If you’ve been putting off investing because you’re not sure how to invest, delay no longer. Robo advisors help make investing as simple as possible, so all you need to do is fund your account.
 
Don’t worry about needing a lot of money to get started. Some robo advisors allow you to open an account with no money at all, and to begin investing when you’re ready to fund your account.
 
In this guide, we’ll take a look at what robo advisors are and provide you with a list of the best robo advisors in the business to help you decide where to start.

What is a Robo Advisor?

A robo advisor is an online, automated investment service that provides low-cost, comprehensive investment management with minimal human interaction. Robo advisors use computer algorithms to provide financial planning services similar, but less full service, to traditional advisors.

Though they’ve only been around for about a dozen years, there are already many robo advisors available. Some are provided as standalone services, and others are offered by diversified brokerage firms, including Fidelity and Charles Schwab.
 
But where traditional investment advisors have high account minimums, like $250,000 or more, you can open an account with a robo advisor with just a few hundred dollars, and sometimes with no money at all.
 
Though robo advisors originally provided only automated investment management, they’ve now branched out into other directions. Many now provide banking services, including high interest savings, as well as checking accounts with debit cards. Some even offer borrowing capabilities.
 
Even though robo advisors are designed to minimize human interaction – which is one way they keep advisory fees so low – some are now moving into live financial advice. It’s even possible to get the benefit of a robo advisor service with a dedicated financial advisor, at least for larger accounts, but you may have to pay a fee.

How Robo Advisors Work

You’ll typically sign up for a robo advisor on their online platform. In the process, you’ll complete a questionnaire that’s designed to determine your investment goals, time horizon, and risk tolerance. The service will use your answers in constructing a portfolio for you.
 
Investments: Robo advisors work using modern portfolio theory (MPT), which emphasizes proper asset allocation over individual security selection. For that reason, most invest either primarily or exclusively using exchange traded funds (ETFs). These are low-cost funds that track an underlying index, like the S&P 500.
 
The robo advisor will invest in each asset class using a dedicated ETF. For example, you may have one ETF for U.S. stocks, one for international stocks, another for U.S. bonds, and still another for international bonds.
 
Once again, the specific asset mix will be based on your answers to the questionnaire. You’ll typically be assigned one of five investor profiles:

    •    Conservative

    •    Moderately conservative

    •    Moderate

    •    Moderately aggressive

    •    Aggressive 


A conservative portfolio will favor a higher allocation in bonds, while an aggressive mix will include more stocks.
 
Fees: The range for robo advisor fees is generally between 0.25% and 0.50% of the account managed. For example, if the fee is 0.25%, and you have $10,000 invested, you’ll pay $25 per year for the service. That said, some advisors charge higher fees for additional service levels, while others have no fee at all.
 
Tax-loss harvesting: This is a process in which losing asset classes are sold to generate losses that will offset gains in other classes. The purpose is to minimize taxes. The asset class sold will be repurchased at a later date to maintain the target asset allocation of the portfolio. Tax-loss harvesting applies only to taxable investment accounts. It doesn’t extend to retirement accounts since they’re already tax advantaged.
 
Once your account is up and running, the robo advisor will handle investment management. That will include reinvesting dividends and rebalancing your portfolio periodically to maintain target asset allocations.

Best Robo Advisors

Below is a summary of the best robo advisors in the industry. You can get a deeper review of each of these robo advisors (except M1 Finance) in our guide: The 13 Best Robo Advisors.

Betterment

Betterment was the first robo advisor and remains the largest independent robo in the industry. 

There’s plenty of good reasons for that, too. Betterment is constantly innovating and upgrading their product, all while maintaining a low fee structure. They were one of the first robos to roll out banking services with their investment program, and they even offer access to financial advisors on their Premium plan.

  • Minimum Investment: $0 for Digital, $100,000 for Premium
  • Available Account Types: Individual and joint taxable investment accounts; traditional, Roth, rollover, and SEP IRAs; trusts, high-interest cash account
  • Investment Mix: US and international stocks and bonds held through ETFs
  • Fees: Digital plan – 0.25%; Premium plan – 0.40%
  • Banking Services: Yes

Wealthfront

Wealthfront is another large independent robo advisor, and Betterment’s primary direct competitor. 

