Fundrise vs Betterment

Fundrise vs. Betterment – Review and Comparison

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Fundrise vs Betterment – could two investment platforms be any more different?

Fundrise focuses strictly on real estate investing, whereas Betterment’s strategy is directly tied to EFTs (exchange traded funds)

Fundrise is crowdfunded. Betterment is a robo advisor – one of the best.

Almost the only facts these two platforms have in common is that they both offer an online avenue to invest and they are both worth billions.

Read on for a comprehensive comparison of Fundrise and Betterment so you can make the right choice for your investing needs and goals.

Who Does it Best? Fundrise vs Betterment

Betterment’s status in the robo advisor industry is unparalleled. Betterment has had more time than any other robo advisor in the field today to get things right, refine, expand, learn and evolve on every level from data security to mobile apps.

Betterment, to its credit, has not rested on its considerable laurels. But Betterment is no longer the only game in town – far from it.

Fundrise is a perfect example of this, with its launch of the first-ever crowdfunded platform focused strictly on residential and commercial real estate investing opportunities.

So let’s take a look at how each platform, Fundrise vs Betterment, has positioned itself to attract investors.

Fundrise is best for:

  • Investors with a desire to participate in the real estate investing marketplace.
  • Real estate investors who desire a passive approach (only three options available).
  • Investors with a low need for liquidity, which can be particularly unpredictable with real estate-centric investments.
  • Investors who plan to keep their funds on the platform for the longer term (there are fees for withdrawal).
  • Investors who have at least $500 up front to invest (this is the minimum).

Betterment is best for:

  • Investors seeking a broad-based portfolio based on EFTs (exchange traded funds).
  • Investors who have little time (or interest) in taking a hands-on approach to investing but do want some access to human financial and investing experts.
  • Investors with a need for liquidity for at least some of their invested funds.
  • Investors who are seeking options for socially responsible investing, tax loss harvesting and other special perks that not all robo advisor platforms provide.
  • Investors who have either a little ($10) or a lot ($100,000) to invest.

Can Betterment Possibly Be Dethroned? 🤔 👑

There is no arguing with fact: Betterment sets the bar for every other robo advisor platform that has come after it.

But Fundrise is not a robo advisor, per se. Rather, it’s a real estate digital investment platform.

For investors interested in getting involved in the real estate market at any level, Fundrise doesn’t really have any direct competitors.

Two Key Areas Where Fundrise Stands Out

In most cases, each new digital investing platform that comes along has gone to the trouble to differentiate themselves from the competition in at least one or two key areas.

So what is Fundrise’s unique selling proposition? What makes it different than Betterment?

1. Real estate, real estate, real estate.

So we have already established that Fundrise, like Betterment, is the pioneer in its investment niche. Founded in 2010, Fundrise is widely regarded as the first (if no longer the only) platform to use crowdfunding principles to spearhead real estate investing.

Fundrise Real estate InvestmentsIn this way, Fundrise is always going to be worth consideration if your primary investing interests run towards the real estate marketplace.

2. Fundrise can be used to invest or to raise capital for your real estate project.

Investors participate in Fundrise to add real estate holdings to their investment portfolio. Real estate entities participate in Fundrise to raise capital for their real estate projects.

It’s a win-win Betterment does not compete with.

Two Key Ways That Betterment Stands Out

As the still-reigning leader of the robo advisor industry, Betterment is always going to provide the gold standard against which all other digital investing platforms are measured.

These are two key ways Betterment is markedly different than Fundrise.

1. Fully integrated mobile user experience.

As we will look at in much more detail here shortly, Fundrise is woefully behind in the mobile user experience arena.

Betterment, on the other hand, just accomplished a complete upgrade to its mobile user experience and is garnering rave reviews across the board.

2. Tried and true portfolio balancing algorithm.

Betterment bases its algorithm on classic Modern Portfolio Theory (MPT). It has worked for decades and continues to work well for its estimated 400,000+ account holders.

Betterment portfolio StrategySure, there is a case to be made for adding real estate into that mix (and Fundrise makes it later on here). But Betterment’s model gives even rank beginners to the world of investing a solid, trusted platform from which to grow.

Public Versus Private Market Investments: Which is Better?

Interestingly, Betterment and Fundrise are both based on the principles of Modern Portfolio Theory, or MPT. But, where Betterment sticks close to home with the original MPT model, Fundrise has chosen to depart by focusing on private market investments rather than public market investments.

Each platform has good points to make.

Betterment uses a model that was built based on Nobel Prize-winning research about how markets move and how to best diversify your investment holdings to manage risk.

Screenshot of Betterment Diversified Portfolio PageBetterment’s model is a 70/30 mix – 70 percent publicly traded stocks and 30 percent publicly traded bonds. But Betterment also achieves this in the form of EFTS (exchange traded funds) rather than the purchase of straight stocks and straight bonds as yet another layer of protection against risk.

