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Robo-advisors have disrupted the financial industry by offering something investors have been craving for a long time: affordable professional investment advice.
These services use technology to automate their processes, resulting in lower operating expenses, which allows them to provide investment advice at a fraction of what traditional firms charge.
If that introduction has already sparked your curiosity, you should stick around and browse this list of the best robo-advisors right now.
|Robo-Advisor||Account minimum||Fees||Learn more|
|Betterment||$0||0.25% (annual) for digital plan, 0.40% (annual) for premium plan||Learn More|
|Wealthfront||$500||0.25% (annual); 0.42% to 0.46% (annual) for 529 plans||Learn More|
|M1 Finance||$100 ($500 minimum for retirement accounts)||0.00% (annual)||Learn More|
|E*TRADE Core Portfolios||$500||0.30% (annual)||Learn More|
|Ally Managed Portfolios||$100||0.30% (annual); 0.00% (annual) with Cash-Enhanced Managed Portfolio||Learn More|
|SoFi Automated Investing||$1||0.00% (annual)||Learn More|
|Ellevest||$0||$1 to $9 per month (subscription)||Learn More|
|Empower Wealth Management||$100,000||0.89% to 0.49% (annual)||Learn More|
|Blooom||$0||$120 – $295 per year (subscription)||Learn More|
|Schwab Intelligent Portfolios||$5,000 ($25,000 for Premium)||$0 (Schwab Intelligent Portfolios) and $30/month (Schwab Intelligent Portfolios Premium)||Learn More|
|Fidelity Go||$0||0.00% (annual) up to $10,000; $3/month $10,000–$49,999; 0.35% (annual) $50,000+||Learn More|
|Vanguard Digital Advisor||$3,000||0.20% annual management fee||Learn More|
There are lots of options for those looking for the right robo-advisor for their needs, but we think there is something here for everyone.
1. Betterment: Best Overall
Betterment is a US-based financial advisory firm that manages more than $29B in assets for its clients through their sophisticated yet user-friendly robo-advisor.
The firm has teamed up with financial giants like Goldman Sachs and Blackrock to further strengthen their selection of available portfolios, which has helped the firm emerge as a strong player in this highly-competitive market.
What We Like About Betterment
Betterment excels at offering a competitive advisory fee, advanced features like tax-loss harvesting, and a wider selection of goal-based portfolios that other robo-advisors do not cover.
Who is Betterment For?
Betterment is best suited for investors who prefer to take their hands off the wheel when it comes to managing their money.
Fees & Pricing
Betterment allocates its clients’ holdings in broadly-diversified ETFs that track multiple asset classes, and charges an advisory fee of 0.25% — although it also offers a premium service for clients with more than $100,000 in their account for a higher annual fee of 0.40%.
The company’s financial planning packages, which consist of phone consultations with Betterment’s Certified Financial Planners (CFPs®), start at $199 per session.
You can read our full Betterment review for more details.
2. Wealthfront: Best For Financial Planning Tools
Wealthfront is one of the largest robo-advisors in the United States, overseeing more than $12B in assets for its more than 400,000 clients.
The firm was named the #1 robo-advisor in the country by Investopedia.com and NerdWallet.com, and this has provided a big credibility boost for the company, helping it in promoting its Self-Driving Money™ approach to many more users.
What We Like About Wealthfront
Wealthfront offers a wide variety of advanced features that other robo-advisors don’t. These include a risk parity program, which follows an approach similar to what is proposed by Modern Portfolio Theory (MPT) but with a twist, as this firm takes into account the individual risk of each asset class before assigning a weight to them.
Additionally, the firm also supports a Smart Beta portfolio feature that assigns a weight to the stocks that comprise the S&P 500 index based on other indicators, apart from just market capitalization.
Additionally, the company has received numerous awards for its services, which include banking, investing, borrowing, and financial planning products.
Who is Wealthfront For?
Wealthfront competes with Betterment in both its cost and the degree of advancement of the features its robo-advisor incorporates. Its services are best suited for investors who prefer a hands-off approach.
Fees & Pricing
Wealthfront charges a 0.25% annual advisory fee, along with the expenses related to the ETFs the robo-advisor uses to build the portfolio.
You can read our full Wealthfront review for more details.
