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8 Investment Fees Every Investor Needs to Understand

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 the focus in investing is often on returns, it’s important for investors to understand the impact of expenses on their investing results.

An investor bulletin published by the Securities and Exchange Commission (SEC) shows the effect of higher expenses on investment returns. They looked at the impact of expenses on a hypothetical $100,000 investment held for 20 years. The SEC assumed a 4.00% annual rate of return, with annual expenses at 0.25%, 0.50% and 1.00%.

Here is the impact of these expense differences on returns:

  • Over 20 years, incurring annual expenses of 0.50% reduced the end value of the portfolio by about $10,000 versus if the annual expenses had been 0.25%.
  • Over 20 years, the portfolio incurring 1.00% in annual expenses had an ending value that was $30,000 less than the same portfolio with 0.25% in annual expenses. According to the SEC’s analysis, this difference in expenses over the 20 years adds up to an additional $28,000 in expenses over this time period. If that money had been available for investment, the investor might have earned an additional $12,000 in returns over this time period.

As you can see, a relatively small difference in the level of expenses incurred by an investor can really add up over time.

There are numerous added costs that investors need to be aware of. These eight common fees and expenses can easily eat into your returns.

1. Expense ratios

Mutual funds and ETFs carry expense ratios that pay for expenses such as administration, trading costs to buy and sell securities held in the fund, and other costs to operate the fund. The expense ratio is calculated by dividing the total operating expenses of the fund by the fund’s total assets.

The returns that investors receive from mutual funds and ETFs are net of expenses. For example, if a fund’s gross return was 10% for the year and its expense ratio was 1%, your net return would be 9% for the period. This is a simplified example as things like your holding period for the fund, investments and distributions during the holding period, combined with the fact that mutual fund accounting is a bit complex all factor in.

What this means is that all things being equal, if you are looking at two funds in the same asset class, the fund with a lower expense ratio would start with an advantage. In the case of an actively managed fund, you will want to look at many other factors beyond expenses. In the case of an index fund, you will want to be sure to compare funds that track the same index such as the S&P 500 or the MSCI EAFE (EAFE stands for Europe, Africa and Far East) index.

2. 12b-1 fees

Some mutual funds carry a 12b-1 fee, which is lumped in as part of their expense ratio. This is considered a marketing fee and is used to compensate brokers, registered representatives or advisors for selling or recommending the fund. These fees are sometimes also used in a 401(k) plan to cover a portion of the plan’s administrative costs and/or to compensate the plan’s outside advisor.

The higher the 12b-1 fee, the higher the fund’s expense ratio will be.

3. Sales loads

A mutual fund load is essentially a sales commission tied to certain mutual funds. Mutual funds with a sales load are usually associated with stockbrokers or registered representatives who are compensated through commissions.

There are two types of loads.

Front-end loads

Front-end loads are a charge assessed at the time that the fund is purchased. They are typically associated with A-shares. The front-end load is deducted from the amount of your money that is ultimately invested in the mutual fund.

As an example, assume the initial investment in a fund is $10,000 and the front-end sales load is 5%. The amount of the sales load would be $500 and the amount invested in the mutual fund is $9,500.

The front-end load goes to compensate the brokerage or advisory firm selling the fund. You may pay these loads in addition to any other fees you are paying for advice. The load reduces the amount invested and ultimately the amount of money you accumulate over time from investing in the fund.

For example, $10,000 invested in a fund on January 1 that earns 10% for the year will grow in value to $11,000 by the end of the year. If only $9.500 was actually invested, the amount you’d have at the end of the year would be $10,450. This would multiply itself over time and the discrepancy in the value of your investment would grow over time.

Back-end loads

Back-end loads have been typically associated with B and C share class mutual funds. B shares have largely gone by the wayside in terms of new sales, but there are certainly some shares out there held by investors.

In the case of B shares, there was no upfront sales charge or load, but the back-end load serves as a surrender charge instead. This means that if you sell the shares prior to the elapse of a set time period, the net proceeds to you from the sale would be reduced by the amount of the back-end load. Typically, these back-end loads decrease over time and disappear altogether at the end of the surrender period.

As an example, if the back-end load was 3% when the shares were sold after holding them for four years, selling $20,000 worth of fund shares would only net you $19,400 after the back-end load was assessed.

