Robinhood vs Betterment

(November 2024)

Robinhood-vs-Betterment

In This Article

Our Verdict

Robinhood-vs-Betterment-our-verdict

When it comes to investing, you’ve got options. Two popular financial platforms, but each cater to different aspects of personal finance.

Robinhood is like the action-packed thriller of investing apps. It’s all about trading stocks, options, and cryptocurrencies, giving you the rush of buying and selling in real time. With Robinhood, you’re in the driver’s seat, making decisions on what to buy and sell.

On the other hand, Betterment is more like the calm, steady hand guiding you through the investing journey. It’s a robo-advisor, meaning it uses algorithms to manage your investments based on your goals and risk tolerance. Betterment takes a hands-off approach, so you can sit back and let the app do the work for you.

With Robinhood, you can start investing with as little as $1, making it accessible to almost anyone. Betterment, on the other hand, requires a minimum investment of $10. Robinhood also offers commission-free trading, while Betterment charges a management fee based on the amount you invest.

In terms of account options, Robinhood offers individual brokerage accounts, while Betterment offers a range of account types, including individual and joint accounts, as well as retirement accounts like IRAs.

So, if you’re looking for a thrill and want to be hands-on with your investments, Robinhood might be the way to go. But if you prefer a more passive approach and want guidance along the way, Betterment could be your best bet.

Why Choose Robinhood

Who Robinhood is Best For

To be eligible for Robinhood, you need to be at least 18 years old and have a valid Social Security number. You must also have a legal U.S. residential address and be a U.S. citizen, U.S. permanent resident, or have a valid U.S. visa.

Additionally, you need a valid bank account to link to your Robinhood account. It’s important to have a good understanding of the risks involved in investing and be able to make your own investment decisions. Finally, you must comply with all applicable laws and regulations, including those related to anti-money laundering and know-your-customer rules.

Who Robinhood Is Not Right For

You might find Robinhood unsuitable if you prefer a wide range of investment options. With Robinhood, you’re limited to trading stocks, ETFs, and options, which may not meet all your investment needs. If you value comprehensive research and educational resources, Robinhood might not be the best fit.

The platform offers limited research tools compared to other brokers, which could impact your investment decisions. Additionally, if you prioritize customer service, Robinhood may not meet your expectations. Some users have reported challenges in reaching customer support and getting timely assistance.

Why Choose Betterment

Who Betterment is Best For

To qualify for Betterment, you need to be at least 18 years old and have a valid Social Security number. You should also have a U.S. residential address, as Betterment is currently available only to U.S. residents. Additionally, you’ll need a bank account to link to your Betterment account for funding purposes.

It’s important to have a clear understanding of your financial goals and risk tolerance, as Betterment’s investment strategy relies on this information to create a personalized portfolio for you. Lastly, you should be comfortable with managing your investments online, as Betterment is a digital investment platform.

Who Betterment Is Not Right For

You might find Betterment not suitable if you prefer more control over your investments. If you like to pick individual stocks or have a specific investment strategy, Betterment’s automated approach might not align with your preferences.

Additionally, if you prefer a more hands-on approach to managing your finances, you might feel limited by Betterment’s digital-only platform, as it lacks in-person support or financial advisors. Lastly, if you’re looking for a platform that offers a wide range of financial products beyond basic investing, Betterment’s focus on automated investing might not meet your needs.

Main Differences

Main Differences Robinhood Betterment

Type

Commission-free stock and ETF trading platform

Robo-advisor investment platform

Establishment

Founded in April 2013 by Vladimir Tenev and Baiju

Founded in 2008  by Jon Stein

Main Features

Focuses on commission-free trading, making it easy for you to buy and sell stocks

Emphasizes automated investing, offering you a hands-off approach to building a diversified portfolio

Minimum Investment

Requires none to start trading, making it ideal for beginners

Needs $0 to open an account but requires a minimum balance of $10 for its digital plan

Fees

Offers commission-free trade in which you can buy and sell stocks without paying fees per trade

Charges a management fee for its automated investing services

Account Types

You can open a standard brokerage account for trading stocks, ETFs, and options

Offers a variety of accounts, including individual and joint taxable accounts

Goal Setting

With Robinhood, you have more control over individual stock investments, letting you set specific goals for each stock

Focuses on goal-based investing, helping you set and achieve broader financial goals

Tax-Loss Harvesting

Don’t offer automatic tax-loss harvesting

Sells investments at a loss to offset gains, lowering your tax bill

Rebalancing

Need to regularly check and adjust your portfolio.

Automatic it rebalance for you, keeping your investments on track

Customer Support

Offers limited customer support, often via email or chat

Provides dedicated advisors you can reach by phone or chat, ensuring personalized assistance

User Base

Attracts active traders like you who seek commission-free trades

Appeals to investors like you looking for automated, diversified portfolios

Educational Resources

Focuses on providing informative articles and videos about investing

Offers a wide range of educational tools and personalized guidance

Security

Focuses on securing your transactions and personal information

Emphasizes securing your investments, with features like FDIC-insured cash management

Regulation

Regulated by the SEC and FINRA, ensuring your compliance with financial laws

SEC-registered investment advisor, offering investment advice within regulatory guidelines

Ease of Use

Focuses on simplicity for trading stocks and cryptocurrencies

Emphasizes automated investing, guiding you through building a diversified portfolio

Transparency

Commission-free trading, offering real-time market data

Transparent about  fees and uses a straightforward pricing structure

Community Features

Focuses on a social trading platform where you can interact with other users

Emphasizes educational content and resources to help you make informed investment decisions

Standout Features

Robinhood

Robinhood-Standout-Features

Instead of Betterment Opt for   Robinhood due to its:

  • Commission-free platform
  • User-friendly interface
  • Fractional shares of stocks and ETFs
  • Mobile-first trading
  • Real-time market
  • Cryptocurrency trading
  • Educational resources
  • Instant deposits

Betterment

Betterment-Standout-Features

Choose Betterment over Robinhood due to its:

  • Automated investing Platform
  • No minimum investment requirement feature
  • Transparent fees and portfolio performance
  • Tax-Efficient portfolio features to minimize taxes
  • User-Friendly interface
  • Diverse range of investment options
  • Educational resources
  • Responsive customer service
  • Cost-Effective approach

Investment Approach

When you’re deciding between Robinhood and Betterment, your choice often comes down to how you prefer to approach investing.

With Robinhood, you have the freedom to choose and manage your investments directly. It’s like being in the driver’s seat, where you decide which stocks or ETFs to buy or sell. This hands-on approach can be exciting and empowering, giving you control over your investment decisions.

On the other hand, Betterment offers a more hands-off approach. You simply set your investment goals, and Betterment takes care of the rest. It’s like having a skilled navigator guiding your investment journey.

Betterment uses a robo-advisor to automatically rebalance your portfolio and optimize your investments for you. This can be great if you prefer a more passive approach to investing or if you’re new to investing and want expert guidance.

Robinhood’s commission-free trading and user-friendly interface make it appealing to active traders and those looking for a DIY investing experience. However, it lacks some of the advanced features and research tools that more experienced investors may prefer.

Betterment, on the other hand, offers a more hands-off approach with its automated investing tools and personalized advice. However, it may not be the best choice for those who want more control over investments or who prefer to pick individual stocks.

In essence, your choice between Robinhood and Betterment depends on your investment style and preferences. If you’re comfortable managing your own investments and enjoy the freedom to choose, Robinhood may be the better option. However, if you prefer a more hands-off approach and want expert guidance, Betterment could be the right choice for you.

Tax Efficiency

When it comes to tax efficiency, you’ll find both Robinhood and Betterment offer different approaches.

With Robinhood, you have more control over your investments, which can be both a blessing and a curse when it comes to taxes. Because you’re in charge, you need to be mindful of things like capital gains and losses, which can impact your taxes.

On the other hand, Betterment takes a more hands-off approach. They use a strategy called tax-loss harvesting to help minimize your tax bill. This means it sells investments at a loss to offset gains, which can be a smart way to reduce what you owe.

Robinhood primarily focuses on is individual taxable accounts, which means any gains you make are subject to capital gains tax. Betterment, on the other hand, offers a variety of account types, including IRAs and taxable accounts. This means you have more options for managing your taxes, especially if you’re looking to save for retirement.

In terms of simplicity, Betterment may have the edge. Its automated approach means you don’t have to worry about the nitty-gritty of tax planning. Robinhood, on the other hand, requires a bit more effort on your part to ensure you’re managing your taxes effectively.

Overall, both platforms offer tax-efficient options, but the right choice for you depends on your investment style and tax planning preferences.