Wealthfront doesn’t offer access to financial advisors but they provide more portfolio options than Betterment, and continue to use a single fee structure for all plans and account sizes. 

They also offer more asset classes than Betterment, including natural resources and real estate in most portfolios. And not only do they offer banking services, but they also provide a line of credit against your taxable investment account, complete with a low interest rate and near instantaneous funds access.

  • Minimum Investment: $500
  • Available Account Types: Individual and joint taxable investment accounts; traditional, Roth, rollover, and SEP IRAs; trusts and high-yield cash account
  • Investment Mix: ETFs invested in U.S. and foreign stocks and bonds, real estate, and natural resources
  • Fees: 0.25% on all account balances
  • Banking Services: Yes
     

M1 Finance

M1 Finance is a true innovator in the robo advisor space. It’s something of a hybrid service because it enables you to choose the ETFs and individual stocks you will hold in your portfolio, then provides complete automated investment management – all at no fee. You can also create as many portfolios – called “pies” – as you like, and hold as many as 100 securities in each.

  • Minimum Investment: $0 to open an account, but $100 to begin investing

  • Available Account Types: Individual and joint taxable investment accounts; traditional, Roth, rollover, and SEP IRAs

  • Investment Mix: ETFs and individual stocks

  • Fees: None

  • Banking Services: Yes


Personal Capital

Personal Capital is often included with robo advisors because they offer automated portfolio management. But it comes closer to traditional human guided financial advisories. 

They offer free services, which include financial and investment tools. But if you have at least $100,000 you can take advantage of the wealth management program, which includes access to financial planners as well as comprehensive financial planning strategies.

  • Minimum Investment: $0 for free financial management tools; $100,000 for Wealth Management

  • Available Account Types: Individual taxable investment accounts; trusts; traditional, Roth, SEP, and rollover IRAs; advice only for 401(k) plans

  • Investment Mix: ETFs invested in U.S. and international stocks and bonds, plus real estate investment trusts, energy, and gold; may also hold individual U.S. stocks

  • Fees: 0.89% on portfolios of $100,000 up to $1 million, then a sliding scale down to 0.49% on balances over $10 million

  • Banking Services: No


RELATED: Personal Capital Review: Free Financial Planning Tools

blooom

blooom is another unique provider among robo advisors. It’s currently the only robo that can manage an employer-sponsored retirement plan, like a 401(k) or 403(b) plan. In fact, retirement plans are all they handle. That includes IRA accounts as well. 

They can manage an employer-sponsored retirement plan for as little as $10 per month and you don’t need your employer’s permission to take advantage of the service.

  • Minimum Investment: None

  • Available Account Types: Employer-sponsored retirement plans; traditional, Roth, SIMPLE & SEP IRAs

  • Investment Mix: Works with the available investments in your employer-sponsored plan

  • Fees: Personalized Portfolio - $120 per year; Advisor access - $245 per year; Financial Consulting - $395 per year

  • Banking Services: No


SoFi Automated Investing

Best known for student loan refinances, SoFi Automated Investing gives SoFi customers an investment option. And not only is there no minimum required investment, but they don’t even charge a fee for the service. 

They also offer SoFi Active Investing, which allows you to participate in self-directed investing. If you add that option, you’ll be able to trade cryptocurrencies.

  • Minimum Investment: $0, but $1 to begin investing

  • Available Account Types: Individual and joint taxable investment accounts, plus traditional, Roth, and rollover IRAs; Keogh plans

  • Investment Mix: ETFs invested in U.S. and foreign stocks and bonds

  • Fees: None

  • Banking Services: Yes


Schwab Intelligent Portfolio

Schwab Intelligent Portfolio has one of the largest offerings of asset classes among robo advisors, with 20. The Basic account has no annual advisory fee, but it does require a fairly steep minimum investment of $5,000.

