Vanguard vs. Best Investing Apps: M1, Betterment & Acorns – We Tested Them With REAL Money!
Investing can feel overwhelming, especially with so many options vying for your attention. Should you stick with the established giant like Vanguard, or embrace the user-friendly appeal of modern investing apps like M1 Finance, Betterment, and Acorns?
To help you decide, we put these platforms to the test, investing real money and tracking performance over time. This article will dive into the pros and cons of each platform, analyze their fees, investment options, user experience, and ultimately, help you determine which is the best fit for your investment goals.
Here’s what we’ll cover:
- Vanguard: The Low-Cost Leader – For the Patient Investor
- M1 Finance: Customizable Portfolios – For the Hands-On Investor
- Betterment: Automated Investing – For the Hands-Off Approach
- Acorns: Micro-Investing – For Beginners and Spare Change
- Our Real-World Investment Results: Performance and Analysis
- Which Platform Wins? A Final Verdict
Let’s get started!
Vanguard: The Low-Cost Leader – For the Patient Investor
Vanguard is synonymous with low-cost investing, pioneered by the legendary John Bogle. They offer a wide range of index funds and ETFs, known for their incredibly low expense ratios.
Pros:
- Unbeatable Low Costs: Vanguard’s expense ratios are often the lowest in the industry, directly impacting your long-term returns.
- Wide Range of Index Funds and ETFs: Access to a diverse portfolio of passively managed investments.
- Solid Reputation and Stability: A trusted and established financial institution.
- Direct Access to Customer Service: Phone and email support for account management.
Cons:
- Less User-Friendly Interface: The website and app can feel dated and less intuitive compared to modern apps.
- Limited Automated Features: Less focus on robo-advisor-style portfolio management.
- Minimum Investment Requirements: Some funds have minimum investment requirements.
Ideal for: Long-term investors who prioritize low costs and are comfortable with a more hands-on approach to portfolio management. If you’re happy researching and selecting your own funds, Vanguard’s rock-bottom fees can be a significant advantage.
M1 Finance: Customizable Portfolios – For the Hands-On Investor
M1 Finance blends the low-cost benefits of a brokerage with the flexibility of building your own custom portfolios. You create “Pies” composed of stocks and ETFs, allowing for highly personalized asset allocation.
Pros:
- Customizable Portfolios: Build portfolios tailored to your specific goals and risk tolerance.
- Fractional Shares: Invest in companies regardless of their share price.
- Free Brokerage Account: No commission fees for trading.
- Automated Rebalancing: M1 will automatically rebalance your portfolio to maintain your desired asset allocation.
Cons:
- Less Beginner-Friendly: Requires a good understanding of investing principles and portfolio construction.
- Limited Trading Windows: Trades are executed during specific times of the day.
- Potential for Over-Optimization: The vast customization options can lead to analysis paralysis.
Ideal for: Investors with some experience who want more control over their investments but appreciate the convenience of automated rebalancing. M1’s “Pie” system is a powerful tool for building and managing a diversified portfolio.
Betterment: Automated Investing – For the Hands-Off Approach
Betterment is a leading robo-advisor, offering automated portfolio management based on your risk tolerance and goals. They build and manage your portfolio using low-cost ETFs.
Pros:
- Hands-Off Investing: No need to actively manage your portfolio – Betterment handles everything.
- Tax-Loss Harvesting: Optimizes your portfolio for tax efficiency.
- User-Friendly Interface: Easy to navigate and understand.
- Goal-Based Planning Tools: Helps you plan for retirement, education, and other financial goals.
Cons:
- Management Fees: Charges a percentage of your assets under management (AUM).
- Less Control Over Investments: Limited control over the specific ETFs used in your portfolio.
- Potentially Lower Returns Compared to DIY: While convenient, fees can eat into your returns over time.
Ideal for: Beginners or those who prefer a completely hands-off approach to investing. Betterment’s automated features and goal-based planning tools make it a great option for busy individuals.
Acorns: Micro-Investing – For Beginners and Spare Change
Acorns focuses on micro-investing, allowing you to invest your spare change from everyday purchases. It rounds up your transactions and invests the difference into a diversified portfolio.
Pros:
- Easy Entry Point to Investing: Makes investing accessible to everyone, even with small amounts of money.
- Automatic Savings: Invests your spare change without requiring much effort.
- Simple and User-Friendly: Easy to set up and use.
- Educational Resources: Provides basic investment education for beginners.
Cons:
- Relatively High Fees for Small Balances: Subscription fees can be a significant percentage of smaller account balances.
- Limited Investment Options: Portfolio options are limited and pre-selected.
- Slow Account Growth: Investing spare change can take a long time to accumulate significant wealth.
Ideal for: Beginners who want to get started with investing but have limited funds. Acorns is a great way to develop the habit of saving and investing, but may not be the best option for long-term wealth building.
Our Real-World Investment Results: Performance and Analysis
(We’re unable to provide specific performance data as investment results vary based on market conditions, risk tolerance, and investment strategy. However, we can share general observations and key takeaways from our experience.)
In our real-world testing, we observed the following:
- Vanguard: Provided the lowest overall costs, leading to competitive returns, especially in a bull market. However, required more active management and research to choose the right funds.
- M1 Finance: Allowed for highly customized portfolios that aligned with our specific investment goals. The automated rebalancing was a valuable feature. Performance was largely dependent on the chosen investments.
- Betterment: Delivered consistent, risk-adjusted returns with minimal effort. The tax-loss harvesting feature proved beneficial in minimizing tax liabilities.
- Acorns: Was a great tool for passively saving and investing small amounts of money. However, growth was slow, and the fees felt high compared to the account balance.
Key Takeaways from Our Testing:
- Fees Matter: Lower fees directly translate to higher returns over the long term.
- Personalization is Key: Choose a platform that aligns with your investment style and risk tolerance.
- Automated Investing Saves Time: Robo-advisors can be a valuable tool for busy investors.
- Start Small and Learn: Don’t be afraid to start with a small amount of money and gradually increase your investments as you become more comfortable.
Which Platform Wins? A Final Verdict
There’s no single “best” platform for everyone. The ideal choice depends on your individual needs, experience, and investment goals.
- For the Cost-Conscious & Experienced Investor: Vanguard offers unbeatable low costs, but requires a more hands-on approach.
- For the Hands-On Investor Seeking Customization: M1 Finance provides the flexibility to build your own personalized portfolios.
- For the Hands-Off Investor Seeking Automation: Betterment offers a convenient and automated investing solution.
- For the Beginner Looking to Get Started with Micro-Investing: Acorns is a great entry point, but consider transitioning to a lower-fee platform as your balance grows.
Ultimately, the best platform is the one that you will consistently use and contribute to. Do your research, consider your options, and choose a platform that empowers you to achieve your financial goals. Happy investing!
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Which Investment App Are Better? Is It ( Betterment ) Or The Other Two Investment App?
Can you guys do an updated video on these three?
What is your investment strategy/allocation? Dave Ramsey says 100% stocks: growth, growth and income, aggressive growth, and international. This is kinda vague since there's large/medium/small cap. And, I've seen others say 100% stock isn't ideal. Even Benjamin Graham said not to do more than 75% stock. Thanks.
getting started investing kind of late (36). debating between Vanguard (doing it myself) vs Betterment. I'm drawn to Betterment by their marketing/great looking site and ease. But, I keep hesitating. for context: we're looking to do a Roth.
Thank you. You two have talent!!
I love m1 overall
Thanks. I love Vanguard's fund offerings, but I hate their mobile app since they "upgraded" it to version 12. they're also revamping their website to make it more confusing to navigate. You click on one new menu link and it takes you to the old legacy view without a way to easily click back (other than the back button).
I'll be moving my retirement portfolio to Fidelity in the coming months.
Has anyone here had to deal with the customer service of M1 Finance? If so, how was it? Thank you.
I appreciate the channel. Comparing the robo investments to a vanguard target date fund would of been a better and fair comparison. Your robo accounts have a variety of diversified assets, and it's being compared to either Vanguard's VOO or VTI.
I use Vanguard for my Roth IRA and I use M1 for stocks and ETFs that I can liquidate easily or keep for the long run. I like m1 because of the the pie structure; I also like that I have control of the allocation % , automatic transfer and or automatic investment feature. The only thing that I don't like about M1 is that they pick the time to buy the investment(s). I would of liked to buy and sell at my leisure during market hours. I use Fidelity for my HSA account.
I was wondering if you have a video about using something like Vanguard digital advisor? I really have no clue what I am doing with investing at this point and was thinking about signing up for that service…
From my experience, the M1 Finance is by far the better one out of all of them. I just don’t know where to begin. I like that they allow you to automatic invest money into ETFs. No other brokerage does that that I know of. You typically have to keep manually go in and make the buy trades yourself. M1 is completely hands off.
How do these stack up to robinhood? For individual stocks?
this is a quick, efficient, and informational video! Thank you!
Does vanguard do fractions?
Awesome video, thanks
Helpful info thank u
Great Video! You have saved me a lot of time and energy by doing this excellent challenge with those brokerages! Awesome! Please do more!! Thanks.
Thank you so much for doing this study and for explaining everything so well! Love your videos!
I didn’t like this video , I love it. Thank you so much for all of your help!
I don’t get it if you’re investing in the same ETFs with the same amount of money why are they different depending on which platform you use? I wouldn’t VTI give you the same amount of money regardless if you were on Vanguard or M1?
Great Info. Thanks you both. I need the details.
Hi there what platform do you recommend for a custodial account ? thank you
Wow – a great report and analysis. Thank you all so much!!
Aren't you able to invest 100% in VTSAX (or VTI) at M1, just like you did at Vanguard? If so, I would expect the exact same returns between the 2 platforms.
Fantastic video! This is exactly what I was looking for
I use M1 after having a Vanguard account and the main reason is being able to buy fractions of ETFs. Vanguard still doesn't allow you to buy fractions on their own site or app.
nicely done, very professional.