If you are wanting to get your money working hard for you but just don’t have the time or energy to fully understand investing or to work with expensive Financial Planners, then welcome to the world of Robo-advisors.
Now if you’re a science fiction movie buff influenced by films like the “Terminator” series and “I, Robot”, and think machines, robots, and artificial intelligence will take over the world and steal your money, then this type of investing might not be for you.
But if you are of sound mind, prefer to be hands-off, and are OK with taking on new and proven technology like smartphones, streaming services, and the internet (there was a time when it was new too), then you will take to Robo-advisors like a duck takes to water.
Robo-advisors are digital platforms for investing. Essentially, they do all the work for you!
You sign up, answer a few questions so the platform can work out your preferred investment strategy, then it’s hands-off for you. Invest a lump sum or make regular contributions, sit back, and watch your money grow.
Betterment and Sofi are two of the best available. So, let’s dive in and learn more about each of them, and which might be best for you.
Betterment
This platform was one of the first and therefore has a longer track record of performance than most competitors. You can invest in Stocks and Bonds with no minimum contributions and a tiny fee of just 0.25%.
A portfolio will be created where your money is invested into mutual funds, bond funds and exchange-traded funds (ETFs). You can also buy fractional shares which are ownership of just a part of the value of a share.
Betterment does it all for you. It will even show you how much you need to fund your retirement. Its goal tracking allows you to see how your investment will grow. As long as you are making automatic deposits, you don’t have to do a thing.
If your investment values move and cause your account to drift away from your set investment strategy by more than 3%, automatic rebalancing will bring your investment back into line for you.
But Betterment is more than just algorithms, it can also help your investment grow with:
- Automated diversification
- Tax-Coordinated Portfolio
- Reinvestment of dividends; and
- Tax-loss harvesting – that’s a valuable feature for larger investors and can reduce their tax bills considerably.
From 2004 to 2020 Betterment’s 75/25 allocation mix fund averaged 8.2% growth.
For those with over $100,000, you can access the Flexible Portfolio feature and change your asset allocation mix. You can also access their Financial Planners at no cost. With a lower balance, the cost to talk to a Financial Planner is a low $199.
Here is a review with more details about Betterment.
Sofi
This is another low-cost investment platform that is great for beginners with a minimum investment of just $5. What is so amazing about Sofi is that there are no fees!
Did you read that? No fees!
The platform has commission-free stock trading and ETF trading, free investing, and free access to Financial Planners which is another great feature for beginners.
Automatic rebalancing kicks every quarter and when the drift from your allocation strategy hits 5%.
Sofi has expanded its services to also include mortgages and mortgage refinancing.
There are 10 automated investment strategies to choose from. But take note, once chosen, you cannot change strategies. So, it is important to pick a strategy you are sure you want to be in over the long term.
If you close your account, there is a $75 fee.
If you want to be active in making decisions with your investment, you can access Sofi Active Invest, where you have complete control over your accounts. You can buy a range of different investments, including fractional shares and even cryptocurrencies and IPOs.
However, through this fund, you can’t buy mutual funds or index funds, and you can’t set up stop-loss orders. It also doesn’t offer tax-loss harvesting, although that’s only important for investors with larger sums of money.
You can learn more about Sofi in this article.
Betterment v Sofi
So, which is the best out of these two leaders in the world of Robo-advisors? Well, there are many different opinions.
I urge you to consider these points:
- Betterment has been doing Robo-investing much longer, so it has a proven track-record
- Betterment has tax harvesting and Sofi doesn’t, this could save you big money in taxes the more you accumulate over $100,000
- Betterment offers 13 investment options, including Socially Responsible, Sofi offers 10 investment options that do include cryptocurrencies
- Both offer rebalancing
- Sofi has greater availability for customer support
- Both offer cash management
- Sofi has no account management fees, Betterment does.
The reality is that these two funds are evenly matched, and it is up to you to consider your own needs first, and then pick the Robo-adviser that best fits those needs.
If you want active investing, no fees, the option of buying into cryptocurrency, and free access to Financial Planners even when you are starting, then Sofi should be preferred.
You can get started investing in Sofi if you click here.
If you want passive investing, competitive low fees, the option of socially responsible investing and you’re prepared to pay $199 to access Financial Planners or go without until you have $100,000 and can access them for free, then Betterment will be a better fit.
You can start investing in Betterment by clicking here.
This is another post comparing these two platforms.
One final point, the longer you intend to invest, and the larger the sum you accumulate, the greater benefit you will gain for the tax harvesting feature in Betterment.
If you’re serious about using a Robo-advisor to accumulate wealth, tax harvesting allows Betterment to come out the clear winner!
