automatically rebalance and get tax efficiencies, which Robo-advisors typically do.
It Provides a Great Learning Opportunity.
M1 is an excellent place to start if you like to trade stocks but are not ready for a full-service broker. With M1, you can only invest in stocks picked for you, and you don’t have to buy whole shares. It makes it a safer way to learn how the stock market works.
It’s Still Pretty Hands-Off
M1 remains a passive investment. You select the assets for your portfolio and can set up periodic contributions. If you don’t do anything else, M1 will continuously distribute that money between the funds and stocks you’ve picked with the specified weights.
If you specify that 10% of your contributions go to Apple shares, it will do so every time. Your contributions will be dynamically distributed to vary your investments over time, and the portfolio will automatically adjust. As a result, it’s a hands-off investing approach that allows for customization when desired.
Why Choose Betterment?
It’s Great for Beginners
Betterment is an excellent place to begin if you’re new to investing. You only need to answer basic questions about your goals and risk tolerance. Betterment will manage your investments for you, so you don’t have to worry about it. You need to contribute money to the account.
You can change the stocks and bonds in your portfolio to match your life. You can also open checking accounts and savings accounts. It is a good choice for someone who is growing their financial life.
Some people want to invest without doing anything. They want to set up automatic contributions and know everything is taken care of. It is called a hands-off approach.
Even if you’re good at picking stocks, sometimes it’s nice not to worry about finding new investments and rebalancing your portfolio. Betterment can do that for you. You can be passive with your portfolio, and Betterment will take care of the rest.
Full-Scale Cash Management, if You Want It
Betterment allows you to open a checking account that is FDIC insured and has no monthly maintenance costs. You can open a Cash Reserve account, which functions as a savings account and pays 2.25% APY.
You can use Betterment to manage all of your money. It includes your banking, investing, and other capital. If you want things to be simple, this is an excellent way to do it.
M1 Finance and Betterment are both excellent choices for new investors. Betterment might be better for people who want a simple investment plan. At the same time, M1 Finance is better for people who want more control over their investments. With M1 Finance, you can choose between pre-made portfolios or invest in individual stocks and ETFs.
Frequently Asked Questions About M1 Finance vs. Betterment
If you wish to borrow money to invest, M1 Finance is an excellent choice. If you want a complete financial solution with checking and savings accounts as well as your investment account, Betterment is the better option.
M1 Finance is a good choice for people who want to buy or sell stocks, ETFs, and cryptocurrencies. It also has features that make it suitable for passive investors. But it might not be the best choice for people who want human advisor access or tax-loss harvesting.
M1 is a better investment option for newer investors who want to take a long-term investment approach. Robinhood is better for people who want to trade individual stocks or options or those interested in trading cryptocurrencies.
M1 Finance is a popular investment platform for self-directed investors. It offers a mix of features from traditional brokerages and Robo-advisors. It allows you to invest in the money market funds and securities you want without fees.
M1 Finance is a significant financial app because it automates your financial decisions. This app allows you to make automated contributions to your Roth IRA, a great feature.
No matter what you do, you cannot avoid risk when investing. There is always a chance that you might lose money. However, you can take steps to reduce the risk in your portfolio. For example, you can invest in more bond ETFs through M1 Finance.