  • Minimum Investment: Basic account - $5,000; Premium account - $25,000

  • Available Account Types: Individual and joint taxable investment accounts; trusts; traditional, Roth, rollover, SIMPLE, and SEP IRAs

  • Investment Mix: Over 50 ETFs covering 20 asset classes, including stocks, fixed income, commodities, and cash

  • Fees: Basic account - $0; Premium account - $30 per month

  • Banking Services: Yes


RELATED: Schwab Intelligent Portfolio vs Vanguard: Which Robo Advisor Should You Pick?

E*TRADE Core Portfolios

E*TRADE Core Portfolios is the robo advisor for the popular E*TRADE investment platform. Two major advantages over its competitors are that 1) portfolios can be customized, and 2) you’ll also have access to human advisors at no additional cost. Meanwhile, you can participate in self-directed investing – or break into it gradually – on the E*TRADE trading platform.

  • Minimum Investment: $500

  • Available Account Types: Individual and joint taxable investment accounts; trusts; custodial; traditional, Roth, rollover, SIMPLE, and SEP IRAs

  • Investment Mix: ETFs invested in U.S. and international stocks and bonds

  • Fees: 0.30% annual advisory fee ($1.50 minimum)

  • Banking Services: Yes


Marcus Invest

Marcus Invest does require a minimum investment of $1,000 and has one of the higher advisory fees in the industry. But it does have more portfolio options than most of the competition, including their socially responsible investing (SRI) and smart beta portfolios.

  • Minimum Investment: $1,000

  • Available Account Types: Individual and joint taxable investment accounts, and traditional, Roth and SEP IRAs

  • Investment Mix: ETFs invested in U.S. stocks and bonds, international stocks, and U.S. and international real estate

  • Fees: 0.35% annual advisory fee

  • Banking Services: High-yield savings and certificates of deposit only


Fidelity Go

Fidelity Go is a robo advisor that will manage the first $10,000 of your portfolio free of charge. 

On higher balances, their rates are competitive with other robo advisors. Because it’s provided by Fidelity you’ll also have the opportunity to engage in self-directed trading with one of the top investment brokers in the industry.

  • Minimum Investment: $0, but $10 minimum to begin investing

  • Available Account Types: Individual and joint taxable investment accounts, and traditional, Roth, and rollover IRAs

  • Investment Mix: ETFs invested in U.S. and foreign stocks and bonds, plus short-term investments

  • Fees: Under $10,000 – no fee; $10,000 to $49,999 - $3 per month; $50,000 and up – 0.35%

  • Banking Services: No


Acorns

In addition to being a robo advisor, Acorns provides another important service – the ability to accumulate the funds you need to invest. 

They do this through a process known as Round Ups. You connect your primary spending account to the Acorns app, and it rounds up your purchases and transfers the “spare change” to your investment account. This is the perfect option for someone who wants to invest but is having difficulty accumulating the funds to do so.

  • Minimum Investment: $0 to open, $5 to invest

  • Available Account Types: Taxable investment accounts; traditional, Roth, rollover, and SEP IRAs

  • Investment Mix: ETFs invested in U.S. and foreign stocks and bonds

  • Fees: Acorns Lite –$1 per month; Acorns Personal – Roth IRA – $3 per month; Acorns Family –$5 per month

  • Banking Services: Yes


Stash

Stash works much the same way as Acorns in that it provides convenient ways to accumulate the funds for investing. That includes both roundups and regular periodic deposits. 

But unlike the other robos on this list, Stash doesn’t directly manage your account. Instead, it’s a registered broker that provides specific investing advice to help you build your portfolio.

  • Minimum Investment: $5

  • Available Account Types: Individual taxable investment accounts, custodial accounts; traditional and RothIRAs

  • Investment Mix: ETFs invested in U.S. and foreign stocks and bonds

  • Fees: Beginner - $1 per month; Growth - $3 per month; Stash+ - $9 per month

  • Banking Services: Yes


RELATED: Stash vs Acorns: Which Investing Service Is Better for You?

Vanguard Digital Advisor

Vanguard Digital Advisor is the basic robo advisor for Vanguard. It has been designed specifically to help new investors not only begin the investment process, but also to manage other financial affairs. This includes tools for paying off debt and saving for retirement. 

