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Betterment vs Wealthfront: Which Robo-Advisor Is Best for You?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

If you are shopping for a robo-advisor to handle your investing needs, you’ve likely read about Betterment and Wealthfront. These two services are among the most prominent and popular robo-advisors, and both offer a very similar range of features and fees. We have made a side-by-side comparison to help you differentiate between the two apps.

Betterment’s service features a narrower range of investments, but has more control and lower fees for bigger balances. By contrast, Wealthfront offers a broader range of highly-automated investment options, as well as a cash account and college education savings accounts. Read on to get a firmer grasp on the other differences between these two leading robo-advisors.

Betterment vs. Wealthfront: Feature comparison

Investment portfolios at both Wealthfront and Betterment are built from different combinations of exchange-traded funds (ETFs), including both bond and stock funds to better meet differing levels of risk tolerance. Betterment builds customized portfolios of ETFs across 12 different asset classes. Wealthfront features 20 different automated portfolios, and each offers a different mix of ETFs across 11 asset classes. In both cases, the mix of ETFs in each portfolio is altered to satisfy different goals. Both periodically rebalance your portfolios as asset values change and markets fluctuate.

Wealthfront offers a highly-automated process. You answer a short questionnaire to assess your goals and risk tolerance, and the app places your money in one of its 20 portfolios. Betterment offers investors with over $100,000 in their account more control over their investment choices, giving you access to live advisors and letting you adjust the percentage invested in any particular ETFs.

BettermentWealthfront
Management fee
  • 0.25% for basic portfolio
  • 0.40% for premium offering (requires $100,000 minimum balance)
  • For account balances of $2 million or greater, the basic portfolio fee is 0.15%, and the premium offering fee is 0.30%
  • 0.25% annual advisory fee on investments
Average ETF expense ratio0.11%0.09%
Account minimum$0$500
Human advisorsYes, for clients with at least $100,000 investedNo
Fractional sharesYesNo
Tax loss harvesting
College savings optionsNoYes
Investment account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Roth IRA
  • Rollover Roth IRA
  • SEP IRA
  • Trust
  • Smart Saver
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • SEP IRA
  • Trust
Savings account optionNoEarn 2.51% APY with no fees and FDIC insurance covering up to $1 million
Ease of use
 
 

Betterment vs. Wealthfront: Management fees

In terms of management fees, Betterment and Wealthfront are very similar. Betterment charges an annual fee of 0.25% for investment balances up to $100,000. Wealthfront’s fee is 0.25% regardless of your investment balance. For balances greater than $100,000, Betterment’s premium option provides access to a team of live financial advisors, with a management fee of 0.40%.

If you have a very large balance to invest, Betterment may be a better choice than Wealthfront. When your Betterment account balance exceeds $2 million, your management fee falls to 0.15% for the basic portfolio and 0.30% for premium service.

With both companies, don’t forget ETF expense ratios. The expense ratio is a fee you pay to invest in ETFs to cover the cost of running the fund, including operational and administrative costs. The expense ratio is deducted directly from the fund, and can impact your investment performance. The expense ratio is dependent on your portfolio, but for the sake of comparison, the average expense ratio on a medium-risk portfolio is 0.11% at Betterment. At Wealthfront, it’s 0.09%.

Betterment vs. Wealthfront: Special features

Betterment and Wealthfront both offer the ability to add your outside investment accounts — such as an employer-offered 401(k) — to your account. You can’t manage the outside account from the robo-advisor dashboard, but they let you to view all of your accounts on one site, giving you a complete snapshot of your finances.

Where they differ is in their investment options. Betterment’s investment portfolio is more limited than Wealthfront’s. Wealthfront allows you to invest in some trendier options, including real estate investment trusts and commodities.

While Wealthfront doesn’t offer investing in savings bonds, as they tend to have a low yield, Betterment does allow you to save in bonds through its Smart Saver service, a low-risk investment option that offers more growth than a simple savings account.

Wealthfront’s Path digital financial planning tool stands out from Betterment. It’s designed to adjust along with your finances, helping you plan for long-term goals, like retirement or buying a home.

On the other hand, Betterment’s tax-coordinated portfolios are an asset for investors with large balances. Betterment will spread your investments across multiple accounts. Highly-taxed investments will be invested in IRAs to minimize taxes, and the rest will be invested in taxable accounts. According to the company, this strategy can increase your portfolio value by an estimated 15% over 30 years.

Betterment’s advantages

If you’re new to investing or want more personalized attention, Betterment offers some distinct advantages over Wealthfront.

