Betterment vs M1 Finance 2026: Which Is Better for Passive Investing?

Betterment vs M1 Finance 2026: Which Is Better for Passive Investing? - Ultimate Guide

In 2026, passive investors seeking long-term growth through buy-and-hold strategies have excellent automated options. Betterment delivers true hands-off robo-advising with algorithm-driven portfolios, while M1 Finance offers a hybrid approach blending customization with automation via its innovative "Pies" system. Investors who enjoy building custom portfolios may also want to compare M1 Finance with Acorns in our detailed Acorns vs M1 Finance - Automated vs Custom Portfolios breakdown.

This detailed 2026 comparison analyzes fees, features, tax efficiency, accessibility, and suitability to determine the best fit whether you prioritize zero involvement or flexible control without active trading.

Table of Contents

• What Is Passive Investing?
• Overview: Betterment and M1 Finance
• Key Differences at a Glance
• How Betterment Works
• How M1 Finance Works
• 2026 Fees and Costs Comparison
• Portfolio Management and Customization
• Tax Efficiency and Optimization
• Account Types and Accessibility
• Tools for Passive Investors
• Cash Management and Extra Features
• Performance Considerations
• Ease of Use and User Experience
• Pros and Cons Summary
• Which Is Better for Passive Investing in 2026?
• Frequently Asked Questions

What Is Passive Investing?

Passive investing focuses on long-term wealth building by holding diversified, low-cost index ETFs that track market performance, minimizing trading and costs. It relies on compounding and market growth rather than timing or stock picking. Automated platforms like robo-advisors make this strategy effortless and accessible.

Overview: Betterment and M1 Finance

Betterment: A pioneering robo-advisor providing fully automated, goal-based ETF portfolios with advanced tax tools and optional human advice.M1 Finance: A hybrid platform enabling custom or pre-built "Pies" of stocks/ETFs with automated investing, rebalancing, and no core management fees. Both support fractional shares and long-term holding, but Betterment emphasizes pure automation, while M1 adds user-directed flexibility.

Key Differences at a Glance (2026)

How Betterment Works

Betterment automates everything for set-it-and-forget-it investing. A questionnaire evaluates risk, goals, and timeline to build diversified ETF portfolios. The platform handles:

• Daily monitoring and rebalancing
• Dividend reinvestment
• Tax-loss harvesting in taxable accounts
• Goal progress tracking

Ideal for investors wanting zero decisions beyond initial setup and deposits.

How M1 Finance Works

M1 centers on "Pies" allocations of stocks, ETFs, or sub-Pies. Choose expert pre-built models or customize fully.Deposits automatically buy according to targets; dynamic rebalancing occurs with cash flows. Fractional shares ensure full investment. Suits passive investors comfortable setting allocations once, then automating execution.

2026 Fees and Costs Comparison

Betterment:

• Digital: 0.25% AUM (or ~$5/month if balance < $24K without recurring deposits)
• Premium: Higher fee ($100K+ minimum) for CFP access
• Low ETF expenses (~0.03–0.15%)

M1 Finance:

• Core investing: Free (no AUM fee)
• Platform: $3/month for balances <$10K
• Optional perks: Additional fees possible

M1 scales cheaper for larger balances; Betterment's fee often offset by tax savings.

Portfolio Management and Customization

Betterment: Algorithm selects global ETF mixes (Core, SRI/ESG). Limited tweaks; focuses on optimized diversification.M1 Finance: Unlimited custom Pies with thousands of stocks/ETFs. Expert models available for passive setups.M1 offers more control for strategy-specific passive investing (e.g., dividend focus).

Tax Efficiency and Optimization

Betterment: Advanced automated TLH+ daily harvests losses, potentially adding significant after-tax value.M1 Finance: No TLH; uses tax minimization on sales (prioritizes low-burden lots). Betterment leads for taxable accounts.

Account Types and Accessibility

Betterment:

• Taxable, IRAs (Traditional/Roth/SEP/rollover/inherited), trusts
• $10 to invest

M1 Finance:

• Taxable, IRAs, custodial, trusts
• $100 brokerage; $500 IRA

Betterment lower entry; both broad options.

Tools for Passive Investors Betterment:

• Goal planning
• Auto-rebalancing
• TLH
• Fractional shares

M1 Finance:

• Pie builder
• Dynamic rebalancing
• Auto-invest schedules
• Fractional shares

Both excel at automation. For investors starting with very small amounts, apps like Stash and SoFi may be more accessible, as discussed in our Stash vs SoFi Invest -Best App for Growing Small Savings comparison.

Cash Management and Extra Features

Betterment: High-yield Cash Reserve, checking/debit.M1 Finance: Integrated spending, borrowing (margin). Both streamline finances alongside investing.

Performance Considerations

Returns tie to markets and allocations. Low fees/tax efficiency boost net growth. Betterment's TLH enhances after-tax returns; M1's zero fees preserve more pre-tax. Long-term: Minor differences; consistency key.

Ease of Use and User Experience

Betterment: Intuitive onboarding, clean dashboards perfect for beginners.M1 Finance: Powerful Pie visuals; slight curve for customization. Betterment simpler for pure passivity. Those who want investing combined with banking and loans should also read our SoFi Invest review, which compares hybrid investing platforms to traditional robo-advisors.

Pros and Cons Summary (2026)

Betterment Pros: True hands-off automation Advanced tax-loss harvesting Goal tools and Premium advice Low entry ($10)Betterment. or a deeper look at Betterment’s automated portfolios, fees, and tax strategies, see our full Betterment Review 2026 - Best Robo-Advisor for Hands-Off Investors? on Sheynest.

Cons: ✘ Ongoing AUM fee ✘ Limited customization

M1 Finance Pros: Zero core fees High customization for passive strategies Dynamic tools and borrowing Expert Pies for ease

M1 Finance Cons: ✘ No automated TLH ✘ Higher minimums for some accounts ✘ $3/month small balances

Which Is Better for Passive Investing in 2026? Depends on your passive style:

Choose Betterment if: You want complete automation/no decisions Tax efficiency crucial (taxable accounts) Beginner or seeking guidance Minimal starting capital

Choose M1 Finance if: You prefer custom allocations (e.g., specific ETFs/stocks) Minimize fees long-term Blend passive with light control Larger balances/planning growth

Overall for Pure Passive: Betterment edges with TLH and simplicity.
For Flexible Passive: M1 wins on cost/customization.

Many use both: Betterment for tax-optimized core; M1 for targeted Pies.

Frequently Asked Questions

Q1. Which is simpler for beginners?
Betterment, guided setup and full automation.

Q2. Does M1 offer tax-loss harvesting?
No; tax minimization on sales instead.

Q3. Betterment or M1 for lowest fees?
M1 core free; Betterment 0.25% (often offset by TLH).

Q4. Can both handle retirement accounts?
Yes, broad IRA support.Q5. Best for long-term buy-and-hold?
Both strong; Betterment for hands-off, M1 for customized passive.