Using a robo-advisor to guide your investing decisions can simplify your financial life. Using advanced technology, robo-advising services work to understand your preferences and tolerance for risk. They offer many of the advantages of hiring a one-on-one financial advisor without the hefty price tag.
A robo-advisor platform invests in a few pre-selected and carefully vetted mutual funds or stocks. Depending on your tolerance for risk, the amount of money you want to invest, and your financial goals, the robo-advisor will allocate your assets so you have the best possible chance of reaching your short-term and long-term financial goals.
Choosing a robo-advisor may seem daunting, but there are a few great companies with a low minimum investment requirement, low fees, and a great track record of helping people manage their money.
M1 Finance investors can use the platform to trade and borrow, but those activities can also be financially risky. While you can create your own trading and investing strategy with M1, it works best as an automated investment tool with free rebalancing.
Investors who want something more than a standard template can customize their strategy with low-cost ETFs and individual shares in more ways than they could with other robo-investing platforms. M1 Finance is one our most favorite platforms for investing your money.
Wealthsimple offers socially responsible investing, as well as a Halal Investment profile with 50+ stock options including investments that do not receive significant income from loan interest. With one million users around the world, Weathsimple is an established robo-advisor option with a track record for helping people invest within their comfort zone.
The company also offers free portfolio reviews to anyone; even if you aren’t a Wealthsimple customer. Clients with a $500,000 balance or higher can access the Generation tier of services with access to two dedicated advisors to help create a holistic plan including tax efficiency, legacy planning, and retirement income strategy.
The customer experience includes a straightforward website where you’ll find information about fees, performance, account management, and portfolio holdings.
Fast Company named Weathsimple one of the Most Innovative Companies in 2019.
Betterment comes with a free high-yield savings account and checking account, so you can keep your finances in one place. Using the information you provide, Betterment handles investing your money. You can adjust how your investments are allocated at any point.
If you choose to bank with Betterment, their integrated Two-Way Sweep Plan automatically sweeps your extra cash into your Smart Saver account until you need it.
Customers who have a balance of less than $100,000 can still get access to one-on-one investment advice from Betterment’s financial experts for a fee between $149 and $399.
Schwab Intelligent Portfolios
Investers who want full-service attention
None to open or maintain an account; unlimited commission-free equity trades
Premium services offer unlimited access to Charles Schwab financial planners and are optional for a one-time $300 fee plus $30 per mont
Schwab recently lowered their account minimums to better compete in the world of robo-advisors. They offer more than 200 no-commission ETFs and an excellent selection of commission-free stocks and mutual funds. Three targeted investment strategies and six risk profiles along with expanded asset classes make personalizing your portfolio according to your wants and needs a breeze for the Schwab algorithms.
Wealthfront helps you put your finances on autopilot. Money left over after paying bills can go into your emergency fund, long-term investments, college savings, home savings, and retirement accounts.
A diversified portfolio of low-cost index funds helps maximize returns for long-term financial goals. Tax-loss harvesting helps lower taxes. The Wealthfront Portfolio Line of Credit allows customers to borrow cash without tapping into investments with a low-interest rate APR.
Blooom offers robo-investing services for retirement accounts. With a focus on diversification and keeping fees low, this company even offers free 401(k) balancing with a workplace plan.
The Blooom algorithm uses asset allocation to help you reach your long-term financial goals. This low-cost service doesn’t offer choices other than stocks and bonds, and you can’t change their asset class allocations. The company specializes in choosing low-cost index funds to keep management costs from cutting into your growth rate. Blooom automatically rebalances your portfolio every three months.
You’ll have access to a spending calculator to help you find extra money to invest, a diversification calculator to help you understand how to keep your money safe while allowing it to grow, and an allocation calculator, so you can see how your investments may perform over time.
Still have questions about the best robo-advisors? FAQs
What is a robo-advisor?
A robo-advisor uses computerized financial algorithms to calculate how best to invest your money to reach your financial goals. The investments offered by individual robo-advisors vary but are typically collections of options that fit into various investment criteria.
Some robo-advisors also offer access to live financial professionals that specialize in giving investment advice, in case you need answers to specific questions about your investing needs.
Does it matter which robo-advisor I choose?
Not all robo-advisors offer the same services. Depending on the amount of money you want to invest, your long and short-term financial goals, and how much one-on-one advice you need, your ideal robo-advisor may look very different than someone else’s perfect fit.
Robo-advisors have different fee structures, offer different services, and have varying minimum investment amounts.
Do I need a robo-advisor if I don’t have a lot of money?
If you want advice about how to invest, no matter how much money you have, and you don’t want to pay hefty fees to get it, robo-advisors are the way to go. Management fees can eat away at your growth rates, so it’s best to choose a robo-advisor with low fees, like the options highlighted here.
Investors who’ve been waiting until they feel confident enough in their knowledge to start working toward their financial goals can take the robo-advisor shortcut. You don’t have to be a financial expert to use a robo-advisor. In fact, you only need basic knowledge of investing and money management to use the investment services mentioned here.
What is rebalancing and how can it help me?
You’ll fill out detailed questionnaires when you open a robo-investing account. This helps the company understand your goals and risk tolerance. They use this information to set up your account and periodically change the percentage of your assets that they’ve put into various groups like bonds, cash, and stocks. When the company rebalances your account, they use the information you gave about your goals to maximize your investment potential while staying within your comfort zone.
What is asset allocation?
Asset allocation divides your money into categories with various risk levels. Stocks may yield higher returns, but they also carry a greater risk that you’ll lose money. Bonds and cash offer low returns but they are safe investments that are ideal for investors who can’t stomach losing money. Aggressive investors who have more time to allow their money to grow may choose a riskier asset allocation to maximize growth potential, knowing that they have time to make up for any losses.
What are some advantages of seeking a human financial advisor’s help over a robo-advisor?
When you speak with a live advisor, you may learn about more investment options than the robo advisor offers. A human advisor can also talk with you about tax strategy, estate planning, and other financial topics that may be related to overall financial health but aren’t strictly about investing.
If you have very specific questions, are stuck on a financial problem, or can’t find the answer to your question online, it may be worth your time and money to seek the advice of an experienced professional financial advisor. You can do so through a robo-advising platform for a small fee. If you know you’ll want help from a live financial advisor at some point, choose a robo-advising platform that offers this service at a low cost.
The bottom line
Robo-advising isn’t for everyone, but for the beginning investor or someone who wants to get great results without having to mess around with their portfolio, it’s a great option. Expect to pay fees for access to the best services. Although the fees are typically low, you’ll pay more for access to a live financial expert if you need one-on-one advice or support.
Many robo-investing services are accessible even if you don’t have much money to put into an account right away. If a lack of confidence in your investing knowledge is preventing you from investing, one of these automated services could be the tool you need to get started right away.