  1. There’s no account minimum: Unlike Wealthfront, which has a $500 minimum to start investing, there is no account minimum with Betterment. That means beginners can start investing with whatever they can afford. That perk can be especially helpful for people who might otherwise put off saving for retirement.
  2. You can purchase fractional shares: Betterment allows you to buy fractional shares, or portions of a whole share, so the full value of your investment is utilized. Plus, fractional shares allow you to buy shares that would otherwise be too expensive for a new investor to afford.
  3. You can put your money to work with Smart Saver: While Betterment doesn’t offer a savings account, it does have Smart Saver, a low-risk investing account that utilizes short-duration bonds bonds. You could earn 2.14% APY, a significant increase over the 0.10% rate you get with most traditional savings accounts.
  4. You could have access to a human advisor: If you have at least $100,000 invested with Betterment, you can get access to a human advisor to help you with issues like tax management and estate planning. If you have a smaller account, you can still get one-time access to a human advisor by buying planning sessions, which range from $150 to $500.
  5. You can donate to charity: Betterment recently launched Charitable Giving, a service that automates the process of donating appreciated shares to charities. You can determine how much you want to donate and what charity you would like to give money to, and Betterment will calculate your tax impact and will select the investments to donate.

Wealthfront’s advantages

If you’re new to investing or want more personalized attention, Betterment offers some distinct advantages over Wealthfront.

For more seasoned investors, Wealthfront offers some more advanced options to grow your money.

  1. You can take advantage of a high-yield savings account: Wealthfront offers a high-yield savings account so you can grow your money. Offering an APY of 2.57% — about 25x above the national average — the savings account is FDIC insured up to $1 million.
  2. Wealthfront Stock-level Tax-Loss Harvesting: Formerly known as Direct Indexing, Wealthfront’s Stock-level Tax-Loss Harvesting allows you to lower your tax bill even more. Available for investors with taxable accounts balances between $100,000 to $500,000, Wealthfront will buy individual stocks from the S&P 500 index, giving you more opportunities for tax-loss harvesting.
  3. You can save for college: If you want to save for your child’s education, you can open up a 529 plan with Wealthfront. Withdrawals from a 529 plan for qualified education expenses — such as tuition, room and board, and textbooks — aren’t subject to federal income tax, making saving in a 529 plan more advantageous than just investing in an Individual taxable account. With fees of no more than 0.46%, a Wealthfront 529 Plan costs less than many other plans.
  4. You can get access to a Portfolio Line of Credit: If you need cash to pay for a trip or a major purchase, you may qualify for a Portfolio Line of Credit with Wealthfront. With this option, you have access to a line of credit that is secured by your investments. Depending on your account size, you could get an interest rate of 4.70% to 5.95%, which is significantly cheaper than you’d get with a credit card or most personal loans. If you have a Wealthfront individual, trust, or joint investment account with a balance of at least $25,000, you automatically have a line of credit available.
  5. You can easily diversify your investments: With Wealthfront, you can invest in low-cost ETFs, instantly diversifying your portfolio. Investing in ETFs minimizes your investment risk and, over time, can help you grow your money. Wealthfront looks for ETFs with the lowest annual expense ratios that also offer liquidity, so you can access your money to pay for major expenses, like buying a home or paying for college.

Betterment vs. Wealthfront: Which is best for you?

Wealthfront fully embraces the robo in robo-advisor, offering no human interaction and a highly-automated investing service, with no options for picking your own stocks or ETFs. If you’re looking to invest and forget it, then Wealthfront is probably your best bet, especially if you’d like to have a 529 college savings account as well.

Betterment offers a limited range of investable assets, however with enough money you can access human advisors, and also get more meticulous control over which stocks and ETFs you’re investing in. Fractional share investing and the zero account minimum make it a slightly better choice for beginning investors.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kat Tretina
Kat Tretina |

Kat Tretina is a writer at MagnifyMoney. You can email Kat here

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Investing

Fundrise Review 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

While many people get excited about the idea of investing in real estate, they may not know where to begin. Real estate often seems like it’s reserved for the super rich, not the everyday investor. That’s where Fundrise — a company that crowdfunds investments in real estate projects — makes a difference.

When 32-year-old Josh Patoka, a freelance writer located near Knoxville, Tenn., read about Fundrise, he was excited. He’d been interested in real estate as an investment but lacked the capital to do it on his own. “What interested me was the ability to invest in private real estate with small amounts of money,” Patoka said. “I don’t have the time or money to own rental properties.”