3. M1 Finance: Best For Low Costs
M1 Finance has emerged as one of the cheapest robo-advisors in the United States, and it currently oversees more than $1B in assets for its clients.
The firm uses its zero-fee entry-level offering to attract investors who are perhaps starting out with a low budget. Plus, the fact that they permit some degree of self-executed customization to the portfolios adds an additional appeal to their service, since some robo-advisors are a bit strict in allowing users to pick individual stocks or ETFs by themselves.
What We Like About M1 Finance
M1 Finance offers a set of 80 different investment portfolios designed to suit the different financial goals that investors may have.
However, those portfolios may just be the starting point, as investors can add or exclude any securities they wish as part of the firm’s self-directed investment approach.
Who is M1 Finance For?
M1 Finance is an affordable alternative that offers the raw elements that virtually all robo-advisors in the industry cover. That said, the custom-made portfolio feature gives it a bit of an edge.
This service is perhaps best suited for investors that want to squeeze as much as possible from their capital, as they will save money on advisory fees.
Fees & Pricing
M1 Finance does not charge a fee for using its platform as part of its Basic package. This package allows investors to trade securities only during certain hours of the day (also known as the trading window).
The firm also offers a Plus package that extends this access to two trading windows during the day rather than just one. This package costs $125 per year
You can read our full M1 Finance review for more details.
In A Nutshell
- Account Minimum: $100 ($500 minimum for retirement accounts)
- Fees: 0% per year
- Promotion: None at this moment
4. E*TRADE Core Portfolios: Best For Socially Responsible Investing
Founded in 1982, E*TRADE was one of the first financial services firms to introduce the concept of electronic trading in America. After 40 years in business, the Palo Alto-based company has attracted over 5.2 million customers who enjoy its sophisticated platform and ample range of services.
Even though it was recently acquired by Morgan Stanley, E*TRADE continues to provide its services as a standalone company including its guided investing solution called E*TRADE Core Portfolios.
What We Like About E*TRADE Core Portfolios
E*TRADE’s automated investing solution has a lot to like. First, the minimum investment required to enroll in the program is relatively low at $500 while annual management fees are highly competitive at $1.50 per year or 0.30% of the account balance.
Moreover, this solution comes with some nice extra features including a tax-sensitive investment strategy that uses municipal bonds to reduce taxes and the possibility of selecting other portfolios aside from the one recommended by the robo-advisor such as the Smart Beta and Socially Responsible alternatives.
Who are E*TRADE Core Portfolios For?
E*TRADE can be a great choice for investors who would like to get started in the financial markets but have a relatively small budget to allocate. The low fees charged by this provider along with the wide range of extra features the service offers make it a great candidate for beginner investors seeking to build a retirement fund or set money aside for their dream vacations.
Fees & Pricing
E*TRADE charges a flat 0.30% annual management fee and requires a minimum investment of $500. This fee does not cover the expenses resulting from holding the exchange-traded funds (ETF) that will comprise the client’s portfolio.
Read our Full E*TRADE Core Portfolios review to learn more.
In A Nutshell
- Account Minimum: $500
- Fees: 0.30% management fee
- Promotion: None
5. Ally Managed Portfolios: Best For Banking & Investing
Ally currently provides its services to more than 350,000 account holders who benefit from both the firm’s managed portfolio and from its self-directed trading platform.
What We Like About Ally Invest
Ally’s robo-advisor does not charge an advisory fee (certain conditions apply) and it offers four different portfolios that aim to fulfill virtually any financial goal its clients might have.
Additionally, the firm’s investment management service is backed by its banking background and strong credibility, as Ally Financial (the firm’s parent company) is a publicly-traded and highly regulated bank holding.
Who is Ally Invest For?
Ally Invest offers the best of both worlds for its clients: a self-directed trading service and a robo-advisor for those who prefer a hands-off approach.
Fees & Pricing
Ally Invest does not charge an advisory fee for its managed portfolio service as long as the client signs up for the firm’s cash-secured feature, which sets aside 30% of the client’s balance at all times.
If the client chooses not to sign up for that option, Ally charges a flat 0.30% annual advisory fee.
Finally, the firm offers highly competitive rates for its self-directed trading service, including zero-fee ETF and stock trades for US-listed securities and zero-commission options trades.
You can read our full Ally Invest Managed Portfolios review for more details.
