Betterment vs. Robinhood [2024]: Which Is Better for Beginners?

If your emergency fund is stocked and your retirement account is maxed out, it could be time to start thinking about investing money. Although all investments come with risk, investing early and regularly could help you reach your long-term money goals and build a nest egg for retirement.

If you are thinking about investing in the stock market, Betterment and Robinhood are two investment apps worth considering. Here’s a look at how they work as well as their features and differences.

Betterment vs. Robinhood

Both Betterment and Robinhood let you start investing even if you don’t have a lot of money to put into the market. But there are some key differences that set these services apart.

Minimum investment	$10 to get started investing, $0 minimum balance requirement	None, or $2,000 (or 100% of the securities’ price, whichever is lower) if you want to invest on margin
Account fees	.25% annually for a Betterment Digital account .40% annually for a Betterment Premium account	None with a basic Robinhood account $5 per month for Robinhood Gold
Asset classes	Stock and bond exchange-traded funds	Stocks, exchange-traded funds, options, cryptocurrencies
Account types available	Trust accounts Joint taxable accounts Individual taxable accounts Inherited IRA SEP IRA Traditional IRA Roth IRA FDIC-insured checking account FDIC-insured Cash Reserve account1	FDIC-insured spending account Individual taxable accounts Traditional IRA Roth IRA
Features	Socially responsible portfolio options Earn up to 5.50% (as of Jul. 31, 2023) APY2 with a Cash Reserve account with no minimum balance or fees3	First stock free Build a customized portfolio Robinhood Cash Card
Distributions	Automatically reinvested	Automatically credited as cash or reinvested
Best for...	Hands-off investors	Hands-on investors
	Visit Betterment	Visit Robinhood
	Paid Non-Client Promotion Paid non-client of Betterment. Views may not be representative, see more reviews at the App Store and Google Play Store. No guarantee of future performance or success is being made. Learn more about this relationship.

How does Betterment work?

Betterment is a robo-advisor that allows you to invest in a portfolio of low-cost ETFs. When you sign up for a Betterment account, the company will ask you about your risk tolerance, your financial goals, and when you’ll need to access your money. You won’t need to pick stocks or manage your portfolio because Betterment’s sophisticated algorithm does those things on your behalf, making it an option worth considering for new investors who prefer a more hands-off investment strategy.

Betterment currently offers two plan options for investors. Its Digital plan has an annual fee of just .25% per year, and there’s no minimum balance requirement. This plan includes convenient features like automatic rebalancing, tax-loss harvesting, and dividend reinvestment. The company also offers a premium account, which requires a minimum account balance of $100,000 and comes with a .40% annual fee. Its premium account includes features like unlimited advice from Betterment’s team of certified financial planners.

In addition to taxable investment accounts, Betterment also offers a checking account, a high-yield cash reserve account, and several options for tax-advantaged retirement accounts. If you’re not sure where to start, Betterment recommends opening a Cash Reserve account, which earns a variable APY of up to 5.50% (as of Jul. 31, 2023),² and then selecting your financial goals to get personalized investment suggestions.

Read our Betterment review for more details.

>> See our picks for the best robo-advisors

How does Robinhood work?

When you invest with Robinhood, it’s a more hands-on experience than you’d get with Betterment or another robo-advisor. You can choose to purchase fractional shares of more than 5,000 stocks listed in U.S. exchanges, 650 global stocks, and ETFs. If you are interested in how to buy cryptocurrency, you may also have the option to invest in these alternative assets with a Robinhood Crypto account, depending on where you live.

Robinhood offers commission-free stock trading, and it won’t charge you to open a basic investment account, and it doesn’t charge management fees, either. If you’re looking for more advanced investing features, you also have the option to upgrade to a Robinhood Gold account for $5 per month. With Robinhood Gold, you can make larger deposits, access funds faster, trade stocks on margin, and view in-depth research reports.

Robinhood also offers tax-advantaged Roth and traditional IRAs through Robinhood Retirement accounts. These accounts give you a 1% match on qualified deposits, which is an uncommon benefit to have with investment platforms.

In addition to its investment accounts, Robinhood recently added a cash card that is linked to an FDIC-insured spending account. The card allows you to automatically invest your change in stocks or cryptocurrencies. When you opt in for this feature, Robinhood will round up your transactions to the nearest dollar and invest the difference in assets of your choice.

Read our Robinhood review for more details.