C-shares use another form of the back-end load which becomes a level load over time. A typical C-share mutual fund will include a 1% back-end loan that works as follows:

  • There is a level load in the form of a 12b-1 fee, which is generally 1% on the fund. This is part of the expense ratio and typically never goes away as long as you hold the fund.
  • If you sell during the first year after investing, the 1% turns into a surrender charge that is assessed on the proceeds of the sale of the fund.

4. Surrender fees

Surrender fees may be assessed on some annuities and mutual funds. A surrender fee is a percentage of the proceeds if the investment product is sold within a certain period of time.
A surrender period may last for a number of years, with the surrender fee decreasing over time. The purpose of the surrender fee is to discourage investors from selling the annuity or the fund prior to the end of the surrender period.

If a surrender charge of 2% is in place at the time an investor sells shares of a variable annuity worth $30,000, then the proceeds of the sale will be reduced by $600 in this case. This is a direct reduction of the overall return on this investment.

5. Financial advice fees

Fees for financial advice will vary depending upon the type of financial advisor that you work with. There are three basic advice models. However you pay for financial advice, it is still a cost and one that you need to understand and manage.

Fee-only advisors

Fee-only advisors charge a fee for the advice they render. There are no commissions or sales of financial products. Fee-only advisors will typically charge in one of three ways:

  • Assets under management (AUM): Under this scenario, the advisory fee will be a percentage of the investment assets for which the advisor is providing advice. A typical fee might be 1% of assets. If you have $250,000 under advisement with the advisor, then your fee would be $2,500 annually. Typically, the fee would be charged based on the total assets under advisement at the end of each calendar quarter based on the annual percentage. In our 1% example, this would be 0.25% per quarter. Often advisors will scale their AUM fees to be lower for clients with higher levels of assets and vice versa for clients with smaller accounts.
  • Flat retainer fees: Some advisors will charge a flat fee that is not based upon an asset level. They may have different fee levels based on the complexity of your situation or other factors.
  • Hourly or project fees: Some fee-only financial planners and financial advisors provide advice on an as-needed or on a project basis. Their fee may be hourly or on a flat-fee basis for a specific project such as a financial plan or a review of your portfolio.

Commission-based advisors

Commission-based advisors are compensated through commissions from the sale of financial products. This might include sales loads from mutual funds or commissions from the sale of insurance products like annuities. These advisors must sell investment and financial products to get paid. Often the true cost of commissions is buried in the expense structure of the product being sold.

Commission-based advisors have the duty to propose suitable investments to their clients, this is a lower standard than acting in their client’s best interest. Therefore, a hidden cost might be that the product sold to you is not the best one for your situation.

Fee-based or fee-and-commission are both names for advisors who are compensated by a combination of fees and commissions from the sale of financial products. An advisor might produce a financial plan for you for a set fee, then implement their recommendations made in the plan through the sale of products that pay them commissions.

Fee-based and fee-only may sound alike, but they are decidedly different compensation methods and investors should understand how they differ. Fee-based has gained a level of popularity in recent years with the advent of the now ill-fated fiduciary rules.

6. Brokerage wrap fees

A brokerage wrap account is a managed account offered by brokerage firms. They will invest your assets in a fashion that is in line with your situation. The assets in the account are often mutual funds but could include ETFs or individual stocks as well.

Wrap accounts have gained in popularity during recent years as many brokerage firms have moved towards offering fee-based type products.

The wrap-fee is a management fee paid to the brokerage firm for managing the account. Wrap-fees can vary, but a typical range is 0.75% to 3% of the assets invested in the account. On top of that, the account may use mutual funds that pay a fee to the brokerage firm either through their 12b-1 fees or another method.

7. Transaction fees

Transaction fees are fees assessed for buying and selling investments. In addition to front-end loads and surrender charges discussed above, there are other types of transaction fees to be aware of.

  • There may be a cost to buy or sell shares of a mutual fund. This may be assessed at certain custodians for certain funds. For example, Vanguard charges $20 per trade for certain non-Vanguard funds if bought or sold online and $50 if bought or sold by phone.
  • There may also be a transaction fee to buy and sell exchange-traded vehicles such as ETFs or shares of individual stocks. For example, Fidelity offers $4.95 trades for many ETFs and stocks.

Note that transaction fees can vary widely from custodian to custodian, so it is wise to investigate. There are also a number of funds available on an NTF basis meaning there are no transaction costs to buy or sell.

8. 401(k) fees

In some cases, the fees and expenses associated with a company’s 401(k) plan might be assessed all or in part against the plan participant’s accounts. This could include costs for administration, recordkeeping and fees associated with an outside investment advisor for the plan. These costs do have to be disclosed, but make no mistake they are real, and they do reduce your returns within the plan.

