Betterment vs Vanguard: what’s the difference?

1 min readLast updated December 5, 2023by Rachel Carey

Find out what you need to know about Betterment vs Vanguard, from investing strategies and fees to pros and cons, socially responsible investing options, and more.

Summary 

  • Betterment is a robo-advisor service, and Vanguard is a renowned brokerage firm. 

  • The two have vastly different service offerings and fee structures. 

  • Betterment financial advisors manage portfolios, and Vanguard offers active and passive options. 

  • You need to choose the option that suits your needs and level of involvement in investing. 

  • A financial advisor can help you decide which option is best. 

Betterment vs Vanguard: what’s the difference?  

There is a wealth of options available for people who want to start investing with large and small long-term and short-term goals in mind. While some of those firms are similar, others offer products and features that are better suited to individuals with a different approach to investing. Betterment vs Vanguard is a good example of how varied investing options can be.  

Betterment is a robo-advisor service that lets you invest in a series of funds automatically managed by the service. You can’t use this platform to invest in individual stocks, options, bonds, and other securities. 

Vanguard is a brokerage firm that offers an online and mobile trading platform. You can use the platform to research, build, and manage your portfolio, with the ability to trade most mainstream securities. 

What are Vanguard and Betterment's specific investment strategies? 

Betterment and Vanguard have significantly different investment strategies.  

Vanguard offers a wide array of investment options, including both active and passive strategies. You can actively trade securities basing your decisions on financial advice, research, and data, or you can let your money work for you by taking advantage of high interest rates.  

Betterment provides automated portfolio management based on individual goals and risk tolerance. 

What fees should I expect from Vanguard and Betterment?  

Fees are another area where key differences emerge when looking at Vanguard vs. Betterment. To put both firms in perspective, let’s take a quick look at the four main types of fees that most brokerage and investment firms and online platforms charge their clients: 

  • Trading commissions: These are charges attached to your trades based on a percentage of the values or volumes of those trades. 

  • Trading fees: These are fixed charges attached to each of your trades, either flat fees or based on the difference between the buying and selling price of the asset. 

  • Inactivity fees: These fees are charged if you hold assets instead of trading them or if you keep money in a brokerage account instead of using it for trading. 

  • Other/non-trading fees: These are additional fees not included in those described above, such as fees for signing up, additional services, or depositing money into or withdrawing it from your brokerage account. 

You will only find some of the four types of fees being charged at Betterment and Vanguard. It’s vital to understand how both firms’ fees are structured. 

At Betterment, most of the fees take the form of commission. You can choose between two different plans based on investment volume. The Betterment Digital basic plan charges an annual fee worth 0.15% of all assets (no minimum balance). For example, you will pay $25 per year if you have $10,000 in your Betterment account. 

The Betterment Premium higher-tier plan charges an annual fee worth 0.30% of all assets ($100,000 minimum balance). For example, you will pay $400 per year if you have $100,000 in your Betterment account. Whether you choose the Digital or Premium plan, Betterment financial advisors will manage your investments. The firm also offers a no-fee checking and savings account. 

At Vanguard, the fee structure is based mostly on trading. There’s no charge for trading stocks and exchange-traded funds (ETFs) and a fee of $1.00 per contract to trade options contracts.  

Vanguard mutual funds, as well as those on the firm’s no-fee list, are free to all investors. There’s a $20 fee to trade third-party mutual funds that are not on the list. You can take advantage of reduced-price options if your account has at least $1 million in assets. The firm doesn’t charge inactivity or non-trading fees, and it doesn’t require a minimum account balance. 

Is Betterment or Vanguard better? 

The offerings of Vanguard vs Betterment are different even though both firms aim to achieve similar results, namely, growing their customers’ money through providing investment opportunities.  

Both have pros and cons that you should be aware of before deciding which firm is best for you. 

Vanguard:

ProsCons
Low-cost fund leader Site doesn’t offer much data and research
High interest rate for uninvested cash Basic trading platform
Big mutual fund selection
No-commission stock, options, and ETF trades
Great quality of order execution

Betterment:

ProsCons
Invest all cash through fractional shares No direct indexing
Multiple portfolio options, such as customization Robo-advisors do not offer tailored guidance whenever you need it.
Low minimum balance and fees
Powerful goal-based tools

Vanguard or Betterment: which should I choose? 

If you’re still wondering whether you should choose Vanguard or Betterment, it’s worth spending time thinking about a few different factors. Consider your circumstances, goals, and whether you would like to actively manage your portfolio.  

You may find that a clear winner emerges from Betterment vs Vanguard. It’s also helpful to speak to a financial advisor about your options. 

Which platform is favored by investors seeking sustainable and socially responsible investing options? 

Betterment offers SRI (Socially Responsible Investing) portfolios as an option, making it an attractive choice for investors interested in ESG (Environmental, Social, and Governance) investing. 

How do Vanguard and Betterment stay competitive and adapt to changing market conditions? 

Both companies continually introduce new features and investment options. They also meet investor needs by staying updated with regard to market trends. 

Need more information? 

In the matter of Vanguard vs Betterment, it isn’t a case of comparing similar firms. Instead, what you find are firms that are suitable for two different types of investors. While Vanguard has active and passive options, the trading platform encourages a more hands-on approach. Betterment is all about offering its clients a hands-off approach as Betterment financial advisors will manage their portfolios.  

Learn more about investment firms and their offerings. Let us match you with a regulated advisor whose expert financial advice can help you navigate your options.

Senior Content Writer

Rachel Carey

Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.