personal finance

Betterment vs. Wealthfront – What’s the better option?

In January of 2016, I decided to open a Betterment and Wealthfront account.  I wanted to see which robo advisor better fit my needs.  I also wanted to see which account would grow faster due to different fees associated with the accounts.  To standardize my experiment I put $500 into each account and then started to contribute $100 a month.

Since I was using automatic deposits with both accounts I could have initially opened the Betterment account with $0 down and $100 a month, but I wanted to keep the experiment fair.  Back when I opened the account in 2016, Betterment had a scaled fee based on how much money you invested.  Now, it is just 0.25% annually, which is a significant savings.  They also now offer Plus and Premium for accounts larger than $100,000 and $250,000.  I’m not there now, but in the future that could be an interesting tool to look into using.  You can also get up to a year free of Betterment by using this link (it also helps me because I’ll get a year too!)

Wealthfront is very similar to Betterment, except your first $10,000 is managed for free.  I like this feature for newer investors and people who aren’t starting out with a large amount of money.  That being said, you need at least $500 to initially open an account.  The fees after $10,000 are also 0.25% annually.  Signing up through this referral link will give you an additional $5,000 managed for free.  A new feature for Wealthfront is Path.  Path helps you look at your financial accounts to see if you are on track for the future.  This could mean looking ahead at retirement, saving for a house, or even saving for a fun family vacation.  I haven’t spent a ton of time using Path yet because I don’t have all of my other bank accounts linked to Wealthfront.  I use Personal Capital instead to manage all of my money.

If I was only opening up one account right now it would be with Wealthfront.  Though the intial $500 is steep for a newbie the free management up to $15,000 (with the referral code) would make it worth it for me.  I’ll update my progress towards the end of the year, but right now both accounts have done very similarly.  Betterment and Wealthfront are both aggressive investment accounts (90% stock/10% bond) and have made 10.3% and 14.7%.  I got both of these directly from the website, but in reality the interest I received through both accounts is about $180.  As a novice, I would stick to Wealthfront for now.

There are lots of new features coming soon, so I’ll continue to look into them to see what other robo advisors are out there!

Do you use Betterment or Wealthfront?

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