M1 Finance vs. Betterment – Which Platform is Better?

Looking for a beginner-friendly brokerage to invest your money? Two of the best options available today are M1 Finance and Betterment. Both offer expert-crafted portfolios and helpful automated investing features. They also each offer integrated banking services.

There are several key differences between these two services. Most notably, M1 Finance enables you to build your own custom portfolios from 6,000 stocks and ETFs, whereas Betterment limits you to choose among its pre-made portfolios. 

So, which investment platform is right for you? Let’s dive into a full comparison of M1 Finance vs. Betterment to help you decide.

About M1 Finance And Betterment

M1 Finance was founded in 2015. The service combines several of the aspects of traditional stockbrokers, robo-advising platforms, and banks to help you invest your money. M1 Finance has grown to more than 500,000 users and over $2 billion in assets under management.

Betterment was founded in 2008 and was one of the first major robo-investing platforms at the time. The platform now also offers checking and savings accounts. Betterment has roughly the same number of users as M1 Finance – around 500,000 – but over $22 billion in assets under management.

M1 Finance vs. Betterment: Account Types

Both M1 Finance and Betterment allow you to open a standard investing account, a joint account, an IRA (Roth or traditional), or a trust account. In addition, Betterment offers 401(k) plans and education savings accounts for children.

M1 Finance only offers checking accounts, while Betterment offers both checking and savings accounts.

M1 Finance vs. Betterment: Investments

One of the biggest differences between M1 Finance and Betterment is what they allow you to invest in.

With M1 Finance, you get access to more than 6,000 individual stocks and ETFs. In addition, M1 Finance has nearly 100 expert-curated portfolios that you can invest in with a single trade. You can combine multiple of these portfolios or mix-and-match them with any individual stocks or ETFs for more customization. M1 Finance also enables you to invest in fractional shares with as little as $1.

Betterment, on the other hand, offers a single ‘Core’ portfolio and just six other portfolio options. The alternative portfolios include options for sustainable investing, all-cash investing or all-bond investing. You can customize the weighting of specific asset classes in your portfolio – for example, change the fraction of small-cap US stocks in your holdings from 5% to 10% – but you cannot invest in individual stocks or ETFs.

M1 Finance vs. Betterment: Auto-Investing Features

The two platforms share some features to help you automatically invest your money. For example, you can easily set up recurring transfers from your bank account with either M1 Finance or Betterment, and the platforms will automatically allocate the money into your existing portfolio.

One thing that’s especially nice about Betterment is that you can set up multiple investing goals within your account. Each goal can have its own recurring transfers. So, for example, you can save a specific amount of money in your ‘Buy a Home’ fund each month and a different amount of money in your ‘Retirement’ fund each month.  Even better, each goal can have its own customized portfolio.

M1 Finance allows you to do something similar, but having multiple portfolios isn’t as straightforward, and you cannot easily project out how much money you’ll have in 10 or 20 years’ time. In addition, M1 Finance automatically uses the money you transfer into your portfolio to shore up underperforming investments. This keeps your portfolio in balance, but it also means that your money is going into poor performing stocks and ETFs rather than the strongest assets in your portfolio.

M1 Finance vs. Betterment: Banking

Both M1 Finance and Betterment offer checking accounts with no minimum balance.

With M1 Finance, the features of your checking account depend on whether you sign up for a paid Plus account or stick with the free account. A free checking account doesn’t offer interest or debit card rewards, and you only get one free ATM withdrawal per month. With a Plus account, you get 1% APY interest, 1% cashback on purchases, and four free ATM withdrawals per month.

Betterment’s checking account doesn’t charge any fees – even overdraft fees. There’s no interest on your deposits, and rewards for purchases vary by merchant (typically 2% to 5% cashback for big brands and 0% for local stores).

Betterment also offers a fee-free savings account with no minimum balance. It offers 0.40% APY on your deposits.

One interesting thing that M1 Finance enables you to do is to borrow money against the funds in your investment portfolio – including IRA and trust accounts. You can borrow up to 35% of your account value instantly, with no paperwork and no credit check. M1 Finance charges interest rates of 3.5% APR for free users and 2% APR for Plus users.

Be very cautious borrowing money from your investing account. If the value of your investments drops, you could be forced to repay some of the loan immediately or to sell off your investments.

M1 Finance vs. Betterment: Pricing

M1 Finance allows you to open investing and checking accounts at no cost. If you want a 1% interest rate and cashback for your checking account or a lower rate for borrowing against your portfolio, you can sign up for M1 Plus for $125 per year.

Betterment allows you to open a checking or savings account for free. If you invest with Betterment, the platform charges 0.25% of your total portfolio value (not including money in checking and savings accounts) as a management fee. If you have at least $100,000 in total assets with Betterment, you can upgrade to a Premium Investing account. This carries a 0.40% management fee and comes with unlimited access to a team of financial planners.

Which Service Is Better?

If you want to make the process of creating a portfolio as simple as possible, Betterment may be the best option for you. You can start investing in the Core portfolio in just a few clicks, and you don’t have to worry about customizing it or adding individual stocks. If you set up recurring investments when you create your account, you can effectively go years at a time without checking in on your portfolio.

If you don’t mind a little more complexity, we think M1 Finance offers a better service overall. You can choose from 100 pre-made portfolios that are ready for you to invest in and forget about. You also have the freedom to build your own portfolio from scratch or to mix-and-match a pre-made portfolio with individual stocks and ETFs. Many users can take advantage of M1 Finance’s free account, in which case this service is significantly cheaper than Betterment in the long run.

M1 Finance And Betterment Alternatives

Services like Stash and Wealthfront compete closely with M1 Finance and Betterment. Wealthfront is identical to Betterment in many ways, although it lacks Betterment’s goal-based portfolios. Stash is very similar to M1 Finance, but it has a narrower selection of stocks and ETFs to choose from and doesn’t enable you to invest for free. Overall, we think M1 Finance is the best choice out of all of these services for most investors.

Conclusion: M1 Finance vs. Betterment

M1 Finance and Betterment are both excellent services that are well-suited to new investors. While Betterment may be better suited to some investors who prize simplicity and goal-oriented planning, we think M1 Finance is the better service for most people. It offers both pre-made portfolios and individual stock and ETF investing, so you can easily build a custom investment portfolio that’s right for you. Still can’t decide? Check out our full review of M1 Finance here and our full review of Betterment here to learn more!