Two powerhouses in the robo-investing world are Motif Investing and Betterment. If you’re considering signing up for one of these services, you should first be aware that they offer tools better suited to particular investors. Read on for a run-down of what makes these robo-advisors unique, and which one is the best fit for you.
- Review of: Motif Investing vs. Betterment
- Reviewed by: Michael Foster
Published on: January 17, 2017
Last modified: January 17, 2017
- Betterment Promotional Offer? Betterment Provides Non-pay 2 Months
- Motif Investing Promotional Bonus?: Coming Soon…
Motif Investing: Bundled Stocks and ETFs
The best benefit that Motif offers is the ability to buy a group of ETFs at one low commission price. With Motif, you can purchase up to 30 stocks and/or ETFs and pay a one-time commission of $9.95 per trade. With most conventional online brokerages, fees are closer to $9.95 (and can even go up to $19.95) per trade, so you’re already saving potentially $300 off the bat with Motif.
When you purchase these assets, you have significant control over what you’re purchasing. To understand what I mean by this, let’s drill into the concept of “motifs.”
Motif Investing offers an easy-to-use platform where investors can select a particular investment thesis and they’re automatically presented with a portfolio of stocks and funds that match that particular thesis. For example, let’s imagine you think inflation is going to skyrocket during President Trump’s presidency and this could ultimately hurt economic growth. You’ll want to buy gold and precious metals to hedge against inflation and diversify away from stocks and bonds.
On other platforms, you would need to find those ETFs and stocks that fit your thesis. With Motif, you choose the pre-selected portfolio for precious metals, and you can buy a group of stocks and funds that match your investment thesis. This brings instant diversification while still corresponding to your own view of the market.
Motif Investing offers thousands of these kinds of portfolios for all kinds of investment styles. If you want high dividends, specialty tech companies poised to boom with AI and IoT, or biotech firms on the cutting edge of science, there’s a motif for you.
On top of that, Motif Investing allows you to create your own motifs if you aren’t happy with the pre-set ones out there. This gives you an additional level of control on your portfolio. You can mix and match the professionally designed motifs with your own to create a portfolio with exposure to multiple hypotheses at the same time.
It’s best to think of Motif Investing as diversification on steroids. Not only do you get the power of controlling your own portfolio, but also the opportunity to diversify across hundreds or thousands of assets at a low-cost.
There’s a low barrier to entry as well. Motif Investing has a $250 account minimum, so it’s easy to jump in.
One of the best things about Motif Investing is that it has tools for more advanced investors. These include:
- Adjusting Motifs
With Motif, you can buy and sell individual stocks inside Motifs or add additional stocks outside of the motif any time you want. These trades are also cheaper (just $4.95 per transaction).
- Real-time quotes
For an additional monthly fee, you can get access to real-time quotes for thousands of ETFs and stocks.
- Automated investing and rebalancing
Again, for an additional monthly fee you can set up Motif to automatically withdraw funds from your bank account and invest them into the motifs you like. (Read below for a breakdown of these fees).
- Margin Investing
Motif also allows leverage. You can borrow at rates between 4.25% and 6.75% to make more aggressive bets. The minimum account balance requirement for margin investing is $2,000.
Betterment: Holistic Financial Planning
Motif Investing gives power investors an extra tool to invest based on their market view, making it a great tool for someone who has confidence in their investment ideas and a clear plan for the future.
Not everyone is so sure about tomorrow, however. For a lot of us, we don’t even know what financial goals are realistically achievable and how we can get there.
If this describes you, then Betterment may be a better choice.
Betterment focuses on individual investors’s financial wellbeing by providing calculators and planning tools to identify what investment strategy will help them achieve their goals. In most cases this means planning for retirement, but people can use Betterment to plan for all kinds of investment goals like building a rainy day fund, saving up to buy a house, or just general prudent money management.
Betterment does this with beautiful, easy-to-use tools. You punch in your income, your age, your goals, and Betterment will tell you how you can reach those goals. Betterment will also tell you which asset allocations will best fit your situation and your risk tolerance.
For instance, let’s say you’re a 25 year old office worker making $50,000 per year and you have $10,000 in cash savings. You know you should put that money to work, but you don’t know how. Also you know you want to retire eventually, but you don’t know when you’ll be able to or how much money you need to get there. You also have no idea how much you should be saving and which accounts you should use to save your money. What’s more, you don’t know which assets make the most sense—stocks, bonds, mutual funds, etc.—and you don’t know where to buy these and how much you should buy every month.
Betterment uses artificial intelligence to answer these questions. You just go to the site or app, input how old you are, what you own, and it will tell you how much you need to save to retire at any age you choose. You can see how much more you’ll need to save to retire at 50 versus retiring at 60. You can also adjust your portfolio to fit your risk tolerance to build a plan that will help you sleep at night.
When you’ve done all of that, Betterment can set up an automatic deposit schedule so you’re automatically investing your money according to your financial plan every paycheck. If you want to save more, you can use their SmartDeposit tool to save and invest extra money left over in your account, instead of letting it sit there and earn virtually 0% in the bank.
Already we can see pretty clearly that Betterment and Motif Investing are very different tools, but is one of them cheaper than the other?
That’s not an easy question to answer.
Motif Investing starts at the $9.95 commission price point mentioned above. For every motif you buy and sell, you’re going to pay nearly $10 per transaction. Motif also allows you to buy and sell individual stocks for $4.95 per transaction.
If you want to auto-invest and auto-balance your portfolio with Motif, that will cost a flat fee ranging from $4.95 per month (for 1 motif) to $19.95 per month (for 3 motifs). You also get three commission-free trades with the more expensive plan as well as real-time stock quotes and exclusive market reports. There’s also a $9.95 per month option that offers almost everything of the priciest option, but without the real-time quotes.
Betterment works on a flat-fee pricing model that ranges from 0.35% for balances less than $10,000 to 0.15% for accounts worth more than $100,000. In-between, you’ll pay 0.25% annually.
Let’s break this down.
If you are looking to invest $30,000 and you plan to buy and hold 3 motifs in one year, Motif Investing will cost you $29.85. If you go with Betterment, you’ll be paying $75. However, if you plan on selling those 3 motifs more than once in a year, you’ll be paying more than Betterment.
When you want to figure out which service is cheaper, it’s best to think about how you’re going to use it. If you plan on buying and holding one basket forever and you know what you want to buy, Motif Investing is the way to go. If you don’t really know what you want, Betterment will probably be better.
However, if you want automatic deposits into your account monthly, Betterment will probably be the cheaper option because of the $4.95 monthly fee at Motif Investing. Unless you’re dealing with a really huge account of $500,000 or more, the math is on your side with Betterment. You can avoid the $4.95 monthly fee at Motif if you deposit manually, again demonstrating that Motif is really better for someone who wants more control over their investing.
Conclusion: Power versus Automation
This overview of Betterment and Motif Investing makes it clear that both have their strengths, and both will work for different kinds of investors.
If you already know what your financial goals are and how much money you need to reach them, Motif Investing will give you the tools to invest based on your own view of the market and the future of the world’s economies. At the same time, Motif offers powerful diversification tools and low-cost trading to buy a basket of related assets that is less risky than buying and holding just one stock.
Betterment, on the other hand, is more of a personal finance assistant that helps you plan your financial goals and create an investment plan that will help you reach them (please check out out Betterment Review article).