Pros and Cons of Robinhood

Pros-and-Cons-of-Robinhood

Consider Robinhood over Betterment because it:

  • Offers commission-free trading
  • Provides a user-friendly interface and mobile app
  • Allows fractional share investing
  • Offers a wide range of investment options including stocks, ETFs, options, and cryptocurrencies
  • Provides access to market news and real-time quotes
  • Offers a cash management feature
  • Provides a referral program for earning free stocks
  • Offers a variety of order types
  • Provides a customizable watchlist feature
  • Offers a Robinhood gold subscription for advanced features

Opt for Betterment and ignore Robinhood as you may:

  • Possess limited research and analysis tools
  • Receive retirement accounts like IRAs
  • Incur no dividend reinvestment program (DRIP)
  • Experience no access to mutual funds or bonds
  • Face outages and technical issues in the past
  • Encounter addiction due to its gamified interface

Pros and Cons of Betterment

Pros-and-Cons-of-Betterment

Ignore Robinhood and go for Betterment for your investment needs because it:

  • Offers automated investing, making it easy for beginners
  • Has competitive fees compared to traditional financial advisors
  • Uses tax-loss harvesting and other strategies
  • Diversified investment across a range of asset classes to reduce risk
  • Set and track specific financial goals, such as retirement or saving
  • User-friendly interface that’s easy to navigate
  • Access to financial experts
  • Automatic rebalancing

Don’t overlook Robinhood in favor of Betterment, as you may:

  • Have limited Investment options
  • Possess no direct stock purchases
  • Incur fees on large balances
  • Have no access to alternative investments
  • Offers only non-human advisors
  • Experience limited control
  • Encounter limited customization
  • Face market timing issues

Customer Reviews

In terms of customer reviews, both platforms have received a mix of positive and negative feedback.  Robinhood’s user reviews often highlight its user-friendly interface with a rating of 4.4 out of 5 stars which has the ability to trade without fees.

Many users appreciate the simplicity of the platform and its mobile app, which make it easy to manage investments on the go. However, some users have criticized Robinhood for its customer service, citing long wait times and difficulty reaching support.

Betterment, on the other hand, is praised for its hands-off approach to investing and its goal-based planning tools. Users appreciate the platform’s ease of use and the ability to set and track financial goals. Betterment’s customer service is also generally well-regarded, with many users reporting positive experiences.

However, some users have noted that Betterment’s fees can be higher than other robo-advisors, especially for larger account balances. Robinhood is praised for its commission-free trading and user-friendly interface Betterment is lauded for its automated investing. Ultimately, the choice between the two platforms will depend on individual preferences and financial goals.

Competitors

It’s crucial you explore competitors of Robinhood and Betterment for an investment platform that fits your needs like a glove.

If you’re looking for a hands-off approach to investing, Wealthfront might be your jam. You’ll get access to automated investing tools that use advanced algorithms to manage your portfolio. Its fees are pretty low, which means more money stays in your pocket.

M1 Finance is a great option for long-term investors looking for a hands-off approach to investing. With M1 Finance, you can create a custom portfolio of stocks and ETFs and set up automated investing to help you reach your financial goals. M1 Finance also offers fractional shares, allowing you to invest in high-priced stocks with as little as $1

Another notable option is Ally Invest which is known for its top-notch support. It offers you lower fees and no account minimums. You can enjoy a wide range of investment options, including stocks, ETFs, options, and mutual funds. With Ally Invest, you get access to valuable research tools and a user-friendly platform, empowering you to make informed investment decisions.

TD Ameritrade is known for its extensive research and educational resources. It offers a wide range of investment products, including stocks, options, ETFs, mutual funds, and fixed income investments. TD Ameritrade also has a user-friendly platform with advanced trading tools for active traders. Its customer service is top-notch, providing support when you need it most.

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Pro Tips

Robinhood-vs-Betterment-Pro-tips

To make the right choice between Robinhood and Betterment, use these pro tips:

  • Evaluate your investment goals
  • Check for hidden fees, account minimums, and transaction costs
  • Look into the range of investment options available
  • Assess the quality of customer service offered
  • Check out for educational resources
  • Ensure both platforms employ strong security measures
  • Consider user experience
  • Look for reviews and ratings from other users
  • Consider your long-term investment strategy

Recap

When you compare Robinhood and Betterment, you’ll notice that Robinhood is primarily a stock trading platform, while Betterment focuses on automated investing. With Robinhood, you can trade stocks, options, and cryptocurrencies commission-free, which can be great if you’re active in the market. On the other hand, Betterment offers automated investing, where both manage your portfolio for you based on your goals and risk tolerance.

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