Choosing where to invest your hard-earned money can feel like walking through a maze. Betterment, a leader in automated investing, keeps popping up as a top pick. But what about mutual funds? If you’re weighing your options, knowing whether Betterment offers mutual funds—and how they work on its platform—can help make your journey much smoother.
Betterment’s Investment Approach: ETFs vs. Mutual Funds
Betterment built its reputation on simple, automated investing with exchange-traded funds (ETFs). ETFs are baskets of stocks or bonds that trade on exchanges, often with lower costs than mutual funds. For years, these low-fee ETFs have formed the backbone of every standard Betterment portfolio.
But times are changing. As of 2024, Betterment has taken a big step forward and now offers access to mutual funds—though how you access them depends on who you are.
Who Can Invest in Mutual Funds on Betterment?
For most individual investors using Betterment directly, the platform’s automated portfolios still use ETFs due to their cost and tax efficiency. If you sign up for a standard Betterment account, expect your money to go into a mix of carefully chosen ETFs based on your goals and risk level.
But there’s more to the story now, especially for those working with an advisor.
Mutual Funds for Advisors and Custom Portfolios
In March 2024, Betterment made headlines by expanding its RIA (Registered Investment Advisor) custody platform. Now, advisors using Betterment for Advisors can access thousands of mutual funds from top providers like Vanguard, Fidelity, Pimco, and T. Rowe Price.
What does this mean for investors? If you work with a financial advisor who uses Betterment’s platform, your custom-built portfolio can include mutual funds alongside ETFs. That opens the door to more flexibility and deeper diversification.
Why Not All Accounts Offer Mutual Funds
Why doesn’t Betterment offer mutual funds to every user? It comes down to cost, complexity, and automation.
- Expense Ratios: Most mutual funds charge higher fees than ETFs. Betterment aims to keep costs down for its everyday users.
- Trading Style: ETFs trade instantly during market hours, while mutual funds settle after markets close. ETFs make it easier to automate investment changes.
- Tax Efficiency: ETFs often have tax advantages due to the way they’re structured, which fits well with Betterment’s goal to help users pay less tax.
Betterment’s focus has always been low-cost, hands-off investing for the masses. However, the recent shift for advisors shows the company is listening to those who need extra tools—like custom mutual funds—for unique strategies.
The Mutual Funds Available: Choices and Flexibility
Financial advisors using Betterment now get access to thousands of mutual funds. These span U.S. and international stocks, bonds, sector strategies, and even some alternative assets. Here’s what’s notable:
- Diversity: You’ll find mutual funds from the biggest names in investing.
- Active and Passive Options: Advisors can mix index funds (track the market) and actively managed funds (try to beat the market) in one portfolio.
- Easy Integration: Mutual funds work alongside ETFs, letting advisors cater fully to a client’s needs.
This blend makes Betterment’s advisor platform a true one-stop shop for custom wealth-building.
How Mutual Funds Fit Into Betterment’s Bigger Picture
Photo by Nikolina
Betterment continues to grow past its beginnings as a robo advisor. The onboarding for advisors now feels more streamlined than ever, while award-winning features like tax-loss harvesting and goal tracking remain standard. By adding mutual funds for advisors, Betterment proves it's not just for set-it-and-forget-it investors anymore.
The company now serves a wide spectrum:
- Individual investors: Automated ETF-only portfolios.
- Businesses: 401(k) plan options through Betterment for Business.
- Advisors: Custom models using both mutual funds and ETFs.
This approach meets people at every stage of their wealth-building journey.
Is Investing in Mutual Funds Through Betterment Right for You?
For most solo investors, Betterment’s ETF portfolios provide simple, cost-effective exposure to the markets. The platform does all the heavy lifting—automatically rebalancing and working to keep your taxes in check.
But if you want more control, or already have an advisor, the addition of mutual funds on the advisor platform means more options. This is helpful for those who need specific strategies, higher levels of management, or want to include certain fund types that only come in mutual fund form.
When weighing Betterment against other brokerages, it’s worth thinking about:
- Costs: Mutual funds may cost more than basic ETFs.
- Customization: Mutual funds on Betterment are currently for advisor-directed accounts.
- Automation: Solo users get hands-off investing with ETFs, while advisor clients get a broader toolkit.
How to Get Started With Mutual Funds on Betterment
If you’re an individual investor, you can open a Betterment account online and start investing with as little as $10. You’ll get a globally diversified portfolio made mostly of ETFs, all managed automatically.
Want mutual funds in your account? You’ll need to partner with a financial advisor who uses Betterment’s advisor platform. The advisor can build a custom blend of mutual funds and ETFs suited to your goals.
Here’s a quick checklist to help you decide what’s best:
- If you want automation and low fees, open a regular Betterment account.
- If you need more custom solutions, ask your advisor about Betterment’s mutual fund options.
- Compare costs and features before moving your money.
Final Thoughts
Betterment’s move to add mutual funds for advisors marks a big shift. Individual users still get ETFs for simplicity and cost savings. But the advisor channel lets clients tap into thousands of mutual funds and greater flexibility. The right choice depends on your needs, who manages your money, and how involved you want to be.
Betterment keeps showing that it can grow alongside investors. Whether you’re just starting out or working with a professional, there’s a path forward. If you crave simplicity, ETFs are still the name of the game. If you want tailored, complex strategies, mutual funds through Betterment for Advisors are now an option worth exploring.
No matter your path, do your homework, ask questions, and pick the structure that matches your goals. Your financial future deserves that kind of care.