Fundrise, on the other hand, has re-allocated the classic 70/30 mix of publicly traded stocks and bonds by recommending the addition of 30 percent holdings in private real estate.

Now, how you make room in your portfolio for that 30 percent in real estate investments is up to you. Either way, Fundrise’s point is that private real estate investing is an asset class that is missing from most portfolios today.

If you agree, it may even make sense to use both Betterment AND Fundrise to build a truly well-rounded investment portfolio.

What About Investment Security? Who Does it Better?

Betterment states up front that, while user investments are not insured against market fluctuations, funds are insured against extreme circumstances (such as Betterment’s own demise) that might create loss of funds.

Investor Outcome After Brokerage Failure IllustrationBetterment insures user funds up to $250,000 for cash and $500,000 overall through the SIPC (Securities Investor Protection Corporation).

Fundrise does not provide any information about what they do or do not provide in terms of insuring investors’ funds against catastrophic unforeseen events.

Here, if you have any concerns in this area, it is going to be extremely important to reach out to Fundrise directly to get your questions answered since their website and FAQ is not forthcoming in this area.

Betterment vs. Fundrise: Investing Options, Pricing & Fees

Comparing Fundrise vs Betterment is not a strictly apples to apples proposition on any front, even factoring in some underlying similarities based on Modern Portfolio Theory.

Where Betterment focuses solely on publicly traded asset classes in the form of EFTs (exchange traded funds) that offer varying degrees of risk, Fundrise is solely focused on private real estate assets presented in the form of its own proprietary funds class called eREITs, or real estate investment trusts, and eFunds.

eREITS are specifically designed to generate income in the form of dividends, while eFunds are designed to be held and accrued over the long-term for growth.

Both classes of funds are vetted and aggregated by Fundrise directly so there are no brokerage commissions on the buying or selling end. But that doesn’t mean they are fee-free.

Now let’s take a look at how each platform’s assets and programs are structured so you can get a sense of which may better suit you or even how the two may benefit your greater portfolio in different ways.

Fundrise eREITs and eFunds

Fundrise offers four account levels: starter, supplemental, balanced investing and long term growth.

Fundrise Investment Plans

The starter account requires a $500 minimum investment. The other three so-called “core” plans require a $1,000 minimum investment each.

The annual account management fee for any of the four account plans is one percent of the portfolio value.

Betterment ETFs

Betterment offers two account plans: digital (basic) and Premium. The digital plan has a $10 account minimum to begin investing. The Premium plan has a $100,000 account minimum to qualify.

Betterment Pricing PlansThere is also a free suite of budgeting and financial planning tools available through the Betterment website. These free tools are available to anyone who wants to use them regardless of whether you plan to ever use Betterment’s robo advisor or Premium services.

The annual account management fee for the digital (basic) plan is 0.25 percent. Digital plan users have access to text-based communications with financial experts. There is also an option to purchase 45 to 60-minute phone meetings with financial planners with costs ranging from $199 and up.

The annual account management fee for the Premium plan is 0.40 percent. This higher level plan also comes with unlimited access to a group of dedicated certified financial planners (CFPs).

There is no doubt that the account management fees are higher when you use Fundrise. Also, Fundrise funds are considered “illiquid,” an industry term that describes privately held funds with lower historical market demand. In other words, they can be hard to offload at short notice, making for very poor liquidity.

For this reason, Betterment’s service is arguably a better choice if you can’t yet afford to have portion of your investment funds essentially tied up for a longer term.

Otherwise, Fundrise offers you a way to get involved in real estate investing that traditional robo advisor platforms like Betterment are not able to do.

Betterment vs. Fundrise: Online Platform and Mobile Apps

Fundrise Mobile App

Fundrise has been woefully slow to the party when it comes to introducing a mobile app. The platform was founded in 2010 and formally launched in 2012. And yet just this past year in 2019 Fundrise finally announced the introduction of an app for the iOS/Apple platform.

To date, there is no indication that an Android alternative may be in the works.

Happily, at least the Fundrise iOS/Apple app has been warmly welcomed and has earned excellent reviews from early adopters. With comments like “fantastic app” and “very pleased so far,” clearly the mobile experience is up to users’ expectations.

Betterment Mobile App

Betterment Mobile Trading AppBetterment, which also launched in 2010 and opened its doors that same year, has long had both an iOS/Apple app and an Android version of the same.

Both apps get overall high marks (with a average of 4.65 (out of five stars)), with the iOS/Apple version delivering slightly higher user ratings overall.

As we mentioned earlier here, Betterment recently redesigned both apps along with its online platform, which no doubt has also had an impact on overall app ratings.

Fundrise vs. Betterment: In Conclusion

When trying to compare Fundrise vs Betterment, it quickly becomes clear we have apples to oranges at the very least. As well, each platform not only sets the standard for its niche market but literally created it.

In that sense, you may just find that both have a place in your big picture investing strategy.

About Author

Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim is also the co-founder of Protective Technologies Capital (protechcap.com).