Picking between M1 Finance and Betterment depends on how you invest and what you want to achieve with your money.
In this article, I’ll compare M1 Finance vs Betterment to help you choose the right platform for you to best grow your money.
My article will break down what they offer and what it costs and make it easy for you to decide which investment platform best fits you.
So, let’s get into it!
Investing made better! Meet the app that gives you the tools, inspiration, and support you need to become a better investor.
Key Takeaways
- Investing involves risk, but good platforms and ways access to investment options can give you a chance for your money to make money.
- M1 Finance is ideal for active investors with its customizable portfolios, fee-free basic plan, and no account management fees.
- It’s also geared for some hands-off management with rebalancing your portfolio to match your target investments, but it isn’t a traditional (full) Robo-advisor.
- Betterment caters to passive investors as a Robo-advisor with goal-based investing, automatic rebalancing, and tax-loss harvesting features.
- Betterment is designed for investors who value ease and automation, with its hands-off investing strategy, though it comes with an associated management fee.
Final Verdict: M1 Finance Vs. Betterment
In the matchup of M1 Finance vs. Betterment, the right choice depends on what kind of investor you are.
For those who like to be hands-on with their investments, M1 Finance is a great pick. It’s tailor-made for active investors who enjoy having control over their investment choices.
On the flip side, Betterment is a standout choice for passive investors who want something to manage their money more closely.
If you’re someone who prefers to set your investment goals and let the platform do the heavy lifting, Betterment is worth considering.
Betterment is my pick because, for the low-cost accounts, you get a lot of benefits- mainly that it’s a Robo-advisor that takes a lot of guesswork out of your portfolio.
M1 Finance Details
M1 Finance is designed for active investors who like to take charge of their investments. This platform stands out with a highly customizable investment strategy.
You can choose from a wide array of portfolio options and manage different accounts under one roof.
One of the big draws of M1 Finance is that it doesn’t charge any fees for its basic plan. That means you can manage your investments without worrying about extra costs.
Key Features
M1 Finance stands out in the world of investment platforms for its unique blend of technology and user-friendly features, making it a great choice for experienced and beginner investors.
Here’s a friendly guide to its key features:
- Pie-Based Investing: Think of it like a pie chart where each slice represents a different investment for your investment strategy. You can customize these slices with stocks, ETFs, and more.
- Expert Pies: M1 Finance offers pre-built Expert Pies that cover various investment strategies, from retirement-focused to income-generating options.
- M1 Plus: For a more enhanced experience, M1 Plus offers additional features like an extra trading window, lower rates on M1 Borrow, and an interest-bearing checking account.
- Mobile App: M1’s mobile app is highly rated. It offers comprehensive features to manage your investments, bank accounts, and loans from your phone.
- Regulated and Secure: For peace of mind, M1 Finance is registered with the SEC and is a member of FINRA and SIPC, ensuring high security and trust for your investments.
- Fractional Shares: M1 Finance has fractional shares, enabling you to fully invest your money and maintain precise asset allocation even with smaller investment amounts.
M1 Basic & M1 Plus
M1 Basic
M1 Basic is the standard, free account offered by M1 Finance. It provides a robust platform for users to start their investment journey.
With no management fees, it’s a cost-effective way to begin investing. M1 Basic users can create custom portfolios, known as “pies,” and choose from a wide range of stocks and ETFs.
The account also includes one daily trading window and automatic portfolio rebalancing.
M1 Plus
M1 Plus is a premium account with a $125 annual fee. It offers many additional features for users who want a more comprehensive investment experience.
M1 Plus members get two daily trading windows, giving them more flexibility in executing their trades.
They also receive a lower interest rate for M1 Borrow, the platform’s loan feature, and can earn more through an interest-bearing checking account.
Other perks include cash back on debit card purchases and ATM fee reimbursements.
Account Types
Whether investing for your personal goals, pooling your resources with someone in a joint account, or planning for retirement with an IRA, M1 Finance has many account types:
Individual Brokerage Account
An Individual Brokerage Account with M1 Finance is tailored for solo investors. This account lets you buy and sell individual stocks, bonds, and ETFs.
It’s ideal for anyone who wants to build and manage their investment portfolio, offering flexibility and control over investment choices.
Joint Brokerage Account
The Joint Brokerage Account is designed for shared investing.
It’s a great way to collaborate on investment decisions and build a shared financial future, giving both parties equal rights and access to the account.
