Years ago, few people would be able to imagine what robo-advisors are capable of today and at such a low cost. But they have become commonplace in 21st century investing as a way to streamline your investing without hiring a financial advisor.
However, with the multitude of options out there, how do you pick the right robo-advisor for your situation that will allow you to move towards your goals?
It is easy to become overwhelmed, and even to possibly experience information overload. SoFi Invest and Betterment are both hefty competitors to the traditional investment portfolio leaders and at a fraction of the cost.
In this review, we will be comparing the two side by side to see how they stack up!
If you prefer watching instead, check out our video on Betterment vs SoFi Invest below!
Betterment is one of the original robo-advisors. By combining the ease-of-use of apps like Robinhood with the personalized advice you previously had to seek from a financial advisor, they are able to create a truly unique offering. The platform takes a goals-based approach to investing and helps you track your progress along the way.
SoFi Invest is a part of the larger SoFi ecosystem. On the platform, you can choose whether to pursue a more active approach of buying and selling individual stocks, or you can opt for their automated investing. Both options are free to use and allow investors to create the kinds of portfolios they are looking for.
Both apps are built on the premise of streamlining the investing process for the masses. However, the route taken by both apps is different and each appeals to a specific audience.
|Management Fees||0.25% To 0.40%||0%|
|Number Of Portfolios||101 Portfolios||10 Portfolios|
|Tax Loss Harvesting||Yes||No|
|Best For||Hands-Off Stock Market Investors||Hands-On Stock And Crypto Investors|
Social Finance, better known as SoFi, is an online personal finance company. They specialize in student loan refinancing, mortgages, personal loans, investing, and banking. While that is a lot to take in, for the purposes of this article, we will focus on SoFi’s investing arm, SoFi Invest.
SoFi Invest refers to a three-pronged platform for young investors ready to get their feet wet in investments. The platform is a relative newcomer to the investment community but has already shown its value to its more than 1 million users.
You can read our full review of SoFi Invest here.
SoFi Invest is broken into three categories, each focused on separate goals for investors. These three categories are: Active Investing, Automated Investing, and Crypto.
When you invest with SoFi, you become part of the community and its many perks. For instance, you can get career coaching, financial planning advice, a paid referral program, discounts on other SoFi products, and more. Benefits like these are free for members and according to SoFi, will only be increasing as time goes on.
With Active Investing, there are no account minimums and fees to stop you from making the leap. In addition, Active Investing feeds investors news updates, so you can stay on top of the world of investing and the companies you are invested in.
Fractional shares called Stock Bits are another huge benefit to investing with SoFi. You can invest in dollar amounts instead of numbers of shares. SoFi doesn't have this option available for all blue-chip stocks, but it does have 43 of the most popular to choose from.
You can invest a minimum of $1 into companies that would be out of your reach ordinarily due to the high share price.
In addition to trading individual stocks, SoFi Invest also lets you purchase ETFs. Listed below are the ETF options available for members (according to the SoFi website):
The fact that SoFi creates their own ETFs is something that sets them apart from many of the other investing apps out there. However, keep in mind that due to how unique these ETFs are, the fees will be a bit higher than you will see from a company like Vanguard.
SoFi Automated Investing is a great choice for people stashing money away for the long-haul (retirement) or a particular goal (college). When you sign up as a member and complete a short questionnaire, SoFi will build and manage a portfolio for you with no management fee.
Through this option, members can tackle these goals and feel confident that they will meet them with SoFi’s regular portfolio rebalancing. These portfolios were created with risk in mind. Therefore, each one is diversified in order to give people their best shot at reaching financial wellness.
While management fees are not included in the portfolios offered, they do come with other expenses ranging from 0.03% to 0.08%. This is fairly low compared to other expense ratios.
In general, you'll be hard-pressed to find a fully automated investing option any cheaper than this. Most options will run you at least 0.25% and sometimes over 1% of your assets.
People can also save for more popular long-term goals like retirement on the SoFi platform. When you sign up with SoFi Invest, you can set up retirement accounts and choose from a Roth IRA, Traditional, or SEP IRA.
By taking advantage of these special account types, investors can reduce and potentially eliminate any taxes owed on their investment gains. Investors with a longer-term time horizon will typically do well to look into these types of accounts.
Investing in cryptocurrency is relatively new to the company. When you complete your first crypto trade of $10 or more, you will automatically get $25 in bitcoin.
Unlike the stock market, cryptocurrency is open for trading 24/7. However, unlike trading stocks with SoFi Invest, trading crypto comes with a cost. They charge a 1.25% fee for each trade. All crypto trades have a minimum order size of $10 per purchase and a max of $50,000.
The fee will be applied based on the amount of crypto you decide to buy. For example, if the price of Litecoin was $100 and you wanted to buy one Litecoin, SoFi would mark up the price to $101.25 and you would receive slightly less than one full Litecoin.
In addition, cryptocurrency can't be transferred to an external wallet. This is done to protect the integrity of SoFi’s user data. If you are looking for a platform with that functionality, we recommend Coinbase.
At the moment, there are 27 cryptocurrencies offered on SoFi. These include Bitcoin, Ethereum, Dogecoin, Cardano, and more.
Betterment is a robo-adviser offering automated and goal-inspired investments for everyday people like you and me.
Betterment creates passive ETF portfolios for investors based on a variety of factors. These portfolios typically consist of a mix of stock index funds and fixed income depending on the individual's situation. Additionally, investors can open tax-advantaged investing accounts including traditional and Roth IRAs.