Bottom Line

The fees and expenses discussed above are paid in a variety of ways, some not always transparent.

  • Advisory fees may be paid directly by check, they may be billed to your investment account and taken from the assets in the account or they may be paid from 12b-1 fees that are part of the mutual fund expenses.
  • Advisors may be compensated directly from the investments they sell or recommend to you using trailing commissions or other means.
  • Expense ratios directly reduce the net return you realize from investment vehicles like mutual funds, ETFs and variable annuities.

It is important that if you are working with a financial advisor or a broker that you fully understand ALL costs related to working with them and how they will be compensated for the advice they provide.

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.

Roger Wohlner |

Roger Wohlner is a writer at MagnifyMoney. You can email Roger here


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Betterment vs Vanguard: 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.

Investing money with a robo-advisor is one of the easiest ways to grow your wealth in the stock market. Robo-advisors use software algorithms to manage your investment portfolio with minimal input needed from you, and charge ultra low fees. Betterment is one of the most well-known robo-advisors, while Vanguard is among the largest investment firms in the world.

Both Vanguard Personal Advisor Services and Betterment combine access to live investment advisors with automated portfolio management. Betterment is ideally suited for beginning investors with smaller portfolios. Vanguard can work well for a DIY investor who wants guidance from live investment advisors and access to a wider variety of investments, and can meet the high minimum balance required. Read on for a closer look at how Betterment and Vanguard compare.

Betterment vs. Vanguard: Feature comparison

In many ways, Betterment and Vanguard have similar offerings, but there is a big, unavoidable difference between the two: minimum balance requirements. Betterment has no minimum balance requirement, so you can start using their services even if you have very little money earmarked for investing. Vanguard Personal Advisor Services requires a minimum balance of $50,000, which makes their robo-advisor best for investors who’ve already built up a significant nest egg.

Management fee
  • 0.25% (up to $100,000)
  • 0.40% (over $100,000)
  • 0.30%
Average ETF expense ratio0.11%0.11%
Account minimum$0$50,000
Human advisorsHuman assisted for clients with at least $100,000 investedHuman assisted
Fractional sharesYesNo, although you can get them through dividend reinvestment programs
Tax loss harvesting
College savings optionsNoNo
Investment account types
  • Individual and joint taxable
  • IRA (and Roth)
  • Rollover IRA
  • Trust
  • Individual and joint taxable
  • IRA (and Roth)
  • Rollover IRA
  • Trust
Savings account optionSmart Saver, 2.14% APY (not FDIC-insured)No
Ease of use

Betterment vs. Vanguard: Management fees

Betterment and Vanguard Personal Advisor Services have similar management fees, with several tiers based on the size of your investment account balance. Vanguard has three tiers:

  • 0.30% for accounts with assets below $5 million
  • 0.20% for accounts with assets from $5 million to below $10 million
  • 0.10% for accounts with assets from $10 million to below $25 million

Once you surpass the $25 million tier, Vanguard offers more personal options and better pricing.

Betterment has two tiers:

  • 0.25% for accounts under $100,000
  • 0.40% for $100,000 or more

With Betterment, having a higher account balance comes with access to human-assisted management, as well as more customized portfolio options. However, it’s a bit unusual to charge more when the portfolio balance is bigger. If you were to build up a $100,000 balance with Betterment, it might be worth moving to Vanguard Personal Advisor Services because you’ll end up with a lower management fee.

Finally, separate from the management fee is the expense ratio you’ll pay on the funds held in your account. The expense ratio is basically the fee you pay for owning the fund. It covers the cost of running the fund, including administration, legal, accounting and other services. It’s a percentage of the amount you have in the fund.

Both Vanguard and Betterment have an average fund expense ratio of 0.11%. So, if you have $10,000 in a fund, you can expect to pay about $11 a year on top of the management fees. Both management fees and expense ratios are taken out of your fund directly, so you won’t get a bill.

Realize, though, that expense ratios vary by fund, and that 0.11% is only an average of what you can expect on a medium-risk portfolio. Your actual expense ratios will be different, and your portfolio’s average could be higher or lower.

Betterment vs. Vanguard: Special features

Many of the special features offered by Betterment and Vanguard are similar. For example, both companies use a process of smart asset allocation to apportion investments where they are likely to do the most good. If you have a tax-advantaged individual retirement account (IRA) and a taxable investing account, both companies look for an allocation that places assets where they are likely to provide the most benefit, such as putting a municipal bond fund in your IRA.