This robo has the advantage of building your portfolio entirely of Vanguard funds, which have some of the lowest expense ratios in the investment universe.

  • Minimum Investment: $3,000

  • Available Account Types: Individual and joint taxable investment accounts; traditional, Roth and rollover IRAs

  • Investment Mix: Vanguard ETFs invested in U.S. and foreign stocks and bonds

  • Fees: 0.15% annual advisory fee

  • Banking Services: No


Vanguard Personal Advisor

If you like investing with Vanguard, and you have at least $50,000, you should take a close look at Vanguard Personal Advisor. Not only does it take advantage of automated investment management, but you’ll also have access to a team of financial advisors. And if you have at least $500,000 in the plan, you’ll have a dedicated financial advisor. 

The plan is especially attractive for larger investors who can pay an annual advisory fee of just 0.10% with an account balance of at least $10 million.

  • Minimum Investment: $50,000

  • Available Account Types: Individual and joint taxable investment accounts; traditional, Roth, SEP and rollover IRAs; trusts and 401(k) plans held with Vanguard

  • Investment Mix: Vanguard ETFs invested in U.S. and foreign stocks and bonds

  • Fees: $50,000 to $5 million, 0.30%; $5 million to $10 million, 0.20%; $10 million to $25 million, 0.10%; $25 million and higher, 0.05%

  • Banking Services: No


Robo Advisors: Pros and Cons

Pros:

  • No investment knowledge needed.

  • You can open an account with little or no money.

  • The robo advisor will provide complete investment management, including portfolio selection, periodic rebalancing, and reinvesting dividends.

  • A robo advisor can be funded with payroll deductions, similar to an employer-sponsored retirement plan.

  • You can open both a taxable investment account and an IRA.

  • Many robo advisors now offer banking services, and even access to live financial advisors.


Cons:

  • Because your portfolio is spread across multiple asset classes, it may not grow as quickly as it could if you were to invest entirely in an S&P 500 index fund.

  • Direct financial support is not complimentary through most robo advisors.

  • Since most robo advisors are automated services, you won’t have any choice over the investments held in your portfolio.


Summary

Robo advisors are an excellent opportunity to begin investing if you are new and inexperienced. You can open an account with little or no money, then make regular contributions to grow your account. While you are funding your account, the robo advisor will provide complete investment management at a low fee.

RELATED: The Best Robo Advisors

References:

https://www.investors.com/etfs-and-funds/etfs/fund-industry-wakens-from-slumber-to-take-on-digital-advice-upstarts/

https://www.nerdwallet.com/article/investing/what-is-wealth-management

https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/modern-portfolio-theory-mpt/

https://smartasset.com/financial-advisor/blooom-review

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Mark Herman, CFP and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Robo Advisor.

How Do I Know If a Robo Advisor Is Right for Me?

A robo advisor may be a better choice for new investors, particularly those with little money to invest. If you want to begin investing but you don’t know how, a robo advisor can help guide you through the process. Not only will they construct and manage your portfolio, but they’ll do it for a low annual fee. As you can see from the list above, some don’t even charge a fee.
 
If you already have experience as an investor, and especially if you prefer self-directed investing, a robo advisor may not be the best choice for you. However, since many brokerage firms offer their own robo advisors, you can choose to have some of your money held with the robo while continuing to engage in self-directed investing.
 
If you have a large portfolio, certainly $250,000 and up, you may be better served working with a traditional financial advisor. They do charge higher fees, generally around 1% of your portfolio value, but they provide personal investment management. Many also provide additional services, like financial planning. That includes everything from retirement planning, to funding your children’s college education, to implementing an estate plan.

Mark Herman has been helping friends with financial questions since serving as an Army helicopter pilot. Since then, he’s gained valuable experience in the corporate world before moving on to become a Certified Financial Planner™.

If you have a question about Robo Advisor, then please ask Mark.

Ask a question Read more from Mark
Mark Herman, CFP - profile
Ask an Expert about Robo Advisor

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms