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Investing is essential for your financial future, but it can beintimidating. All the terms, abbreviations, and numbers are enough to scare any potential investor away. Luckily, software is making the process easier and more accessible than ever. Robo-advisorsprovide financial advice or portfolio management online or via a smartphone application. Rather than using human managers to build portfolios, they usealgorithms to determine where to invest.
We compared two of the largest and most popular robo-advisors in the US, Betterment and Wealthfront. You can’t go wrong with either service, but you may want to consider the specific features that could make you favor one service over the other.
Betterment and Wealthfrontbothcombine proven investment strategies with software so that you can maximize your returns. They are available online and as an iOS or Android app. They are similar in many other ways, from the financial solutions they offer to the methodologies used to get you the best results. The differences lie in the details.
For example, in offering the 529 college savings plan, Wealthfront is the better option for parents who wantto start saving up for their kids’ academic futures. Meanwhile, Betterment has a tiered pricing system and is suitable for investors who would also like to seek advice from real human advisers.
Betterment was founded in 2008 by Jon Stein and Eli Broverman. While studying behavioral economics in college, Stein realized he could apply thoseconcepts to the mistakes he was making in managing his own investments. Economics assumes people are rational, when in reality they are far from rational, especially when it comes to managing money. He wanted a service that told him what to do with his money, and then did it.
He teamed up with Broverman, a securities attorney at the time who understood the regulatory landscape of the financial world.
Wealthfront was also foundedin 2008 byAndy Rachleff and Dan Carroll. Rachleff taught tech entrepreneurship courses at the Stanford Graduate School of Business. Entrepreneurs and students always asked him for investing advice, but he couldn’t recommend the services he used because the account minimums were too high. As Vice Chairman at the University of Pennsylvania’s endowment investment committee, he noticed that the best-managed endowments in the world relied on outdated tools, and he had a vision for an upgrade.
Carroll was a former trader helping his parents assessing the damage they experienced from the financial crisis in 2008. He looked at the statements from their financial adviser and didn’t think they were being given quality advice.
Wealthfront/Google Play Store
Both services will help you manage the following types of investment accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- Rollover IRA
- Individual investment
- Joint investment
- Trust investment
Wealthfront offers additional services:
- 529 College Savings plan
- Company stock selling plan