Betterment vs. Robinhood

Betterment and Robinhood are both widely accepted as popular trading platforms, but they are very different. Betterment is a robo-advisor, an automated investment service that is about as hands-off as you can get. Robinhood users do it all themselves, and get to pick and choose the individual securities they invest in. Here’s some key points to consider if you’re trying to decide whether Betterment vs Robinhood would be best for you.

A financial advisor can review trading platforms and investment strategies with you that align with your portfolio and long-term goals.

Betterment vs. Robinhood: Services and Features

Betterment and Robinhood offer two diametrically opposed versions of investing. As a robo-advisor, Betterment automatically invests your money according to a series of algorithms set by the brokerage. Robinhood leaves the decisions up to you, and offers a suite of tools to make analysis easier.

Betterment

When you set up a Betterment account you’ll input certain parameters, such as your risk tolerance, investment goals, and income. Then the company’s artificial intelligence selects one of 12 investment portfolios, compromising exchange-traded funds (ETFs), that match your profile. The firm also offers traditional and Roth IRAs, as well as cryptocurrency options.

Betterment’s portfolios include higher- and lower-risk portfolios, as well as ones built to meet a specific purpose. For example, one portfolio is built around socially responsible investing, income investing, and innovative technology.

While it’s for people who lean toward a set-it-and-forget-it approach to handling money, users who would like individualized guidance can pay for a Betterment Premium subscription to work with a Certified Financial Planner™ (CFP®).

Robinhood

Robinhood, on the other hand, is a highly streamlined platform designed for new investors. The platform presents users with a clean trading interface, without the intimidating wall of information and options that can scare off novices. Unlike Betterment, Robinhood users trade specific assets, meaning they create their own portfolios. There is no financial automation or advising.

The firm offers an IRA match of 3% annually for Gold subscribers and 1% annually for all other customers.. The match, which does not involve an employer, is automatically added after eligible contributions from an external account, including rollovers and transfers. Check Robinhood’s’s IRA FAQ to learn of fees and possible limitations.

Through Robinhood you can trade stocks, ETFs, options, and American Depositary Receipts (ADR). This leaves out several popular asset categories, most notably bonds, mutual funds, and currencies, although Robinhood Crypto allows you to trade cryptocurrencies.

Finally, Robinhood supports basic trading instructions such as stop-loss and limit orders. It does not, however, support more sophisticated instructions. The firm also provides Morningstar research for Gold customers.

Betterment vs. Robinhood: Fees

A couple compare Betterment vs. Robinhood.

There are usually four types of fees to look out for when choosing a trading platform. You should look out for these when evaluating any investment or trading service:

Trading fees: Any fixed charge attached to each trade that you make. This can come in the form of a flat fee or what’s known as the “spread.” This is when your broker charges you based on the difference, if any, between the buying and the selling price of an asset.
Trading commissions: This is when a broker will charge you a percentage based on the volume or value of each trade.
Inactivity fees: Any fees that the broker charges you for not trading, such as for keeping money in a brokerage account.
Non-trading/Other fees: Any form of fee for trading on this platform not covered above. For example, a brokerage might charge you for making deposits into your brokerage account, taking money out of it or signing up for additional services.

Given the different services offered by Betterment and Robinhood, the two firms’ price structures vary widely.

Users who sign up for Betterment’s basic package, known as Betterment Digital, pay an annual fee of 0.25% of all assets. For example, if you have $10,000 in your Betterment account you would pay $25 per year for the service. There is no minimum balance for holding a Betterment Digital account. It should be noted, however, that you could pay $4 per month if you don’t set up recurring monthly deposits or maintain a $20,000 balance across your Betterment accounts. Betterment discontinued crypto accounts in 2024, instead offering a crypto ETF under the same fee structure.

Users of the higher tier package, Betterment Premium, pay an annual fee of 0.65% of all investments held by Betterment. There is a $100,000 minimum balance for Betterment Premium, which would come to a $650 per year fee. Betterment Premium users receive free person-to-person financial advising.

Robinhood, on the other hand, charges nothing for most of its services. There are no fees or commissions on each trade. Robinhood also doesn’t charge inactivity fees or other transaction fees for the most common activities such as depositing or withdrawing money. It offers a sliding scale for margin trading interest rates that starts at 5.75%. For Robinhood Gold subscribers the first $1,000 of margin trades are interest free each day, but the company does charge $5 per month ($60 per year) for the service.

Betterment vs. Robinhood: Online and Mobile

Betterment and Robinhood offer similar customer service options. You can reach Betterment through their virtual chat option or by telephone during business hours five days a week. Meanwhile, Robinhood also gives you the ability to speak with a customer service representative via phone or chat.

Outside of support, the Betterment experience reflects the automated nature of its product. Betterment’s layout is straightforward and well-designed. Users can access their portfolio quickly, and Betterment lays out your limited options in clear terms.

The user interface guides you to selections such as building a retirement account, setting specific investment goals, and even moderating risk. While Betterment does not discuss the actual mechanics of robo-advising, for many users this may be a feature rather than a bug. This allows you to invest without getting overwhelmed by the details of Betterment’s investment strategy.

No service is as simple as Robinhood. The user experience of Robinhood is, above all else, streamlined. It reflects the firm’s clear intent to make investing feel like a familiar in-app experience, closer to Instagram than E*TRADE. Users can quickly find their investment portfolio information, and assets are arranged in lists that are easy to search and sort.

Robinhood categorizes assets according to tags, letting you quickly find other investments that are similar. The individual asset pages are similarly well laid out, with the basic information presented alongside a clear interface for buying or selling each product.

Betterment vs. Robinhood: Tax Features and Tools

Taxes can have a significant impact on your investment returns, and the two platforms take very different approaches to tax efficiency.

Betterment is designed with built-in tax optimization features that work automatically in the background. All taxable accounts benefit from tax-loss harvesting, which can help offset gains and reduce your tax bill by selling securities at a loss and replacing them with similar investments. Betterment also uses tax-coordinated portfolios for clients with multiple accounts, placing less tax-efficient investments in tax-advantaged accounts and more tax-efficient holdings in taxable accounts. Dividends can be automatically reinvested, and annual tax forms are provided directly through the platform.

Robinhood, by contrast, does not offer automated tax optimization tools. While you can reinvest dividends through its DRIP (Dividend Reinvestment Plan), you’re responsible for managing your own tax strategy, including harvesting losses or making tax-efficient trades. Robinhood provides standard tax forms, such as 1099s, but there’s no automated guidance on reducing taxable gains. For investors who prioritize tax efficiency but prefer an active trading approach, this means tax planning will need to be handled independently or with the help of a tax professional.

Betterment vs. Robinhood: Who Should Use Each?

Betterment and Robinhood are both designed for investors who want a simplified experience, but that’s where the similarities end. Betterment is a strong choice for investors who are very hands-off and goal-oriented. You will not have to actively manage your money or make trades with this product. It is also organized around fund-based trading, not researching and picking stocks, meaning that Betterment’s assets are designed for long-term traders with specific goals in mind.

Robinhood is best for beginner investors who want to try their hand at researching and picking select stocks. It is easy to use for basic trades and for tracking investments over time. The app offers very little information and trading data and relatively few types of securities for trading. Its feature-light design makes it easier for new investors to navigate the market, but experienced investors, even those who want a simplified investment experience, will quickly find this limiting.

Inexperienced investors will have to go outside Robinhood to understand more complex strategies since Robinhood does not help them learn how to invest wisely or well, even for products on the platform. The gamified interface may channel users into high-volume, high-risk trading positions such as options with little to no explanation. Active investors who want an easier experience would do well to seek out products such as Fidelity’s trading platform or E*TRADE.

Bottom Line

A man looks at his brokerage account balance and smiles.

Betterment is among the best robo-advisors on the market, and a good choice for investors who would rather set goals and let someone else – or something else – handle the financial portion. Robinhood is a somewhat gamified platform that is all about high user engagement and minimal friction in the trading process. It offers too little information for experienced investors and may entail too much risk for novices, but can offer a good starting point for buying and selling stock.

Tips for Investing

How you choose to invest could play a huge role in what your potential return is going to be. You can work with a financial advisor if you’re looking for a professional to manage your investments. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Before you start using either Betterment or Robinhood, use an investment calculator to “run the numbers” on your investment plan so you can have confidence that you’re on a sensible road to achieving your financial goals.