In A Nutshell
- Account Minimum: $100
- Fees: 0% Annual Fee —Cash-Enhanced Managed Portfolio; and 0.30% Annual Fee —Managed Portfolio without 30% cash allocation requirement
- Promotion: None at the moment
6. SoFi Automated Investing: Best For Low-Cost ETFs
SoFi Invest is the investment management unit of Social Finance Inc., a firm founded in 2011 that provides banking, insurance, and advisory services to individuals in the US.
The firm has a dual approach to investing that allows clients to either entrust their holdings to the firm’s robo-advisor or to take the wheel of their portfolios through a user-friendly proprietary trading platform that incorporates a wide variety of financial instruments for active traders.
What We Like About SoFi Automated Investing
SoFi provides investment management for more than 1 million clients in the US, which makes it a popular alternative — especially among younger clients.
In this sense, SoFi stands out for being an attractive alternative for millennials who would like to have access to innovative instruments like cryptocurrencies, as the firm currently supports investments in Bitcoin, Ethereum, and Litecoin.
Who is Sofi Automated Investing For?
SoFi Automated Investing is a good choice for young investors who would like to get some exposure to innovative financial instruments like cryptocurrencies, which are usually not incorporated or offered by other robo-advisors.
Similar to Ally, SoFi also offers its clients the possibility of engaging in active trading, which may be an appealing alternative for investors who would like to have more control over their holdings.
Fees & Pricing
SoFi doesn’t charge a fee for its robo-advisory service.
You can read our full SoFi Automated Investing review for more details.
7. Ellevest: Best For Values-Based Investing
Ellevest was founded by Sallie Krawcheck, a former executive from the financial industry who decided to use a robo-advisor to help women in managing their investments.
This robo-advisor incorporates some unique features that are designed to cater to a female audience, including banking, investing, coaching, and retirement solutions.
What We Like About Ellevest
Ellevest has a mission: to teach women how to manage their money more wisely.
This mission makes this robo-advisor an attractive choice for women, as its services were primarily conceived with their unique needs and preferences in mind.
Additionally, Ellevest charges a subscription fee that makes other robo-advisors look expensive, although its features lack the degree of advancement that other providers like Betterment incorporate.
Who is Ellevest For?
The firm’s strongest suit is probably its niche approach, as its services are primarily designed to cater to a female audience (with special emphasis on its coaching modules), although Ellevest states that it also provides its services to male clients.
Fees & Pricing
Ellevest currently offers three different packages for its clients: Essential, Plus, and Executive. Each of these packages comes with different features.
The cost of these packages starts at $1 per month for the Essential alternative – which is a steal – while the Executive alternative costs $9 per month and gives the client full access to all the firm’s investment management services.
Ellevest also offers a Private Wealth Management service to clients with a net worth higher than $1M.
You can read our full Ellevest review for more details.
8. Empower Wealth Management: Best For Portfolio Management
Although Empower is perhaps best known for the free technological apps the company has designed to help individuals in the US in managing their finances, the company also offers a Wealth Management Solution that works as a robo-advisor.
This company incorporates some unique insights they have obtained through their extensive research of the financial markets through advanced features that promise to enhance the returns of their investment portfolios.
What We Like About Empower Wealth Management
Empower Wealth Management’s advanced features like dynamic portfolio allocation, tax optimization, and smart weighting strategies are the most appealing characteristics of their robo-advisory service.
These features seek to improve the portfolio’s returns by modifying the way the portfolio assigns a weight to each of the securities it holds.
This level of advancement may be the reason why this provider is more expensive, although investors will have to decide if they are worth the extra money.
Who is Empower For?
Empower’s Wealth Management Solutions are designed for individuals with an account balance higher than $100,000 – which makes the firm a sophisticated player in the robo-advisory landscape and possibly one best suited for high net-worth investors.
Fees & Pricing
The firm’s advisory fees start at 0.89% for clients with a balance lower than $1M, and they are progressively reduced to 0.49% per year for clients with more than $10M in assets.
Although this makes Empower one of the most expensive robo-advisors, they do bring a few extras to the table.
You can read our full Empower review for more details.