This type of account is perfect for couples, parent-adult-child duos, or any pair looking to manage their investments jointly.
Trust Accounts
A designated trustee manages Trust Accounts at M1 Finance to benefit the beneficiaries. These accounts are set up through a specialized process that involves paper forms.
These are suitable for estate planning, charitable giving, or providing for specific beneficiaries, offering a structured way to manage and allocate assets according to the trust’s terms.
Custodial Account
The Custodial Account is designed for minors, with a custodian managing the account until the minor reaches the age of majority.
It’s available exclusively to M1 Plus users, adding an extra layer of options for the minor’s benefit.
Individual Retirement Account (IRA)
M1 Finance’s IRA options include Traditional, Roth, and SEP IRAs, each catering to different retirement planning needs:
- Traditional IRA: This account offers tax-deferred growth with the possibility of tax-deductible contributions, only paying taxes upon withdrawal in retirement.
- Roth IRA: Known for its tax-free growth and withdrawals, the Roth IRA is an excellent option for those who anticipate being in a higher tax bracket during retirement.
- SEP IRA: Aimed at self-employed individuals and small business owners, the SEP IRA allows for higher contribution limits than Traditional and Roth IRAs.
401(k) Rollover
M1 Finance also supports the rollover of previous employers’ 401(k) funds into an IRA. Don’t leave money just sitting around when it could be invested!
This option lets you consolidate retirement savings when transitioning between jobs, ensuring your retirement funds grow in a tax-advantaged account.
Crypto Account
For those interested in the digital currency market, M1 Finance offers a Crypto Account. It’s a fairly new offering, but investors have been awaiting this account!
This account type allows you to buy and sell various cryptocurrencies, catering to investors looking to diversify their portfolios with digital assets.
Pricing & Fees
- Commission-Free Trades: Offers zero commission on trades for stocks and ETFs
- Account Minimums: Requires a $100 minimum for taxable accounts and $500 for retirement accounts
- M1 Plus Subscription: $36 per year (90-day free trial)
- Margin Loans: Minimum of 50% of the value of marginal securities purchased in a Margin and Short Account; interest rates are 7.25%
- Regulatory Fees: Small fees passed on to customers, including a regulatory transaction fee on sales and a trading activity fee per equity share sold
- Other Fees: Possible management fees for specific services such as ADRs
Portfolio Management
When you set up your investment portfolio with M1 Finance, known as your “Pie,” the platform takes care of rebalancing.
They make sure your portfolio stays aligned with your initial asset allocation goals. This is their automated feature that’s sort of like a Robo-advisor.
You can also start rebalancing manually to adjust your portfolio outside these events.
Customer Service
M1 Finance offers a range of customer service options to cater to the needs of its users.
If you need direct assistance, phone and email support are available during weekdays from 9 a.m. to 4 p.m. ET.
While they don’t provide pre-funding phone consultations with certified advisors, they offer an AI chatbot for online chat support.
The chat can be a quick and efficient way to get answers to common queries, but I suggest emailing as quickly as possible if you want human support.
Their website also features an easily accessible and comprehensive FAQ section for finding detailed answers to questions about services and investment platforms.
Tax Advantage Investing
M1 Finance doesn’t offer tax-loss harvesting but has tax-savvy investing features. When you withdraw, M1 smartly sells off investments with losses or long-term gains first.
This can help reduce your tax bill. Plus, their tax minimization feature lowers taxes when selling investments.
M1 Finance Pros & Cons
Pros
- Commission-free trading
- No Hidden Fees! Transparent fee structure with no hidden costs.
- Customizable portfolios- over 80 options!
- Expert Pies
- Portfolio rebalancing available
- Variety of account types
- User-friendly interface
- Invest in fractional shares
Cons
- Not a full Robo-advisor- no full automated investing
- Limited trading windows
- Mutual Funds aren’t offered
- No tax-loss harvesting
Betterment Details
Betterment is a game-changer in the world of investing. It combines smart technology with personalized strategies to make investing easy for everyone.
Betterment makes investing hassle-free, whether saving for retirement or a short-term goal. It’s a Robo-advisor that takes the reigns and shifts your money to do the most good in your portfolio.
They offer investment options, from diversified portfolios to socially responsible investing. Plus, they’re known for their tax-efficient strategies, which can help you keep more of your money.
We’ll get more into its great features, but see why I think it’s the better pick compared to M1 Finance in my full Betterment Review.
