M1 Finance vs. Betterment: Which Is Right for You? | The Ascent by Motley Fool (2024)

Are you in the market for a new online stock brokerage? Trying to decide between M1 Finance vs. Betterment can be a tough choice. Both brokerages offer a range of services and features, as well as giving you an easy way to invest in the stock market.

Let's take a closer look at how M1 Finance compares to Betterment, and which brokerage platform might be the best fit for your financial goals as an investor.

M1 Finance and Betterment are two of the best low-cost robo advisors. Both of these platforms make it easy to invest for the future at near-zero costs, with no commissions or trading fees.

Betterment charges a management fee of $4 per month (or 0.25% per year), but you get some added value for that money -- because Betterment works like a built-in, automatic financial advisor to help manage your money for you. Betterment gives you an easy way to put your money into expert-built, diversified, low-cost ETF portfolios with automatic rebalancing to suit your time horizon and goals. It's a way to invest in stocks without having to pick stocks; with Betterment, you can just put your investments on autopilot and let the magic of the markets do their work.

M1 Finance's basic M1 Invest Account charges no management fees, which could make it a better option than Betterment if you prefer to manage your own investments and build your own portfolio, without the guiding hand of a financial advisor or robo-advisor. M1 Finance also gives you the option to sign up for M1 Plus ($3 per month) to get some premium benefits, like cash back rewards, lower rates on margin loans, and extra trading features.

READ MORE: Best ETF Brokers

Both M1 Finance and Betterment offer the power of automated investing, but there are some big differences in the way you can invest on these two brokerages.

M1 Finance offers over 6,000 stocks and ETFs (which can include stocks, bonds, or commodities). M1 Finance customers can also invest in cryptocurrency and a few individual over-the-counter (OTC) stocks like Adidas, Nintendo, Nestlé, and Volkswagen.

One advantage of M1 Finance, compared to some traditional stock brokerages, is that M1 Finance allows you to trade fractional shares. For example, if the stock you want to buy costs $500 per share and you only have $100 ready to invest, M1 Finance lets you buy 0.20 shares of that stock.

M1 Finance is often a better fit for people who want to be hands-on in managing their own investments, while Betterment is focused on passive investing in exchange traded funds (ETFs).

A big difference between M1 Finance vs. Betterment is that M1 Finance is more flexible in how it lets you invest your money. M1 Finance allows you to buy individual stocks and create your own portfolio of funds. But the brokerage also offers a wide range of diversified model portfolios that you can choose to invest in. Or you can mix and match some of M1 Finance's model portfolios with your own investment choices.

Betterment is not set up for active investing or stock picking. In fact, Betterment does not even allow its customers to invest in individual stocks, bonds, or funds. Instead, Betterment lets you invest in its own range of expert-built, diversified ETF portfolios of stocks and bonds, or diversified crypto portfolios.

Keep in mind that neither M1 Finance nor Betterment support certain other types of investments. Investors can't use these brokerages to trade mutual funds, CDs, options, or currencies.

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M1 Finance is not a bank, but it offers a wide range of financial services and accounts, in addition to the investment accounts you'd expect from a brokerage.

M1 Finance investment accounts include:

• Brokerage accounts (individual, joint, and custodial)
• Traditional IRAs
• Roth IRAs
• SEP IRAs
• Crypto accounts
• Trust accounts (revocable and irrevocable trusts)

Other accounts you can get from M1 Finance's bank partners include:

• High-yield savings account: offering a competitive APY
• Owner's Rewards credit card: offering cash back rewards up to 10%
• Loans: M1 Finance customers can get margin loans and personal loans with competitive APRs

Betterment is also not a bank, but it's also more than a brokerage, offering a wide range of financial products and services. If you wanted to move most of your everyday banking activities to Betterment, you probably could.

Betterment investment accounts include:

• Betterment taxable brokerage account
• Traditional IRAs
• Roth IRAs
• SEP IRAs
• Rollover IRAs (you can move your old 401(k)s to Betterment)
• Crypto accounts
• Trust accounts

Other accounts you can get from Betterment's bank partners include:

• Betterment Cash Reserve (offering 5.00% APY)
• Betterment Checking

LEARN MORE: Best IRA Accounts

The M1 Finance robo-advisor platform can be used via desktop or mobile app, and M1 Finance's app gets rave reviews on the App Store (4.7 stars) and Google Play (4.5 stars). Here are a few features that make M1 Finance stand out from other brokerages:

• You set up your investment portfolio as what M1 Finance calls a "Pie," with various "slices" of stocks or ETFs. It's visually appealing and easy to understand.
• Build your portfolio "Pie" based on your own investment choices (including individual stocks), or with M1 Finance's diversified model portfolios, or a mix of both.
• You can do dynamic rebalancing with the tap of a button, and M1 Finance's robo-advisor automation will handle the rest -- while being tax-efficient with your portfolio's capital gains and losses.

READ MORE: Best Robo-Advisors

Betterment also lets customers access its platform via desktop or mobile, and its app also gets high ratings on the App Store (4.7 stars) and Google Play (4.6 stars). Here are the biggest differences that make Betterment unique compared to M1 Finance or other brokerages:

• Curated portfolios: Betterment offers a range of portfolios that you can invest in, built with a diversified mix of ETFs. You can choose specific investment goals and priorities to support with your money, such as Social Impact, Climate Impact, and Innovative Technology.
• Hands-off, automated investing: If you don't want to worry about picking stocks or fretting about whether it's the right time to sell your shares, Betterment handles this for you.
• Financial advice from real humans: Betterment is not just a robo-advisor; you can get help from a real person when you need it. There are a few options to meet with financial advisors, either as part of the Betterment Premium plan (minimum assets and annual fee required) or as a one-time package of services.

M1 Finance is a better fit for people who want a "hands-on" approach to investing. If you want to be involved in choosing stocks or ETFs, and making your own adjustments to the asset allocation of your portfolio along the way. M1 Finance also offers a high-yield savings account, personal loans, margin loans, and a credit card with rewards tied to your brokerage account.

Betterment is a better choice for "hands-off" investors who just want low-cost, diversified ETFs so they can put their retirement savings on autopilot. Betterment also offers its high-yield Betterment Cash Reserve account and checking account through its partner bank.

Neither of these brokerages are designed for day traders. But both can be good choices for everyday investors who want to save for retirement or grow your money for other goals.