In A Nutshell
- Account Minimum: $100,000
- Fees: 0.49% – 0.89% depending on account balance
- Promotion: None at this moment
9. Blooom: Best For Retirement Accounts
Blooom is exclusively a retirement planning service, which means that they don’t offer the full range of services that other providers in this list do.
However, their approach to managing retirement accounts is the same as any other robo-advisor, as they evaluate each account to make recommendations on which securities the investor should incorporate to achieve his/her financial goals.
The firm currently oversees more than $3B in assets from the retirement accounts its users hold.
What We Like About Blooom
Blooom’s strongest suit is definitely retirement planning and retirement account management and its fees are very competitive considering the benefits their involvement will bring once the robo-advisor has optimized the portfolio according to the client’s goals.
Who is Blooom For?
Blooom is a robo-advisor designed specifically for retirement planning purposes as the firm only supports 401(k)s and IRA accounts that the user already holds, providing insights, recommendations, and portfolio design services to those accounts after the robo-advisor conducts a thorough revision of the account’s current holdings.
Fees & Pricing
The firm offers three different plans at the moment: Essentials, Standard, and Unlimited.
The Essentials plan costs $95 per year, and only supports one retirement account, providing basic insights and portfolio arrangement.
The Standard plan charges a higher fee of $120 per year, but adds an automatic rebalancing feature, withdrawal alerts, and access to a financial advisor via e-mail.
Finally, the Unlimited plan provides all of the features mentioned above, but also supports multiple accounts and provides access to a financial advisor through an online live chat.
You can read our full Blooom review for more details.
In A Nutshell
- Account Minimum: $0
- Fees: $120 per year (Personalized portfolio), $165 per year (Advisor access), and $295 per year (Financial consulting)
- Promotion: Free account analysis (*401k or IRA accounts)
10. Schwab Intelligent Portfolios: Best For Customizable Tools
Charles Schwab is a highly-reputed financial institution in the United States that holds over $3.3T for its customers, which makes its services stand out due to the significant credibility that the organization brings to the table.
Although Schwab specializes in in-person financial advisory and other similar services, they have also launched a robo-advisory portfolio known as Intelligent Portfolios which help customers save money in fees and time in designing a portfolio on their own.
What We Like About the Schwab Intelligent Portfolio
One of the best things about this service is that Schwab doesn’t charge an advisory fee or any other commission for building or managing the portfolios, but a minimum deposit of $5,000 is required to start. The firm’s service includes a tax-optimization feature.
Who Is Schwab Intelligent Portfolios For?
If you have $5,000, Schwab Intelligent Portfolios are a decent alternative as they don’t charge any fees for this service and the firm has a great reputation in the financial industry.
Fees & Pricing
Schwab Intelligent Portfolios don’t charge any advisory fees or commissions, although there is a premium package that requires a $25,000 minimum deposit and charges a one-time $300 planning fee and a $30 monthly advisory fee.
This version of the service includes access to one-on-one consultations with a Certified Financial Planner (CFP).
Read our full Schwab Intelligent Portfolios review to learn more.
In A Nutshell
- Account Minimum: $5,000 ($25,000 for Premium)
- Fees: $0 (Schwab Intelligent Portfolios) and $30/month (Schwab Intelligent Portfolios Premium)
- Promotion: None at this time
11. Fidelity Go: Best For No Investment-Expense Ratios
Fidelity is one of the largest asset management firms in the US with over $3.3T in assets managed for its clients and offering a wide range of services including investment, and retirement advisory and insurance.
The firm has joined the growing number of big finance companies like Schwab and TD Ameritrade who have seen the potential in the robo-advisory market and is now introducing a basic service with very attractive fees, especially for retail investors.
What We Like About Fidelity Go
Fidelity Go is a basic robo-advisor service that requires as little as $10 to start investing and the firm charges no fees for managing portfolios under $10,000.
On the downside, Fidelity uses a set of mutual funds – which are usually more expensive than ETFs – to build broadly diversified portfolios for clients, depending on their financial goals.
Who is Fidelity Go For?
Similar to M1 Finance, Fidelity is a good alternative if you have a small portfolio and would like to save money on advisory fees.
Fees & Pricing
The firm doesn’t charge an advisory fee for accounts under $10,000, but once that threshold is exceeded, the fees start at $3 per month for portfolios between $10,000 and $49,999. Then, they go up to 0.35% of the account balance per year for investors with over $50,000 in investable assets.
