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Bottom line: Vanguard could be the better choice if you’re looking for access to a larger selection of low-cost investments, including retirement funds. But this brokerage’s advisor-assisted and automated investing accounts could make it a good fit for hands-off investors, too. However, you should consider Betterment Investing if you’re solely in search of inexpensive, goal-focused robo-advice. You can sign up for Betterment with a $0 account minimum, but you’ll need at least $3,000 for Vanguard’s robo-advisor.
Betterment vs. Vanguard: The biggest differences
Betterment and Vanguard are top investing platforms providing a wide range of wealth-building products at low costs. The two share similar features: automated investment offerings, human advisor access, IRA accounts, and socially responsible investment options.
But while both offer low fees, Betterment manages your investment portfolio for you, while Vanguard gives you the option to trade on your own or invest in a managed portfolio.
Betterment and Vanguard also have notable differences when it comes to account types, features, and investment choices.
Betterment
Vanguard
Account types
Individual and joint taxable accounts
Individual retirement accounts
401(k)s for businesses
Trust accounts
Checking and cash reserve accounts
Account types
Individual and joint taxable accountsIndividual retirement accountsSmall business retirement plans529 plansEducation savings accounts
Investment choices
Stock ETFs and bond ETFs
Investment choices
Stocks, ETFs, options, bonds, mutual funds, and CDs
Account perks
Tax-loss harvesting
Goal-based investing
Automatic portfolio rebalancing
Dividend reinvestment
Charitable giving
Account perks
Tax-efficient managed portfolios
Automatic investingAutomatic withdrawalsInvestment research and analysisMargin trading
Human advisors available?
Yes — unlimited access to certified financial planners with premium plan or one-time consultations starting at $199
Human advisors available?
Yes — unlimited access to financial advisors with Vanguard Personal Advisor Services account
Robo-advice?
Yes — all of Betterment’s accounts are automated
Robo-advice?
Yes — Vanguard Digital Advisor and Vanguard Personal Advisor Services
Is Betterment right for you?
Pros
No minimum account size requirements for digital planTax-loss harvesting, goal-focused investing strategies, charitable giving, and socially responsible investing availableMobile app with option to connect external bank accountsCertified financial planners available
Cons
Only investments available are stock ETFs and bond ETFsIt’ll cost more to consult a financial advisor, unless you’ve got the premium plan
Betterment is an automated advisor offering investment and retirement management services, so it’s a good choice for those who want to be more hands-off with their assets. With more than $29 billion in assets under management, the company currently provides individual and joint taxable accounts, retirement accounts, trust accounts, and checking and cash reserve accounts.
Betterment offers two subscription plans for investors: digital and premium. The digital plan has no minimum account size requirements and holds a 0.25% annual fee. But you’ll need at least $100,000 to access Betterment’s premium plan (and you’ll have to pay a 0.40% annual fee).
Both plans offer tax-loss harvesting, goal-focused investing strategies (Betterment currently offers five different goals: retirement savings, retirement income, safety net, major purchase, and general investing), fractional share investing, dividend reinvesting, and socially responsible investing portfolio options (socially responsible investments represent companies that strive to improve society through environmental, social, and ethical means).
But with premium, you get unlimited access to certified financial planners, and you can add Betterment’s checking and cash reserve for free. Another thing to note: Portfolios typically consist of a mix of stock ETFs and bond ETFs, and you can adjust your investing goals (and target amount) at any time.
The digital account doesn’t include unlimited financial advisor access, but Betterment offers one-time consultations for $199. And the company offers Betterment for Advisors, a platform that helps financial advisors offer more investing tools to their clients.
If you’re looking for new retirement savings options, Betterment offers individuals traditional IRAs, Roth IRAs, 401(k) rollovers, and IRA rollovers. Retirement plans cost 0.25% per year, and Betterment also has 401(k)s for businesses.
Is Vanguard right for you?
Pros
Thousands of low-cost mutual funds availableSelf-directed, advisor-assisted, and automated investing accounts availableCommission-free stocks, ETFs, and optionsGreat customer service
Cons
Options contract fee is higher than most brokeragesNo other trading platforms besides the Vanguard web and mobile apps
Formed in 1975, Vanguard is an online brokerage offering a vast collection of investing and retirement savings accounts for individuals and businesses.
On the investing front, Vanguard has a wide selection of commission-free stocks, ETFs, and options (though options contracts cost $1). You can also actively trade these investments without meeting any minimum account size requirements, but minimums for Vanguard’s mutual funds start at $1,000 and range up to $10,000.
Vanguard has about 160 of its own mutual funds, but you can also take advantage of more than 3,000 no-transaction-fee mutual funds from other companies. And if you’re thinking of investing in ETFs, you’ll have the choice of about 75 commission-free Vanguard ETFs plus 1800 ETFs from other companies.
If you’re big on investment education and/or research, you’ll have several sources and tools to choose from. Vanguard offers multiple tools and calculators for investment planning, retirement, and education savings planning. Plus, the brokerage offers tons of downloadable documents on the latest investment research and expert analysis.
The brokerage also has a couple of options for investors looking for hands-off and advisor-assisted investing. Its two robo-advisors – Vanguard Digital Advisor and Vanguard Personal Advisor Services — both allow you to sit back and watch your money grow, but you’ll need a $3,000 minimum for the former and a $50,000 minimum for the latter.
When it comes to retirement, Vanguard gives you a variety of options. You can currently utilize traditional IRAs, Roth IRAs, and 403(b). Businesses can open SEP IRAs, individual 401(k)s, and SIMPLE IRAs.
Vanguard’s IRA offerings have no minimum requirements, but you’ll need at least $1,000 if you decide to invest in the Vanguard Target Retirement Fund or the Vanguard STAR Fund. You’ll need a minimum of $3,000 for other Vanguard funds.
Finally, the Vanguard 529 plan lets you save for qualified education expenses and access perks such as tax deductions, tax-deferred growth, and tax-free withdrawals.
Betterment vs. Vanguard: Which is right for you?
Is Betterment worth the fee?
Betterment could be right for you if you’re looking for a low-cost robo-advisor with an array of goal-specific investment strategies and automated account features. And — if you want some human advisor support every now and then — you can either pay for a one-time consultation, or you can get unlimited access to certified financial planners with the premium account.
The platform’s lowest fee option is 0.25% per year. This isn’t bad compared to other automated investing platforms, like Wealthfront and SigFig, that also charge 0.25% (although you can find robo-advisors — like SoFi and Ally Invest Managed Portfolios — that don’t have advisory fees). Its premium has a higher fee (0.40%), but it includes unlimited access to CFPs.
Who is Vanguard best for?
Vanguard is great for those looking for an all-around investing experience. For hands-on or DIY investors, the brokerage has thousands of mutual funds and offers commission-free trading for stocks, ETFs, and options. And if you’re more of a passive, or hands-off, investor, Vanguard offers you two options: Vanguard Digital Advisor or Vanguard Personal Advisor Services. Vanguard also provides a long list of retirement and investment research materials and resources.
What are the cons of using Betterment?
One downside of Betterment is that its investment selection is limited to ETFs. It doesn’t compare to Vanguard’s expansive offering of investments. Another drawback is that you need at least $100,000 to utilize financial advisor guidance. If you don’t have this balance, you can pay for individual sessions, but they’ll cost $299 to $399 each.