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Betterment vs. Robinhood: Which is Right for You?

In today’s world of online software and fintech companies, the general consumer marketplace tends to lump everything together into one big bucket. As a result, the average investor feels overwhelmed by the sheer number of options, terms, and seemingly complex strategies. 

But if you take the time to dig in and truly understand the different choices that exist, you’ll realize that they aren’t as similar as they seem. Not only that, but making a choice on which platform to choose – like Betterment vs. Robinhood – isn’t as difficult as most make it out to be. 

It simply comes down to selecting the one that’s right for you and your goals.

Betterment vs. Robinhood: Basic Overview

In some cases, DIY investing platforms are so similar that you have to read between the lines and study individual features to determine which one is right for you. This is true when comparing Acorns vs. Betterment or SoFi Invest vs. Betterment. (Even Wealthfront and Betterment share a ton of the same features, which makes it more difficult to decide between the two.) 

The point is, most robo-advisors offer similar features and target investors with like-minded goals. However, this is not the case with Betterment and Robinhood. Casual investors frequently ask questions like, “Should I choose Betterment or Robinhood?” But in reality, these two trading platforms are very much opposites of one another – at least in how they fit into your investing strategy.

Betterment is a robo-advisor that’s designed to be as hands-off as possible. Robinhood is a trading platform that gives users the ability to easily buy and sell stocks in real-time using an intuitive interface that looks more like a dating app than an investment tool. 

When studying Betterment vs. Robinhood, the biggest difference lies in how investments are made. With Betterment, a series of complex algorithms are responsible for automatically investing your funds based on your risk tolerance and goals. The internal artificial intelligence engine selects from a variety of investment portfolios and fund types, including mutual funds and exchange-traded funds (ETFs).

With Robinhood, you’re responsible for making your own investments. The platform simply removes all of the confusing clutter and gives you a clean trading interface that makes buying stocks and funds as simple as clicking a button. You’re the one creating the portfolio. There’s no robo-advisor or automation doing it for you.

H2H Comparison: Betterment vs. Robinhood

The easiest way to see the differences between Betterment vs. Robinhood is by analyzing some of the different features in a head-to-head comparison. Take a look:

Betterment Robinhood
Minimum account balance to open     $0 minimum
  • $0 minimum 
  • $2,000 minimum (or 100% of the securities’ price, whichever is lower) if you want to invest on margin
Individual Stocks     ✅
Management fee
  • 0.25% for “Digital” (no minimum account balance)
  • 0.40% for “Premium” (minimum $100k balance)
  • No fees with a basic Robinhood account
  • $5 per month for Robinhood Gold account
Account types
  • Traditional & Roth IRA
  • Rollover IRA
  • Joint taxable
  • Individual taxable
  • Individual taxable accounts
  • FDIC-insured cash management account
Crypto Investing       ❌ ✅  (You can buy crypto assets, but you don’t have the ability to transfer to another crypto wallet or cold storage. You must sell the investment and liquidate in the form of fiat currency.)
Tax loss harvesting       ✅ ❌
Automatic rebalancing       ✅ ❌
Fractional shares       ✅ ✅
Human Advisor Option       ✅ ❌
Customer support Email & Phone Email & Phone
Mobile app Android & iOS Android & iOS

The Pros and Cons of Betterment

Betterment has an impressive track record as one of the industry’s first robo-advisor platforms. Over the past decade, it’s added features, simplified its interface, and carved out a niche as one of the easiest-to-use DIY platforms in the industry. 

The Pros of Betterment

One of the most notable benefits of Betterment is its simplicity. Despite having a robust series of complex features underneath the surface, it maintains a simple and intuitive interface that makes investing easy for anyone.

Not only can you choose from a variety of different portfolio types that are tailored to your own specific investment goals (like eventually investing in real estate or creating extra cash flow in retirement), but there’s also a human advisor option. These are features that Robinhood doesn’t offer.

The Cons of Betterment

If you’re simply looking to buy and sell stocks, there are less complicated platforms than Betterment. Betterment gives you the ability to invest in individual stocks – even going so far as to offer fractional share investing – but that’s not the focus. It’s more designed for building portfolios and targeted investment funds (like IRAs).

Like many robo-advisor platforms, Betterment also offers the help of human advisors (if you want it). However, you can expect to pay somewhere between 0.25 percent to 0.40 percent for their services. This is still much lower than the traditional 1.00 percent that you pay for a full-time advisor to manage your funds, but it’s an expense nonetheless.

The Pros and Cons of Robinhood

Robinhood provides a very hands-on experience. However, it’s also one of the simplest platforms on the market. (There’s a reason it’s attracted millions of young investors who otherwise have no interest in investing.)

The Pros of Robinhood

The two biggest benefits of Robinhood are its simple interface and its lack of fees. As for the latter, there are no fees or commissions on either side of a trade (buy or sell). Not only that, but there are no inactivity fees, transaction fees, or charges for depositing or withdrawing money. The only way Robinhood makes money is by charging $5 for its Robinhood Gold subscription service that allows users to trade on margin.

The Cons of Robinhood

Robinhood isn’t for everyone. For starters, there’s no robo-advisor component. This means you’re completely on your own to make investment decisions. There are some neat research and recommendation features inside of the platform, but they’re very limited. The other strike against Robinhood is the fact that you can’t buy mutual funds or set up targeted portfolios. 

Betterment vs. Robinhood: The Choice is Yours

In reality, Betterment and Robinhood aren’t really an equal comparison. The former is a true robo-advisor designed to help investors create targeted portfolios that allow them to move toward specific investing goals. Robinhood is a commission-free, DIY stock trading platform that boasts total control and autonomy. In many cases, investors have both Betterment and Robinhood accounts. In other situations, one platform isn’t necessary. The choice is yours.

Sky Richardson
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