With Fundrise, an investor can pool their money with other investors to buy shares in real estate investment trusts (REITs), which own and manage income-earning real estate. But while the returns can be impressive, Fundrise may not be for everyone.

Fundrise
Visit FundriseSecuredon Fundrise’s secure site
The bottom line: Fundrise allows you to easily diversify your portfolio and invest in real estate with relatively small amounts of money.

  • Start investing with as little as $500 while receiving a 90-day, money-back guarantee.
  • Gain access to valuable commercial real estate investments.
  • Investments are illiquid; each eREIT and eFund plans to look for opportunities to provide liquidity to its investors after approximately five years of operations, but there’s no guarantee.

Who should consider Fundrise

Investing in real estate can be appealing, but it typically requires large upfront investments, sometimes hundreds of thousands of dollars. Traditional real estate investments tend to be for wealthier individuals rather than everyday investors.

Fundrise is a smart option for those who want to invest in real estate but lack the initial investment capital traditional real estate requires. It allows investors with smaller amounts of available money to pool their resources and buy shares of REITs.

It’s also a good option for investors who want to diversify their portfolio beyond the stock market. Investing in real estate can help you earn returns regardless of the stock market’s performance. Rather than having all your money tied up in one place, diversifying your investments gives you more protection and peace of mind in the case of a market downturn.

Fundrise fees and features

Amount minimum to open account
  • $500
Current promotions

Fundrise offers a Starter Portfolio for $500, which includes a free upgrade to a Core plan.

Commission0.85% annual asset management fee + 0.15% annual investment advisory fee
Account fees (annual, transfer, inactivity)
  • $0 full account transfer fee
  • $0 partial account transfer fee
Customer supportEmail

Strengths of Fundrise

Fundrise offers many benefits to investors, including:

  • Low initial investments: While most real estate investment opportunities require you to invest thousands of dollars, you can get started with just $500 by taking advantage of the Fundrise Starter Portfolio.
  • High potential returns: The returns on your investments can be quite high. As of 2018, the average annualized return on Fundrise investments was 9.11%. That’s close to the stock market’s annual return, which has averaged 10.5% historically. However, keep in mind that Fundrise has been in operation for only 10 years, so current returns are not necessarily indicative of future returns.
  • 90-day, money-back promise: Fundrise offers a 90-day, money-back promise that it will buy back your investment at the original amount if you’re dissatisfied within three months of opening an account.

Drawbacks of Fundrise

While Fundrise can be beneficial to many investors, it isn’t for everyone for the following reasons:

  • Investments are not liquid: Because Fundrise‘s REITs are not traded on a public exchange, they’re illiquid. That means you may not be able to find a buyer for your shares when you want to sell, so it may be difficult to recoup your investment.
  • There are plenty of fees: You’ll pay 0.85% annual asset management fee + 0.15% annual investment advisory fee on eREITs and eFunds.
  • Crowdfunded real estate is new: The concept of crowdfunded real estate is new, and it hasn’t been tested in a recessionary environment. While Fundrise has posted high annual returns for the past couple of years, there’s no guarantee those returns will continue.

Is Fundrise safe?

All investments carry some level of risk, and Fundrise is no different. Although there is the potential for high returns, you risk losing money as well.

However, Fundrise is a legitimate company. Fundrise investors have invested $2.5 billion in property since 2013, and that number continues to grow. Plus, it has an A-plus rating from the Better Business Bureau and an average of five stars from customer reviews.

That said, you should keep in mind that Fundrise’s eREITs work differently than traditional REITs do. Fundrise’s eREITs are non-traded companies whose shares fall under Regulation A — an investment category with limited disclosure requirements — and do not have the same level of safeguards publicly traded REITs have.

Final thoughts

Investing in real estate can be intimidating for a beginning investor, but Fundrise makes it easy to get started. With just a small initial investment, you can diversify your investments and learn the ins and outs of real estate investing. While you could invest in REITs on your own, Fundrise’s offerings provide investing options with much lower fees.

If you’re interested in broadening your portfolio, Fundrise isn’t your only option. Here are six ways you can invest in real estate.

Open a Fundrise accountSecured
on Fundrise’s secure website

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kat Tretina
Kat Tretina |

Kat Tretina is a writer at MagnifyMoney. You can email Kat here

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Pay Down My Debt

10 Ways to Trim Your Monthly Expenses

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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If you’re trying to improve your finances, you know how difficult it is. Finding extra money can feel impossible, and you might think you’ll never get ahead. However, you can make progress by aggressively cutting your budget. In fact, with a few simple changes, you can significantly reduce your monthly expenses.