The platform is primarily designed for hands-off investors that do not want to trade and rebalance their portfolio themselves. Betterment takes care of the maintenance of your investments so you can focus on other things and know your portfolio is on track.
Betterment has several features that make it stand out among other robo-advisers.
Like many other online platforms today, Betterment has a no-fee checking account, high-yield savings, goal-specific portfolios, and automated retirement savings. However, in order to compare apples-to-apples with SoFi Invest, this review will focus on Betterment’s investing arm.
Betterment prides itself on helping people accomplish specific goals.
Start by brainstorming your goals before you set up your Betterment account. Maybe it’s a dream house, a tropical vacation, or a lump of cash to pay for your child’s education. Whatever the goal, Betterment can help design the right portfolio for you.
Within your Betterment account, you can set up separate sub-accounts for working towards each of your goals. This makes it very easy to make sure you're on track and keep your motivation high as you go.
Betterment touts that its portfolio strategy was built on Nobel-prize winning research. This was done so people will feel confident they will earn great returns at each risk level. Portfolios were designed on the foundations of Modern Portfolio Theory, one of the leading theories on investment portfolio construction.
Betterment features ETFs in 12 asset classes set up to match your risk tolerance for your specific. Listed below are some examples of ETFs to choose from:
You can also be more hands-on with the ‘flexible portfolios’ approach letting you change the amount in a specific ETF.
In addition to their standard portfolios, Betterement offers a number of advanced portfolios to investors looking to pursue more complex investing strategies. Two of their most popular advanced portfolios are the Smart Beta Portfolio and the Target Income Portfolio.
Betterment's Smart Beta Portfolio was designed by Goldman Sachs and has the objective of taking on additional risk and volatility in the short term in order to provide greater returns in the long term.
The Target Income Portfolio was built by BlackRock and is designed to provide a fixed income stream that provides diversification away from the stock market.
By partnering with well-established firms like Goldman Sachs and BlackRock, Betterment is able to further diversify their offerings and provide a level of service to their users that other companies cannot. These portfolios allow everyday investors to take advantage of some of the strategies that were previously reserved for only the ultra-wealthy.
Another investing strategy previously only open to individuals wealthy enough to work with a financial advisor is tax-loss harvesting. This is the process of selling investments that have declined in value in order to negate taxable gains in your portfolio.
Typically this strategy was applied by financial advisors near the end of the year in order to mitigate the tax burdens of their clients. However, by offering automated tax-loss harvesting to their users, Betterment has democratized access to this service.
All Betterment users are able to benefit from automated tax-loss harvesting and this feature alone has the potential to save investors significantly more than the fees Betterment charges them.
Based on their research, the average Betterment user sees a 0.48% per year increase in their portfolio as a result of tax-loss harvesting. While there may have been some bias in those results, it is clear that this strategy alone could be more than worth the price of admission.
Users of Betterment who are socially-inclined will be pleased to hear that on the platform, investors can choose to invest in socially-responsible investments. These include investments in renewable energy, conservation efforts, and purpose-driven companies striving to improve the world we live in.
For many, it is important that their investment dollars are not going towards so-called "sin stocks" and by choosing to invest in socially-responsible companies, investors can be assured that their investing aligns with their beliefs.
Betterment knows that no two people are alike. Therefore, retirement strategies are not cookie-cutter! You start with a short questionnaire about your age, goals, income, and how much risk you're willing to take.
Next, Betterment creates a personalized plan for you. Betterment lets you open a brand new Traditional, Roth, or SEP IRA, or roll over an old 401k or convert an old IRA into a new one.
One of the best features with long-term savings through Betterment is being able to project how much will need to retire comfortably and set up automatic withdrawals whenever you like. While it is free to create a retirement plan through Betterment, be aware that they charge a management fee if you decide to invest with them.
The platform's fees are based on two different pricing models that vary depending on your account balances and the level of advice from actual people!
The Digital plan comes at a 0.25% fee with no account minimum and no human advice.
Betterment Premium is for people with $100,000 to invest and are willing to pay a fee of 0.40%. In return, Betterment Premium customers get advice from the pros and one-on-one guidance on their money both within Betterment and outside of it.
As with other robo-advisors, Betterment will rebalance your account every time your portfolio strays too far from its original goal. This will make sure your portfolio is always optimized and you are always on track to achieve your goals. When they rebalance, the company will also buy fractional shares, so they invest every dollar.
Depending on your investing style and goals, these features could more than make up for the fee that Betterment charges.
You also don't have to worry about any hidden fees or costs on Betterment. What you see is what you get, and you won't be on the hook for any other fees on this platform.
In conclusion, both platforms are extremely impressive and offer several perks outside of the old investment options. However, they are each unique and carry their own value.
If you are looking for more flexibility in how and where you invest, SoFi is the clear winner. By offering individual stock investments as well as cryptocurrency, you are able to create a more precise portfolio. When it comes to fees, again, SoFi takes the cake. With no management fee, it is hard to find too many issues with SoFi Invest.
If you are looking to spend as little time as possible on your investments, Betterment clearly takes the cake. The streamlined process for designing users a portfolio and managing it over time allows for hands-off, automated investing.
Additionally, Betterment has poured lots of research into its portfolio mix, which is a significant plus. This alone should help you feel more confident about your investments and justifies the larger expenses associated with the accounts.
In the end, it comes down to your specific goals as an investor and how involved you want to be with your investments. You're also able to use both for different investments which might make sense for you if you want some of each!