![M1 Finance vs Betterment [Comparison]](https://cdn.statically.io/img/www.mikegingerich.com/f=auto/wp-content/uploads/2022/09/robo.jpg)
There is a spectrum of investing tools available to investors today. Anyone can trade stocks with Robinhood and other apps with almost no guidance, rules, or planning. On the other side, an investor can seek out a certified financial planner and let them make all the decisions - for a fee of course. In the middle of the spectrum is a world of robo-advisors and fintech companies.
Originally, M1 Finance was designed for passive investors that want to set up their custom portfolio strategy, automate their deposits and monitor their growth over time. It allows an investor to focus on asset allocation and diversification. The M1 platform provides automation to the masses. Over 1 million clients use their platform and they have over $5 billion in assets under management.
M1 is set up for investors to automate many of the order entry functions that take place in the buying and selling of stocks and ETFs.
With M1 you first plan your portfolio strategy, then the platform performs the trades behind the scenes. You build your portfolio with something they refer to as pies and slices. M1 Finance allows investors to pick from over 60 “M1 Expert Pies” or you can create your own. Investors can also have a mix of M1 Expert Pies and custom-made pies. A pie is composed of several pieces (they call them slices) or it can be just one large slice - or pie.
A slice is a smaller portion of the pie and all the pies add up to be the portfolio. A slice can be a single stock or an ETF.
For example, let's say you have 3 pies that make up your portfolio. With M1 Finance it could look like this:
Once you set your portfolio and asset allocation you will “auto-invest” any deposits or dividends. Over time one of your pies might become bigger than you want. In this case, M1 will automatically invest new deposits into the smaller pies to put the asset allocations back to the percentages that you choose. Dividends can also be set up to automatically help in this rebalancing process.
You can also manually ask the system to “rebalance” which tells the platform to sell some positions to add to others.
Click here to get started with M1 Finance today.
Betterment is an independent robo-advisor. As of December 31, 2021, it had over 700,000 customers and more than 33 billion assets under management. Within the Betterment app or their website, users can not buy individual stocks or ETFs. With Betterment, you answer a few questions about your financial situation, goals, and retirement timeline and they build you a custom plan with predetermined portfolios built with low-cost ETFs.
Betterment does offer several different account types including taxable brokerage accounts and a variety of tax-efficient retirement accounts. Betterment is even moving to build its 401(k) division even larger by offering its services to small and medium-sized businesses.
Once you have selected your account and have told Betterment your investing goals all you have to do is deposit funds. Betterment is designed for investors to automate almost everything. You can customize how often and how much you want to invest.
Betterment automates the following:
Click here to get started with Betterment today.
The first difference between M1 Finance and Betterment is the fact that Betterment doesn’t allow you to pick single stocks or single ETFs to buy. You can only invest in their predetermined portfolios.
Secondly, Betterment charges a yearly fee of 0.25% per asset under management (AUM). M1 Finance does not have a fee for AUM.
Finally, Betterment engages a tax loss harvesting strategy and M1 Finance does not.
Both platforms automate the buying and selling process. This might be beneficial to new investors that don’t want to worry about order fill.
Secondly, both platforms focus on a portfolio plan, and both offer options to periodically rebalance.
Thirdly, both platforms offer checking, savings, and borrowing accounts.
If you want some guidance but don’t want to pay the high fees of human advisors both M1 Finance and Betterment might be an option. However, if you want more guidance and fewer options then Betterment is certainly the best choice.
On the other hand, if you want to hand select some stocks and ETFs and manage your portfolio strategy, M1 Finance will be your better option. Another article on M1 Finance vs Betterment can be read here.
