Two powerhouses within the robo-investing world are Motif Investing and Betterment. Should you’re contemplating signing up for one in every of these providers, it is best to first bear in mind that they provide instruments higher suited to explicit traders. Learn on for a run-down of what makes these robo-advisors distinctive, and which one is the most effective match for you.
- Evaluate of: Motif Investing vs. Betterment
- Reviewed by: Michael Foster
- Printed on: January 17, 2017
- Final modified: January 17, 2017
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Motif Investing: Bundled Shares and ETFs
The most effective profit that Motif provides is the flexibility to purchase a gaggle of ETFs at one low fee worth. With Motif, you should purchase as much as 30 shares and/or ETFs and pay a one-time fee of $9.95 per commerce. With most standard on-line brokerages, charges are nearer to $9.95 (and might even go as much as $19.95) per commerce, so that you’re already saving probably $300 off the bat with Motif.
While you buy these property, you’ve got vital management over what you’re buying. To know what I imply by this, let’s drill into the idea of “motifs.”
Motif Investing provides an easy-to-use platform the place traders can choose a selected funding thesis and so they’re routinely introduced with a portfolio of shares and funds that match that exact thesis. For instance, let’s think about you suppose inflation is going to skyrocket throughout President Trump’s presidency and this might finally harm financial progress. You’ll wish to purchase gold and valuable metals to hedge in opposition to inflation and diversify away from shares and bonds.
On different platforms, you would want to seek out these ETFs and shares that suit your thesis. With Motif, you select the pre-selected portfolio for valuable metals, and you should buy a gaggle of shares and funds that match your funding thesis. This brings instantaneous diversification whereas nonetheless equivalent to your individual view of the market.
Motif Investing provides hundreds of those sorts of portfolios for every kind of funding types. If you’d like excessive dividends, specialty tech firms poised to growth with AI and IoT, or biotech companies on the chopping fringe of science, there’s a motif for you.
On prime of that, Motif Investing means that you can create your individual motifs if you happen to aren’t pleased with the pre-set ones on the market. This provides you an extra stage of management in your portfolio. You can combine and match the professionally designed motifs with your individual to create a portfolio with publicity to a number of hypotheses on the identical time.
It’s finest to think about Motif Investing as diversification on steroids. Not solely do you get the facility of controlling your individual portfolio, but additionally the chance to diversify throughout a whole lot or hundreds of property at a low-cost.
There’s a low barrier to entry as properly. Motif Investing has a $250 account minimal, so it’s straightforward to leap in.
Probably the greatest issues about Motif Investing is that it has instruments for extra superior traders. These embody:
- Adjusting Motifs
With Motif, you should buy and promote particular person shares inside Motifs or add extra shares exterior of the motif any time you need. These trades are additionally cheaper (simply $4.95 per transaction).
- Actual-time quotes
For an extra month-to-month fee, you will get entry to real-time quotes for hundreds of ETFs and shares.
- Automated investing and rebalancing
Once more, for an extra month-to-month fee you’ll be able to arrange Motif to routinely withdraw funds out of your checking account and make investments them into the motifs you want. (Learn under for a breakdown of those charges).
- Margin Investing
Motif additionally permits leverage. You can borrow at charges between 4.25% and 6.75% to make extra aggressive bets. The minimal account balance requirement for margin investing is $2,000.
Betterment: Holistic Monetary Planning
Motif Investing provides energy traders an additional device to speculate based mostly on their market view, making it an excellent device for somebody who has confidence of their funding concepts and a transparent plan for the longer term.
Not everybody is so positive about tomorrow, nevertheless. For lots of us, we don’t even know what financial objectives are realistically achievable and the way we are able to get there.
If this describes you, then Betterment could also be a more sensible choice.
Betterment focuses on particular person traders’s financial wellbeing by offering calculators and planning instruments to determine what funding technique will assist them obtain their objectives. Typically this implies planning for retirement, however individuals can use Betterment to plan for every kind of funding objectives like constructing a wet day fund, saving as much as purchase a home, or simply basic prudent cash administration.
