Which app is better, Stash or Betterment?
I’ve been investing with both of these apps for about 2 years now, and they are very very different! So if you’re looking for guidance on which one to go with, you’re in the right place. Keep reading for a detailed HONEST review.
Both of these apps make investing super easy for novice investors, but they are very very different. In this article, I’ll compare each app in terms of:
- Investment approach, or how your money gets invested
- Safety and a discussion of the risks involved
- And finally, of funding options and account types offered
Before signing up for any investing app, it’s important to understand how is your money going to get invested. Stash and Betterment have very different approaches to investing, so let’s talk about that.
A platform that simplifies investing for the everyday person. Rather than listing your investment options using typical financial jargon, they put everything in everyday language. With any other brokerage, you’ll see everything labeled under financial jargon, but Stash takes out all the intimidating technical language to make choosing investments as easy as possible for you.
The thing with Stash is that it’s totally up to you to do your own research and pick what stocks you want to buy. The app doesn’t DO any investing for you.
As an investor, your goal is to create a portfolio (or a collection of stocks and bonds) that grows your money over time. At Stash, you have to create your own portfolio, and no one’s going to tell you what to put in it. On the other hand, Betterment creates portfolios for you. They’re basically saying, look – we know how to build investment portfolios, so just tell us what your goals are and we’ll do it all for you. You don’t get to pick and choose what goes in there, we know what’s best.
For example, here’s my Betterment portfolio. They created this for me based on basic inputs: time, target amount, etc. My money is invested in all these ETFs, and I’m not the one who picked them vs at Stash, my money is invested in Women who lead and Do the right thing, which is ETFs I’ve picked myself.
Here’s the detailed explanation
Investing at Stash is like having someone hand you an empty grocery basket and telling you, “Here, put whatever you want in it.” Whereas investing at Betterment is like having someone who’s very knowledgeable and qualified, hand you a ready-made basket that has a bunch of goodies already in it.
Now, what do I think is better? It depends – do you want to pick your own investments, or do you want someone to do it all for you? It’s definitely empowering and more fun to choose your own stocks, but that means you also have to do your own research and know what you’re doing. I could easily see someone who doesn’t know what they’re doing put all their money into stocks and hoping they have enough to buy a house in 5 years. But if you need to cash out on your investments in 5 years, you should have most of your money invested in bonds, not stocks. There needs to be a lot of intentionality behind how you invest your money, but the average person doesn’t know this!
And that’s where Betterment wins over Stash. For beginners, you don’t know what factors to consider when choosing your own investments. So letting Betterment create the portfolio for you is better than shooting in the dark and trying to figure it out on your own. And I’m talking specifically if you’re a beginner.
tax loss harvesting – show my portfolio spreadsheet!
short term vs long term capital gains
a big part of how I became a “smart investor” was by watching what Betterment is doing
most people aren’t OCD like me, so if you don’t want to make yourself go crazy with spreadsheets to track your tax stuff, then go with Betterment
Now let’s talk about safety and some of the risks involved with each app.
They’re both registered with the SEC, which means that they’re legit and they can’t lie and cheat you. They’re also insured by the SIPC, which means that even if the company goes bankrupt, you’ll get your money back because they have insurance. These are basic requirements for any investing app. Any app that didn’t have these things would have been shut down by now because it’s 100% illegal for any company to hold investments for people without it!!! So rest assured your money is safe with either of these apps.
I also want to make a comment about risk. As with any type of investing, there are obviously no guarantees that you’ll make money. All investing involves a risk of loss. The question is, do you know what you’re doing? So Stash and Betterment are no different in that regard. Whether you make or lose money will depend on how good of an investor you are. If you make an investment just because you feel like it and then you sell it if you get scared, you’re probably going to lose money. But if you have good logical reasons for making an investment and you stick to your plan, you’ll be fine. Regardless of whether you go with Stash or Betterment, what’s risky or not depends ultimately on you and how YOU use the app.
Now for a quick comparison of costs. First of all, no matter how you look at it, using either of these apps is going to cost you A LOT less than it would cost you to hire a human financial advisor. That being said, there are some fees involved.
Betterment charges an annual percentage fee of 0.25%, while Stash charges a monthly flat fee of $1.
So if you had $1k to invest, at Betterment you’d pay an annual fee of $2.50. And at Stash, you’d pay $1 a month or an annual fee of $12. A $12 fee for your $1k is 1.2% annually – almost 5x more than Betterment! On small amounts of money, that flat $1 monthly fee works out to be a big percentage of your assets.
Now if you had $5k or more, then a flat fee starts to be a better deal. With $5k, your Betterment fee would be $12.50, vs $12 at Stash. So if you have $5k or more, Stash is gonna be cheaper for you. And if you have less than $5k, then Betterment is the cheaper option for you.
You also gotta keep in mind the level of service that you’re paying for. Given that Stash isn’t doing anything other than presenting investments to you in an easy-to-understand way, I think Stash charges a lot for what it is. Whereas with Betterment, you’re getting full-service advice and 24/7 portfolio management.
Don’t get me wrong, I’m all for cutting out all the financial jargon to make investing accessible for beginners, but Stash is charging you a lot for what it is. You definitely get a much higher level of service at Betterment.
FUNDING OPTIONS & ACCOUNT TYPES
And finally, let’s talk about funding options and account types offered by each app. Stash offers roundups, which is a feature that lets you invest with your spare change by rounding up your debit card and even credit card purchases. Betterment, on the other hand, doesn’t offer the roundups feature. I really don’t mind this about Betterment, because it’s not like investing my spare change is gonna make me a millionaire. That’s just ridiculous. What’s gonna make you a millionaire is committing to making regular deposits weekly, biweekly, or monthly and automating it. So, while the roundups feature is nice and every cent counts, I still don’t think Stash is worth the fees, especially if you’re investing tiny amounts of money.
Betterment also offers more account types that Stash doesn’t offer, such as Joint accounts and SEP IRAs. SEP IRAs are meant for anyone who’s self-employed and doesn’t have a 401k, so if you’re self-employed make sure to check out this video here to find out more about that.
So what’s the verdict? Which one are you leaning towards – Stash or Betterment? Let me know in the comments and let’s discuss!
- So in summary, Betterment creates a fully diversified investment portfolio for you, while Stash gives you the tools and support to create an investment portfolio on your own.
- While both apps are registered with the SEC and SIPC-insured, the level of risk involved ultimately depends on how thoughtful you are about choosing your investments.
- As for costs, you get a lot more for your money at Betterment since they do full portfolio management for you, and Stash’s flat fee structure is especially not worth it if you have $1k or less because the $1 monthly fee works out to be a big percentage of your account balance.
- And while Stash offers a cool way to fund your account with the spare change roundups feature, it’s not a dealbreaker because it’s much more critical and impactful for your wealth to make recurring weekly or monthly deposits, which both apps let you do.
- Lastly, Betterment offers more account types than Stash does, including Joint accounts and SEP IRAs, so if you have a significant other that you share assets with or you’re self-employed, Betterment will be a better fit for your needs.