>> See our picks for the best investment apps

What both investment platforms excel at

Both platforms allow you to invest in fractional shares, though Betterment does so indirectly. With Robinhood, you can purchase fractional shares of company stock. With Betterment, you’re investing in ETFs, but your investment mix could include fractional shares. Fractional shares can help you build a more diversified portfolio with a smaller investment than what you’d typically need to invest in full shares.

Both Betterment and Robinhood are relatively low-cost options, compared with actively managed mutual fund portfolios with traditional brokerages, which may require high investment minimums and typically charge larger fees. A basic investment account with Robinhood is free, and Betterment charges a .25% management fee for its Digital account.

In addition to their desktop platforms, Robinhood and Betterment have well-reviewed mobile apps available for Android and Apple devices, so you can easily manage your account no matter where you are. And whether you’re a new or experienced investor, both investing apps offer a wealth of free financial resources to help you learn about investing. In addition to their investment products, both companies also offer checking and savings products for holistic money management.

Get Up to 5.00% APY on Uninvested Cash With This Membership

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FinanceBuzz writers and editors score products and companies on a number of objective features as well as our expert editorial assessment. Our partners do not influence our ratings.

Robinhood Benefits

• Earn more interest on your uninvested cash with 5.00% APY (as of April 12, 2024)
• Get up to $50K of your deposits instantly, so you can jump on investment opportunities faster
• Borrow money to increase your buying power with margin investing at 8% (as of Nov. 15, 2023) APY for Gold members

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FinanceBuzz writers and editors score products and companies on a number of objective features as well as our expert editorial assessment. Our partners do not influence our ratings.

Join Robinhood Gold here

5 important differences between Betterment and Robinhood

Although both services could be a great option if you’re looking to start investing for a relatively low cost, there are several key differences between Robinhood and Betterment:

1. Choosing investments: Although you have the option to handpick your stocks and ETFs with Robinhood, you can’t invest in individual stocks or funds with Betterment. Instead, you choose your level of risk and investing style, and Betterment builds a portfolio of low-cost ETFs based on your preferences. If you prefer a more hands-off approach to investing, Betterment could be the better choice for you.
2. Automatic rebalancing: Betterment offers automatic rebalancing, so if your portfolio deviates from your target allocations, Betterment will automatically rebalance it for you. Robinhood does not offer automatic rebalancing, so if you choose to open an account, you’ll need to manage your portfolio manually.
3. Customer support: If you have general questions, you can reach Betterment customer support specialists by phone or email, five days per week. Robinhood offers an online form for general customer service inquiries, but there's no contact phone number available on its website.
4. Financial advisors: Betterment gives you the option of buying a financial advice package with its Digital plan. You can also get ongoing financial planning advice from human advisors when you sign up for a Betterment Premium account. Robinhood does not offer clear information about whether account holders have the option to work with a human.
5. Available securities: Betterment’s ETF investment mix could include bonds, while Robinhood does not allow you to invest in bonds either directly or indirectly. Robinhood offers the option to invest in cryptocurrencies with a Robinhood Crypto account, but Betterment does not offer this option.

Which investment platform should you choose?

If you like the idea of being able to pick and choose companies to invest in and you have the knowledge and experience to be able to build a balanced portfolio, Robinhood could be a good choice for you. If you prefer passive investing or are new to investing, Betterment might be the better investing platform between the two.

Although Betterment does come with a management fee of either .25% or .40%, depending on the account you choose, paying the fee takes the burden of portfolio management off of your shoulders, which could be a good thing depending on your personal investing strategy.

Also, consider the type of investment options that best meet your needs. For instance, if you want to buy and sell cryptocurrencies, Robinhood could be a good choice.

FAQs

Bottom line

Both Betterment and Robinhood offer investors an opportunity to break into the market with a small investment at a low cost, but they meet very different needs and investing styles. If you’re still not sure which investment platform is right for you, check out our picks for the best brokerage accounts and best investment apps to see the full range of options.

FinanceBuzz is not an investment advisor. This content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice.

Get Up to 5.00% APY on Uninvested Cash With This Membership

4.2

FinanceBuzz writers and editors score products and companies on a number of objective features as well as our expert editorial assessment. Our partners do not influence our ratings.

Robinhood Benefits

• Earn more interest on your uninvested cash with 5.00% APY (as of April 12, 2024)
• Get up to $50K of your deposits instantly, so you can jump on investment opportunities faster
• Borrow money to increase your buying power with margin investing at 8% (as of Nov. 15, 2023) APY for Gold members

4.2

FinanceBuzz writers and editors score products and companies on a number of objective features as well as our expert editorial assessment. Our partners do not influence our ratings.

Join Robinhood Gold here