Betterment vs. M1 Finance vs. Acorns | Which Robo-Advisor is Better (Battle of the 'Bots)
- Our Rich Journey
- Jul 23, 2019
- 4 min read
The Battle of the Bots: Betterment vs. M1 Finance vs. Acorns
A lot of people are curious about robo-advisors, and whether or not they’re worth using. We get asked this question all the time! So Amon and I started a “friendly competition” between three of the most popular robo-advisors: Betterment, M1 Finance, and Acorns.
I call this the “Battle of the Bots.” Basically, we invested $1000 into each robo-advisor to see which one would take our money and perform the best out of the three. We tracked the performance of each relative to each other, and relative to the total stock market.
You can find the results on our Instagram page, but today I’m going to share the ground rules for our “battle,” and the nitty-gritty details of each robo-advisor we chose.
Ground Rules
First, we deposited $1000 into each account and added another $10 per week on the same day (Wednesday). This is all US dollar-cost averaging.
Second, we used the same demographic for each account. 35 years old, married, two kids, and a family income of $100,000. With high-risk tolerance and general investing for the long-term. We reported our profile as having little to no investing experience. These stats aren’t ours, just the kind of profile we thought would typically invest in a robo-advisor.
Third, all money will be invested in the portfolio that the robo-advisor recommends. Each robo-advisor took our demographics and made recommendations based on this, so it’s a useful way of judging the advisors against each other.
Something to keep in mind: each robo-advisor took the same demographics, and though they didn’t give us the exact same recommendations, they were very similar across the board. Each one recommended we go into an aggressive stock portfolio made up of 80-90% stocks and 10-20% bonds.
M1 Finance
M1 Finance is our first contender, and it’s an online broker and investment manager hybrid that was established in 2015.
The reason that M1 Finance is considered a hybrid brokerage is it allows you to choose between self-managing your investments, or letting the robo-advisor algorithm manage them for you. M1 lets you choose individual stock funds or robo-advisor portfolios with a predetermined investment style.
The most appealing thing about M1 is that they don’t charge service fees for managing your money! They are absolutely free, and everyone likes free stuff.
When we signed up for M1 we were asked a series of questions in order to assess our risk tolerance and investment goals. Unlike other robo-advisors, they don’t just refer you to a specific portfolio after you’ve finished the questionnaire. They make you work a little more for results.
After the questionnaire, you’ll get options for ‘expert pies,’ which are predefined portfolios that follow an investment style. This way you can choose a ‘pie’ that fits your risk tolerance. Because we’re doing general investing, we reviewed the 8 general investing options and chose the one that we felt fit our demographic best.
This was the aggressive pie. This portfolio is made up of 8 Vanguard ETFs and has a dividend yield of 2.384% and an expense ratio of 0.06%. It’s made up of 86% stocks and 14% bonds.
Betterment
Betterment is probably the number one robo-advisor on the market, mainly because it’s one of the oldest and largest of its kind. Most people who invest have heard of it.
To start using the Betterment robo-advisor service, Better Digital, there’s no account minimum but there is a fee of 0.25% for assets under annual management. It only took us 10 minutes to fill in the questionnaire, and Betterment quickly recommended a portfolio.
Their recommendation was a general investment portfolio made up of 90% stock ETFs and 10% bond ETFs. It consists of 11 ETFs, most of them being Vanguard. The expense ratio is 0.06% which is the same for M1, except here they charge a 0.25% fee. One strange thing about using Betterment is that we couldn’t find the portfolio's exact dividend yield.
Acorns
Acorns are the young bucks of the robo-advisor game. It’s very popular with millennial investors and is best known for being one of the first ‘spare change investment’ apps. They let users save their spare change by automatically rounding up the purchases they make on their linked credit and debit cards.
So if you buy a soda for 75 cents, Acorn will take the remaining 25 cents and invest it. This is part of the reason it’s so popular, as it almost tricks you into investing. It also has a ton of other enticing features and has even started offering retirement accounts.
But you aren’t limited to spare change. You can invest any amount and set up recurring deposits, which is what we did of course. Acorn service fees cost $1 a month for an account with less than $5000 invested. But if you’re 18-23 years old they don’t charge you anything!
Once again, you fill in a questionnaire and Acorn will recommend a portfolio based on your demographics. It’s usually one of five portfolios that range from conservative to aggressive. We got a moderately aggressive portfolio, consisting of 80% stocks and 20% bonds. It’s made up of 7 ETFs (mostly Vanguard) with an expense ratio of 0.10%.
Strangely enough, the dividend yield is not published here, just like Betterment.
Tried comparing a few robo-advisors last winter just to understand how people automate investing without overthinking every move, and it got confusing faster than expected. The interfaces look clean, the promises sound simple, but once you start digging, each platform handles risk and control a bit differently. I remember sitting late with too many tabs open, trying to figure out what actually matters long term. In the middle of that, I opened https://international-development-services.pissedconsumer.com/review.html not even related to finance at first, yet the way real situations were described made me step back and think more about expectations versus reality. It helped slow things down instead of rushing into a decision based on surface impressions.
Comparisons like this are so useful because robo advisors can seem simple at first, but the little differences really shape the experience over time. Some people want automation and ease, while others like having more control and flexibility. I have noticed that the best choice usually depends less on hype and more on your habits, goals, and how involved you want to be. That is why side by side breakdowns help so much. It reminds me of reading holborn assets reviews before looking into financial services, because real decisions feel easier when you can compare clearly. Personal finance gets a lot less intimidating when someone lays it out in a practical way.
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