Betterment Vs Wealthfront: Which Is The Better Option For You?

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Triston Martin

Jan 26, 2022

Both companies provide a wide range of wealth-building solutions, such as investment accounts, savings accounts, retirement accounts, and other products and services. Also available are web-based systems and smartphone applications that allow you to passively invest in ETFs using Robo-advisors. However, the price structures, stock portfolios, and account features offered by the two advisers are somewhat different. So, what's best for you betterment vs wealthfront?


Betterment


Betterment was one of the first Robo-advisors to launch, and it continues to be one of the industry's leaders. There is no minimum to begin, so you can get started right now. Aside from the fact that there is no need for a minimum balance to get started, Betterment has specialists on hand to provide personalized guidance. Because no two people's investing goals are identical, you may consult a qualified financial planner to obtain personalized advice tailored to your needs. There is a higher yearly cost associated with the premium plan — 0.4 percent instead of 0.25 percent for a standard account — and you will need at least $100,000 to get started with it. Alternatively, if you do not satisfy the premium account requirement, you may speak with a professional for at least $199.


Betterment provides socially responsible investing, which means that your money is invested in accounts that adhere to particular social and environmental criteria, as defined by Betterment. Additionally, Betterment provides a cash account. A minimum deposit of $10 is required; it presently offers a competitive annual percentage yield of up to 0.30 percent and requires a minimum deposit of $10.


Wealthfront


Wealthfront requires a $500 minimum deposit to open an account. This might persuade you in a different direction, but it all depends on what you want to invest in. Instead of a 529 college savings plan, Wealthfront offers one, but Betterment does not. If you want to put money aside for college, a Wealthfront account could be the best place to store your funds. Wealthfront provides tax-loss harvesting at the stock level. Instead of investing only in exchange-traded funds (ETFs) or index funds, it makes individual stock investments in the S&'P 500 index, similar to ordinary tax-loss harvesting. These are potentially attractive investments for people looking to step up their portfolios. Wealthfront also provides a cash account (with an annual percentage yield of 0.26 percent) that can be opened with as little as $1.


Tax Strategy


· Betterment


It is also possible for a Robo-advisor to contribute value via its tax strategy, and Robo-advisors are well positioned to do tax-loss harvesting since they have the capacity to execute transactions that would be prohibitively difficult for a human advisor to execute. Tax-loss harvesting is the practice of selling losers to claim a tax loss that may be used to offset profits. Betterment and Wealthfront both employ daily tax-loss harvesting to attempt to maximize your earnings, which is why both are recommended. Normal practice is to sell one fund and then replace it with another with many of the same qualities as the previous one. You will have access to this service regardless of the number of assets you deposit into the accounts.


A tax-coordinated portfolio is also available via Betterment, which aims to reduce taxes by allocating assets efficiently between taxable and tax-advantaged accounts, such as an IRA. According to Robo, this service increases after-tax returns by about 0.48 percent per year, or almost double the advising cost.


· Wealthfront


Wealthfront, on the other hand, takes tax-loss harvesting to a whole new level. As soon as you have more than $100,000 in your account, Wealthfront may begin employing direct indexing, which will provide you with additional possibilities to save money. As a result, your account owns the stocks that make up the fund rather than owning the fund. Wealthfront has more opportunity to incur losses on each given trading day, which translates into more savings over time.


A tax-loss harvesting software from Wealthfront claims to be able to reimburse the company's charge for 96 percent of its customers. According to the Robo-advisor, customers with riskier portfolios (that is, portfolios that are heavily weighted in stocks) have had an estimated after-tax benefit of six to thirteen times the advising cost. On the other hand, Betterment claims that their tax-loss harvesting service would have given an average 0.77 percent after-tax improvement to an investor's returns between 2000 and 2013. Betterment's yearly advising charge is almost three times this amount.


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