Both Betterment and Vanguard offer human-assisted help with your portfolio. With Vanguard, you get access to human advisors as soon as you open an account — keep in mind, the minimum balance is $50,000. With Betterment, you only get access to a live human advisor once you have a balance of $100,000.

Another difference is that, even though Vanguard has a wider variety of funds available, it doesn’t offer a specific socially responsible portfolio. So, if you’re interested in a socially responsible portfolio, Betterment might be the better choice.

Both companies offer tax loss harvesting, which helps you minimize losses and maximize gains from tax situations that arise from buying and selling stocks. Betterment uses an algorithm to look for tax loss harvesting opportunities each day. Vanguard performs tax loss harvesting only when it’s called for in your financial plan, or when you make a change to your portfolio.

Rebalancing is used to bring your portfolio back in line with your desired asset allocation. Again, Betterment is more active in its approach, using an algorithm daily to determine whether your asset allocation has strayed out of line, and automatically adjusting. Vanguard rebalances quarterly, or might rebalance less often, depending on what your individualized plan calls for.

Betterment‘s advantages

  • Set up different goals: Rather than just having one account, you can track your progress for different goals. It’s possible to designate different asset allocation mixes, depending on what you want to accomplish and when you need access to the money.
  • Portfolio projection tools: In addition to different goals, you can project possible performance for each goal. This allows you to try different ideas and tweak your regular contributions, based on what you need to do.
  • Optimize your taxes: With the help of Betterment, you can maximize your portfolio’s tax efficiency. Betterment will make sure that the right assets are in tax-advantaged and taxable accounts. Additionally, Betterment will look for chances to harvest your tax losses.
  • Smart Saver: Betterment offers Smart Saver, an account separate from your investment balance that places funds in low-risk bonds to get a return that beats most traditional savings accounts. On top of that, Smart Saver will analyze your bank account to see if you could be putting your money to better use.
  • Sync other investment accounts: If you have other investment accounts and bank accounts outside Betterment, you can sync those up and see them in your account dashboard. Betterment will include those items in its projections and even offer suggestions on management so you’re getting the most out of your money — no matter where it is.
  • Option to get human help: You can also pay to speak with a financial professional to get help planning your portfolio and your financial path. If you have the Premium plan, with more than $100,000, you do have more access to professionals and a greater degree of customization.

Vanguard‘s advantages

  • Human-assisted advising: No matter your portfolio level, Vanguard offers access to advisors. You can make an appointment via phone or online to speak with someone about your planning needs.
  • Investment choices: Because Vanguard puts together its own funds, you have access to a wide variety of options. Plus, you can invest in Vanguard‘s Admiral class funds, without having to meet the minimum, which starts at $3,000 for most index funds. This provides you with a range of low-cost fund options.
  • Low fees: One of the hallmarks of Vanguard is its low fees. The management fee starts at 0.30% when you open an account with a minimum of $50,000. This is in line with many other robo-advisors. While you’ll initially pay less with Betterment, the reality is that once you reach $100,000 in your portfolio, Betterment becomes more expensive.
  • Holistic planning: Vanguard only manages the assets you have in your Personal Advisor Services portfolio on your behalf. However, if you have other accounts, including investment, savings, retirement and trusts elsewhere, Vanguard will take a look at those and incorporate them into planning and how they manage your portfolio.

Betterment vs. Vanguard: Which is best for you?

Both Vanguard and Betterment are strong choices for investors looking for a low-cost robo-advisor with access to human professionals. However, which service you choose depends largely on where you’re at right now, and what type of experience you’re looking for.

Betterment is more automated than Vanguard, so if you’re looking for a place to stick your money and not think about it, Betterment can be the right choice. However, if you want a more personal touch, Vanguard can be the better choice — especially if you can meet the steep $50,000 minimum.

Vanguard also offers more for the DIY investor, providing access to a wider variety of funds, and the ability to personalize a long-term plan, including designating when you want to rebalance. While there are more customization options with Betterment when your portfolio reaches $100,000, Betterment is really better for the hands-off investor.

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.

Miranda Marquit
Miranda Marquit |

Miranda Marquit is a writer at MagnifyMoney. You can email Miranda here


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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.

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
  • Trust
  • Smart Saver
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Rollover Roth 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