10 ways to lower your bills

While cutting your bills will require some sacrifice on your part, the results will be more than worth it. Here are 10 ways you can trim your monthly expenses.

Refinance your student loans

If your monthly student loan payment is too high, one option to lower it is to refinance your student loans. Through this process, you take out a loan from a private lender for the amount of your current loans. The new loan has a different interest rate, repayment term, and monthly payment. If you qualify for a lower rate or extend your repayment term, you could dramatically reduce your monthly bill.

For example, let’s say you had $35,000 in student loans at 7% interest, and had 10 years left in your repayment term. With those terms, your minimum payment would be $406.

If you refinanced that debt and qualified for a loan at 4% interest and extended your repayment term to 15 years, your payment would drop to just $259. That means you’d have nearly $150 extra in your budget each month.

Consolidate your credit card debt

If you have high-interest credit card debt, it can be difficult to dig your way out. Worse, juggling multiple minimum payments and due dates can be confusing, making it easy to fall behind. To streamline your payments and save money each month, consider consolidating your debt.

With this approach, you take out a personal loan for the amount of your credit card debt and use the loan to pay off the cards. Moving forward, you’ll have just one payment and one monthly due date to remember. Even better, you could get a lower interest rate, so more of your payment goes toward the principal rather than interest.

Negotiate your cellphone and cable bill

Between your cellphone and cable bill, it’s easy for these expenses to cost as much as a car payment. Thankfully, there are ways to reduce your bills.

Contact your cellphone carrier or internet provider and explain that you’ve been a loyal customer, but that the service is just too expensive for your budget and you can’t afford to keep paying it. Tell the representative that you’re looking at other providers to try and find a better deal.

Chances are, the representative will offer you a lower price and a better deal just to keep you as a customer.

Cancel unused subscriptions

The internet makes it easy to sign up for monthly subscriptions for streaming services and apps. While many of these services are low-cost, they can add up and consume a large portion of your monthly budget. You likely don’t even use all of the services that you pay for.

One way to quickly and easily cancel those unused subscriptions — and save a boatload of money — is to use a service like AskTrim.com. AskTrim scans your emails for subscriptions and identifies which ones you don’t use. It will notify you about what subscriptions you’re signed up for, and if you want to cancel, AskTrim will handle the process for you.

Cook at home

While eating out and services like GrubHub and Seamless are convenient (and tasty!), they can cost hundreds of dollars each month. You can save a significant amount of money — and get healthier — by cooking at home. Preparing your own meals and bringing your own lunch to work can help you save thousands over the course of a year.

Comparison shop for car insurance

According to insurance site The Zebra, the average cost of car insurance in the United States is $1,426 a year. However, you can reduce how much you pay each month by comparison shopping for a new insurance policy every year. Using a site like The Zebra, you can get offers from multiple insurance providers, making it easy to find the best deal.

Sign up for an income-driven repayment plan

If you have federal student loans and don’t want to refinance your debt, another way to reduce your payment is to sign up for an income-driven repayment (IDR) plan. With this approach, your loan servicer extends your repayment term and caps your payment at a percentage of your discretionary income. Some people will qualify for a payment as low as $0.

With an IDR plan, you’ll likely pay more in interest over the length of your loan than if you stuck with a standard 10-year repayment plan. But when you’re short on cash, it can give you some much-needed relief.

Eliminate banking fees

If you review your bank statements, you’ll likely see a list of fees, such as ATM fees. Over the course of a year, these fees can add up, eating up a significant portion of your bank account.

You can reduce fees by visiting only your bank’s ATMs, rather than the most convenient ATM near you. It will mean planning out your ATM visits more carefully, but the extra work is worth the amount of money you’ll save.

Negotiate your medical bills

Medical bills are one of the leading causes of bankruptcy. If you can’t afford your monthly payments, don’t give up hope; there may be a way to reduce your medical bills.

Contact the hospital billing department and explain your situation, emphasizing that you can’t afford the bills at their current rate. You may be eligible for a bill reduction or even balance forgiveness, cutting down or even eliminating your debt.

Refinance your car loan

If you have less-than-stellar credit, you may have been stuck with an expensive car loan with a high-interest rate when you bought your car. As your credit improves, you can ditch that pricey loan by refinancing your car loan.

When you refinance, you take out a new loan for the amount you currently owe, and use it to pay the loan off. If your credit score went up, you can qualify for a lower-interest loan and even change your repayment term, freeing up money in your budget each month.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kat Tretina
Kat Tretina |

Kat Tretina is a writer at MagnifyMoney. You can email Kat here

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