Read out full Fidelity Go review to learn more.
In A Nutshell
- Account Minimum: $0
- Fees: $0 (<$10,000), $3 per month ($10,001 to $49,999) and 0.35% per year (>50,000)
- Promotion: None at this time
12. Vanguard Digital Advisor: Best For Goal Planning
The Vanguard Group pioneered the passive investing movement by introducing some of the first managed investment vehicles in the United States including index funds. The firm was founded nearly 50 years ago and currently oversees $8.1 trillion in assets from over 30 million investors.
This company has created some of the most popular passively-managed solutions including exchange-traded funds (ETFs) and mutual funds and recently dived into the growing automated guided investing market by introducing its Vanguard Digital Advisor product.
What We Like About Vanguard Digital Advisor
The Vanguard Group is a reference when it comes to the passive investing movement. The company is a stable financial institution that has ample experience in this particular field and that makes it a go-to provider for those seeking investment advice.
Vanguard has opted to waive its advisory fees during the first 90 days after enrolling in the Digital Advisor program and, since the ETFs used to build the robo-advisor’s portfolios are managed by the firm, they have also opted to refund the fees charged by these vehicles during that same period.
Who is Vanguard Digital Advisor?
Vanguard’s robo-advisor is a great choice for those who are building a retirement fund or any other kind of investment account from scratch. The fact that the minimum investment required to open an account is relatively low — $3,000 — and the low fees charged by this provider (currently 0.20% per year) make Vanguard a great alternative for beginner investors.
In addition, investors will save some money during the first three months after enrolling as Vanguard will waive its fees and ETF-related expenses during that period.
Fees & Pricing
Vanguard requires a minimum investment of $3,000 to open an account and the Digital Advisor solution charges a 0.20% annual management fee along with any fees charged by the investment vehicles used to build the suggested portfolios.
Read our full Vanguard Digital Advisor review to learn more.
In A Nutshell
- Account Minimum: $3,000
- Fees: 0.20% annual management fee
- Promotion: None
Our number one goal is to provide an independent review of the various providers in order to help our readers make an informed decision. We have taken a number into consideration a number of items while evaluating and selecting the best robo advisors. Some of the key metrics we looked at include:
- Cost: Considering things like management fees and any other fee — like expense ratios — that could impact the performance of your portfolio.
- Portfolio Construction: Taking into consideration the underlying ETFs used to create the various portfolios.
- Account Types: Taking into consideration the available accounts types at your disposal, including retirement accounts (i.e. Traditional IRA, Roth IRA, SEP IRA, etc.)
- Mobile and Web Platforms: We also took into account how easy is to use the platform and how is the mobile and desktop user experience.
- Other Tools & Resources: We also consider what other tools an investor has access to like goal setting, retirement planning and educational resources.
Beyond the above, we also took into consideration things like robo-advisor’s proven track record, overall performance, account minimums and access to human advisors.
Some of the platforms that we’ve reviewed this year that didn’t make the cut include:
- Axos Managed Portfolios
- Morgan Stanley Access Investing
- Wells Fargo Intuitive Investor
- Zacks Advantage
- UBS Advice Advantage
- Capital One Investing
- Interactive Advisors
- Merrill Guided Investing
Please keep in mind that the robo-advisors that didn’t make the list are not necessarily bad. Each platform comes with its advantages, disadvantages, and unique features.
Robo Advisors Pros
- Highly diversified investment portfolios can be built in a matter of minutes.
- The optimal portfolio allocation is selected based on the client’s financial goals, risk tolerance, and other relevant variables.
- Management fees are considerably low considering the sophistication of the services provided.
- Investors can enjoy some advanced features such as tax-loss harvesting and smart portfolio solutions to increase their returns and even “beat the market” in some cases.
- Some providers offer the possibility of pairing the robo-advisor’s service with human advice.
- Portfolios are built by using low-cost investment vehicles such as exchange-traded funds (ETFs).
- The minimum investment required by most providers is low and that allows almost any kind of investor to access this type of solution.
Robo Advisors Cons
- They might not be the most fun way to invest in the markets.
- If a provider charges an annual 1% fee or higher that can significantly diminish the portfolio’s return over time.