Investing made better! Meet the app that gives you the tools, inspiration, and support you need to become a better investor.
Key Features
- Automated Portfolio Management: Betterment is a Robo-advisor that automatically manages and rebalances your investment portfolio based on your financial goals and risk tolerance.
- Flexible Portfolio Options: While Betterment provides pre-built income portfolios, they also have the option to adjust their asset allocation.
- Goal-Based Investing: The ability to set and track multiple financial goals, such as retirement savings, emergency funds, or major purchases.
- Tax-Loss Harvesting: Uses strategies to minimize tax liabilities on investment gains.
- Customizable Portfolios: Allows customization of investment portfolios.
- Retirement Planning Tools: Provides comprehensive tools and advice for retirement planning, including IRA accounts and retirement calculators.
- Socially responsible investing: Socially responsible investors can get into the stakes and support socially conscious businesses.
- Fractional Shares Investing: Enables investment in fractional shares, allowing diversification even with small amounts of money.
Betterment Plans
Betterment Digital
Betterment Digital is the basic, free plan offered by Betterment. It’s designed to provide a robust platform for users to start their investment journey.
Users can enjoy automated portfolio management, goal-based investing, and tax-efficient investing strategies. The account also includes automatic rebalancing of your portfolio.
Betterment Digital has no minimum balance requirements, making it an accessible option for investors of all levels. However, this plan does come with a 0.25% annual management fee.
Betterment Premium
Betterment Premium is the upper-tier plan offered by Betterment, designed for those wanting a more comprehensive investment management service.
This plan requires a minimum balance of $100,000 and comes with an annual fee of 0.40%.
As a Premium member, you’ll receive all the benefits of their regular plan, including automated portfolio management, goal-based investing, and tax-efficient investing strategies.
However, the Premium plan kicks things up a notch with unlimited financial advisor access to your accounts.
Account Types
Betterment offers several investment accounts that cater to a wide range of investor needs:
Individual and Joint Taxable Accounts
Betterment’s Individual Taxable Accounts are designed for single investors to manage their investments, suitable for various savings goals outside of retirement.
The Joint Taxable Accounts are ideal for partners or couples, enabling shared investment strategies and joint management of funds, fostering collaborative financial planning.
IRAs
Betterment offers a suite of IRA options, each tailored to different retirement planning needs:
- Traditional IRA: Offers tax-deferred growth and potential tax-deductible contributions, making it a wise choice for those seeking immediate tax benefits.
- Roth IRA: Ideal for investors anticipating a higher tax bracket in retirement, this account provides tax-free withdrawals and growth.
- SEP IRA: Specifically designed for self-employed individuals or small business owners, allowing for higher contributions than traditional retirement accounts.
401(k) Rollover IRA
Betterment’s 401(k) Rollover IRA is perfect for those changing jobs or consolidating retirement savings.
It allows the transfer of funds from an existing 401(k), maintaining tax advantages while broadening investment options under Betterment’s management.
Trust Account
Trust Accounts with Betterment are intended for estate planning or managing assets for beneficiaries.
They provide a strategic way to invest trust funds with an eye toward tax efficiency and specific investment goals of the trust.
529 Plan (Through Betterment at Work)
Betterment’s 529 Plan, available through the Betterment at Work program, focuses on college planning.
It offers tax benefits and flexible investment choices, making it an excellent option for saving for future educational expenses.
High-Yield Cash Account and Checking
Betterment offers a cash reserve High-Yield Cash Account and Checking account for everyday financial needs and short-term savings goals.
Cash Management Accounts
Betterment offers a high-yield cash account and a checking account, providing cash management services for short-term savings and everyday cash accounts.
Pricing & Fees
- Basic Plan Management Fees: Betterment’s basic plan includes a 0.25% annual management fee.
- Betterment Premium Plan Management Fees: 0.40% annual fee
- No Commissions or Fees for Cash Reserve: Betterment does not charge commissions or additional account fees for its Cash Reserve service.
- Potential Savings on Earnings: The absence of commissions and certain fees means more earnings stay in your investment and savings accounts.
Portfolio Management
Betterment Financial LLC streamlines portfolio management by combining automated robo-advisor technology with goal-based investing.
The platform creates diversified portfolios for their clients’ brokerage accounts using a mix of U.S. and international ETFs tailored to individual financial goals and risk tolerance.