Betterment does this with stunning, easy-to-use instruments. You punch in your earnings, your age, your objectives, and Betterment will inform you how one can attain these objectives. Betterment will even inform you which asset allocations will finest suit your scenario and your danger tolerance.
As an example, let’s say you’re a 25 yr previous workplace employee making $50,000 per yr and you’ve got $10,000 in money financial savings. You know it is best to put that cash to work, however you don’t know the way. Additionally you already know you wish to retire ultimately, however you don’t know once you’ll have the ability to or how a lot cash you should get there. You additionally don’t know how a lot try to be saving and which accounts it is best to use to avoid wasting your cash. What’s extra, you don’t know which property take advantage of sense—shares, bonds, mutual funds, and so on.—and also you don’t know the place to purchase these and the way a lot you should purchase each month.
Betterment makes use of synthetic intelligence to reply these questions. You simply go to the location or app, enter how previous you might be, what you personal, and it’ll inform you how a lot you should save to retire at any age you select. You can see how far more you’ll want to avoid wasting to retire at 50 versus retiring at 60. You may also modify your portfolio to suit your danger tolerance to construct a plan that can allow you to sleep at night time.
While you’ve completed all of that, Betterment can arrange an automated deposit schedule so that you’re routinely investing your cash in response to your financial plan each paycheck. If you wish to save extra, you should utilize their SmartDeposit device to avoid wasting and make investments extra cash left over in your account, as an alternative of letting it sit there and earn just about 0% within the financial institution.
Already we are able to see fairly clearly that Betterment and Motif Investing are very totally different instruments, however is one in every of them cheaper than the opposite?
That’s not a simple query to reply.
Motif Investing begins on the $9.95 fee worth level talked about above. For each motif you purchase and promote, you’re going to pay practically $10 per transaction. Motif additionally means that you can purchase and promote particular person shares for $4.95 per transaction.
If you wish to auto-invest and auto-balance your portfolio with Motif, that can price a flat fee starting from $4.95 per 30 days (for 1 motif) to $19.95 per 30 days (for 3 motifs). You additionally get three commission-free trades with the dearer plan in addition to real-time inventory quotes and unique market experiences. There’s additionally a $9.95 per 30 days possibility that gives virtually the whole lot of the priciest possibility, however with out the real-time quotes.
Betterment works on a flat-fee pricing mannequin that ranges from 0.35% for balances lower than $10,000 to 0.15% for accounts value greater than $100,000. In-between, you’ll pay 0.25% yearly.
Let’s break this down.
In case you are seeking to make investments $30,000 and you propose to purchase and maintain 3 motifs in a single yr, Motif Investing will price you $29.85. Should you go along with Betterment, you’ll be paying $75. Nonetheless, if you happen to plan on promoting these 3 motifs greater than as soon as in a yr, you’ll be paying greater than Betterment.
While you wish to determine which service is cheaper, it’s finest to consider the way you’re going to make use of it. Should you plan on shopping for and holding one basket eternally and you already know what you wish to purchase, Motif Investing is the best way to go. Should you don’t actually know what you need, Betterment will most likely be higher.
Nonetheless, if you would like automated deposits into your account month-to-month, Betterment will most likely be the cheaper possibility due to the $4.95 month-to-month fee at Motif Investing. Except you’re coping with a extremely enormous account of $500,000 or extra, the maths is in your facet with Betterment. You can keep away from the $4.95 month-to-month fee at Motif if you happen to deposit manually, once more demonstrating that Motif is actually higher for somebody who needs extra management over their investing.
Conclusion: Energy versus Automation
This overview of Betterment and Motif Investing makes it clear that each have their strengths, and each will work for totally different sorts of traders.
Should you already know what your financial objectives are and the way a lot cash you should attain them, Motif Investing gives you the instruments to speculate based mostly by yourself view of the market and the way forward for the world’s economies. On the identical time, Motif provides highly effective diversification instruments and low-cost buying and selling to purchase a basket of associated property that is much less dangerous than shopping for and holding only one inventory.
Betterment, alternatively, is extra of a private finance assistant that helps you propose your financial objectives and create an funding plan that can allow you to attain them (please try out Betterment Evaluate article).