- Investors may miss out on some of the eye-popping growth that certain segments of the market may experience due to the highly diversified nature of these automated portfolios.
What To Look For In A Robo Advisor
In this section, we will share with our readers some of the most relevant characteristics that they should pay attention to when picking a robo-advisor as the space is quickly getting filled with competitors.
A robo-advisor’s fees will have a sizable impact on the portfolio’s return over time and, therefore, investors should shop around to select the provider that offers the best bang for the buck.
Any advisor that charges over 1% may be ruled out entirely as those kinds of fees are no longer considered a healthy industry average. Some providers within our list charge as little as 0.1%. If the investor feels comfortable with the services provider, saving that much on fees will have a dramatic impact on the performance of the portfolio, especially if the investment horizon is quite long (5 years or more).
The minimum investment required by a provider may or may not be an issue depending on the investors’ budget. For low-budget investors, some alternatives allow investors to open an account with as little as $100. That said, percentage-based fees, even if they are not disclosed as such, tend to be higher if the account balance is lower than $1,000.
If a provider promotes a fee expressed as a fixed dollar amount, make sure you do the math and check how much that is in percentage terms to make sure you are not overpaying.
Since automated passive investing is typically associated with retirement, it is typically a good idea to choose a provider that offers both taxable and tax-deferred investment accounts such as 401(k)s and individual retirement accounts (IRAs). As a rule of thumb, the higher the number of available accounts, the better.
The periodic rebalancing of a portfolio is crucial to keep risks at bay and make sure that returns end up landing near the expected goal. Since an automated solution should take most of the work out of this activity, the best providers offer an automatic rebalancing feature that will execute the required trades to keep the asset allocation in line with the initial plan.
Tax Loss Harvesting
Tax-loss harvesting is a feature that takes advantage of tax credits resulting from the sale of losing investments to offset the portfolio’s short-term gains and reduce the resulting tax bill. A provider that offers this kind of feature — especially if it does it for free — is one worth considering as its implementation can boost the portfolio’s returns by a few decimal points that can turn into a lot of money down the road.
Access to Human Advisors
The financial situation of some people is too complex to rely solely on a robo-advisor’s advice to build a portfolio on their behalf. In these scenarios, counting on the advice of a human – a professional in the investment field — is a great alternative to determine the best course of action by taking into account estate planning and tax considerations.
No technology is completely fool-proof and the best financial services firms understand it and act proactively to come up with solutions for customers who have experienced issues when building a portfolio through a robo-advisor.
The best robo-advisors provide live support via online chatting features or customer support tickets. The more alternatives you have to reach out to a representative, the better.
Aside from just suggesting the optimal portfolio allocation for a client, the best robo-advisors incorporate great additional features such as tax-loss harvesting, portfolio themes, smart portfolios, and reduced fees if the account balance exceeds a certain threshold.
FAQ Best Robo-Advisors
Here are the most frequently asked questions on the web with regards to robo advisors and how to choose the best for you.
What is a Robo Advisor?
A robo-advisor is a program designed to create portfolios for investors automatically based on certain data such as the user’s financial goals, risk tolerance, available investment budget, income, and employment situation.
How do Robo Advisors Work?
Robo-advisors use algorithms to determine the optimal portfolio allocation based on the variables mentioned in the previous question. In most cases, financial services firms create three to five types of portfolios going from the most aggressive allocation (high risk/high reward) to the most conservative (low risk/low reward).
After the allocation is selected, the program uses passively-managed investment vehicles – typically low-cost exchange-traded funds (ETFs) – and executes the required trades to build the portfolio.
If the investor adds more money to the account, all the required trades are executed automatically to keep the portfolio’s composition in line with the initial structure.
In addition, the program typically assesses the portfolio’s allocation periodically and rebalances it to achieve the same goal.
Who Should Invest with Robo-Advisors?
Robo-advisors are a great alternative for hands-off investors that would like to put their investments on autopilot by relying on technology and time-tested investment philosophies that involve holding financial assets for a long period, with periodic rebalancing.
These services are perhaps not suited for active traders or investors who prefer a hands-on approach. However, some of the providers listed above offer the possibility of doing both.
Robo-advisors cannot protect portfolios from market downturns, but they can release investors from the burden of building and monitoring a portfolio by themselves, and the strategies they follow have proven to be the most profitable for passive investors over the long run.
How Do I Choose the Best Robo-Advisor?
Picking the right robo-advisor for you depends on different variables, including the following:
- Whether or not you would like to have some control over your portfolio.
- How much money you have available to invest.
- What kind of advice you are seeking (robot only or a combination of human and robot)
- Your financial goals.
- How much you are willing to pay for the service.
Depending on your answers to some of those variables, you can easily determine which of the robo-advisors listed in this article is the best one for you as you may be seeking the cheapest provider, or you might focus on which offers the most advanced services of all regardless of their price.
Can Robo-Advisors Replace Human Financial Advisors?
To some extent, yes. Robo-advisors will ultimately take over a significant portion of the job that financial advisors do as they can build a portfolio in a matter of minutes following a set of guidelines established by portfolio managers.
However, human advisors can help investors in navigating certain personal and financial situations that robo-advisors are still not capable of providing advice for.
Human advice will always be useful, and robo-advisors require human advisors to develop and polish their algorithms based on any new theories or approaches that financial professionals come up with over time to improve returns or minimize risks.
How Much Do I Need to Invest With a Robo Advisor?
Most robo-advisors require a minimum investment of over $1,000. However, some providers within this list allow investors to enroll in the program for as little as $100. Keep in mind that the services or features to which the client has access if the account balance is low may be limited compared to those that require a higher minimum investment.
Can I Lose Money With A Robo Advisor?
Yes. The value of risky assets such as stocks, exchange-traded funds (ETFs), and other similar securities is susceptible to fluctuations in both the short and long term. Many variables could affect the performance of a portfolio over time including interest rates, inflation, and economic growth.
However, most robo-advisors have conducted backtests for their suggested portfolios and they all have produced positive results during long investment horizons. That said, past results are not a guarantee of future performance.
Are Robo Advisors Better Than Index Funds?
Robo advisors typically incorporate index funds in their suggested portfolios. Whether they are better or not depends largely on the investor’s financial goals and risk tolerance. Index funds can opt to track different benchmarks depending on their objective and preferred investment methodology.
Therefore, it is difficult to draft an apple-to-apples comparison between these two investment alternatives.
How Much Does a Robo-Advisor Cost?
The cost of a robo-advisor can be broken down into two items. First, there is the management fee charged by the company that is offering the service. This fee is typically expressed in percentage terms on an annual basis although it might be deducted on a monthly or quarterly basis.
Meanwhile, the portfolios built by the robo-advisor use exchange-traded funds (ETF) to achieve the target allocation. These funds have expense ratios, which are also annual management fees expressed in percentage terms. These fees are also deducted from the account balance periodically and are also a cost that must be considered whenever investing through these solutions.
Are Robo-Advisors Safe?
Robo-advisors are software that controls how the balance of an account is distributed among the different assets that comprise the user’s portfolio. Whether they are safe or not depends on the institution that is offering the investment account.
Most of the providers mentioned in this list are large financial institutions overseen by top regulatory agencies. Moreover, investment accounts in the United States are protected by the Securities Investor Protection Corporation, also known as SIPC.
This insurance covers up to $500,000 in securities and $250,000 in cash held within an investment account held with an authorized financial services firm. It does not cover losses.
What Is The Difference Between A Robo Advisor and A Stock Broker?
A robo-advisor is a program that uses algorithms to recommend an optimal portfolio composition based on the investor’s financial goals and risk tolerance — among other variables. A stock broker is an institution or company through which the investor can execute the trades required to build that or any other type of portfolio he prefers.
Can A Robo Advisor Beat The Market?
Beating the market is a term that typically means to exceed the returns produced by a certain stock market benchmark such as the S&P 500 or the Dow Jones Industrial Average during a certain period.
A robo-advisor can beat the market in some years and underperform in some others depending on the portfolio’s target allocation. Some providers use advanced strategies such as “smart beta” or “tactical allocation” to beat the market.
Whether they will be able to do this sustainably in the long term is difficult to estimate.
This list should provide a starting point to help you find the robo-advisor that fits you best.
Although this list does not cover all the features or details of each provider we’ve discussed here, you can read individual reviews for each of the robo-advisors on this website to learn more.
That way, you’ll be able to make an informed decision about the robo-advisor that’s best for you.
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Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and has also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.