It offers customization, including socially responsible investing options, and employs tax-efficient strategies like tax-loss harvesting.
Betterment provides access to certified financial planners in its premium plan for those seeking personalized advice.
Customer Service
Betterment offers customer service through phone and email, directly assisting its users. You can reach them at 718-400-6898 during weekdays from 9 a.m. to 6 p.m. ET.
However, Betterment Financial LLC doesn’t offer this service if you want a pre-funding phone consultation with a certified advisor.
They have a digital investment advisor available for online queries, which can handle various common questions and issues about your Betterment account.
Additionally, their website features a comprehensive FAQ section, answering questions about their Betterment Premium services and platform.
Tax Advantage Investing
Betterment provides several features for tax-advantaged investing. One notable feature is tax-loss harvesting, which can help lower your tax bill and potentially enhance your investment account returns.
Additionally, Betterment employs tax-efficient investing strategies designed to reduce tax impact, optimizing your returns after taxes.
Betterment Pros & Cons
Pros
- Automated portfolio management
- Hands-off investing
- Low-cost accounts
- No minimum deposit for the free plan
- Goal-based investing
- Diversified ETF portfolios
- Premium Plan – Access to human financial advisors
Cons
- Charges a management fee
- Betterment isn’t a licensed tax advisor
- Doesn’t offer self-directed brokerage accounts
- Not a bank- neither Betterment Financial LLC nor any of their affiliates is a bank
FAQs
Is M1 Finance trustworthy?
M1 Finance is a reliable choice in the world of investing.
People love M1 Finance for its easy-to-use interface, no trading fees, and cool features like customizable portfolios.
They’ve got the official stamp of approval from regulatory bodies like the U.S. Securities and Exchange Commission (SEC) and FINRA, so you can trust that they play by the rules.
Your money is also protected with SIPC insurance, covering up to $500,000 per account, including $250,000 in cash. It’s like having an extra safety net for your investments.
Is it worth using Betterment?
Betterment is valuable, especially if you’re a passive investor looking for goal-based strategies and tax benefits.
It offers a hands-off investing experience with automatic portfolio rebalancing and tax-loss harvesting, making your money go further.
Betterment’s track record in recent years has shown promising returns, making it a platform worth exploring for your investment needs.
What services do M1 Finance and Betterment offer?
M1 Finance is the go-to platform for active investors who appreciate customization.
It allows users to create and adjust their portfolios, supporting some minor automated trading but focusing on manual trading.
Betterment is tailored for passive investors who prefer a hassle-free approach.
It offers an automated investing experience with features like automatic portfolio adjustments, making it ideal for those who want to take a hands-off approach to their investments.
Is Betterment better than M1 Finance?
M1 Finance vs. Betterment? I think Betterment is better based on its automated investing and tax advantages, but there are many happy M1 Finance users, too.
Betterment is a great option for individuals who prefer a hands-off investment approach.
Betterment’s automatic portfolio adjustments and goal-based investing could be a major draw if you want a set-it-and-forget-it strategy.
You can define your financial objectives, and Betterment takes care of the rest, making it a hassle-free choice for those who don’t want to manage their investments actively.
Who is M1 Finance best for?
M1 Finance is a great choice if you’re just starting to invest or have limited funds to invest.
They offer a free basic plan and allow investments minimum, so it’s a great chance for new investors to get a diverse portfolio started.
Who should use M1 Finance Vs. Betterment?
M1 Finance and Betterment are two options in the investment world, but they’re like apples and oranges.
If you’re the kind of person who likes to roll up their sleeves and be in the driver’s seat regarding investments, M1 Finance could be your cup of tea.
But hold on, if you’re more of a “set it and forget it” type, Betterment might be calling your name. You tell them your goals, and they handle the rest.
Final Thoughts
Learning how to start investing can change how you make money, but it also involves risk, and choosing the right platform is only the first step.
M1 Finance and Betterment have their positives and negatives, and your decision about financial planning packages should align with your circumstances.
M1 Finance is a hands-on site where you can tailor your investments, including individual stocks, according to your risk tolerance and financial objectives.
On the other hand, Betterment offers cash accounts, the expertise of financial advisors, and automated investing.
I think Betterment is my overall pick for new investors, but your goals are the real driving force. Pick them if you want to be hands-off and let the pros get to work.
Investing made better! Meet the app that gives you the tools, inspiration, and support you need to become a better investor.
