Robo-advisors are online tools programmed with algorithms to build the right portfolio for your profile. It selects good investment portfolio to fit your financial needs and wants! With this tool, you can have a middle ground from doing it to yourself and to hiring a human financial advisor.
So once you invest your funds, the automated advisor makes changes to your investments when it sees fit and aligns your portfolio back to a targeted designation for you! Many will purchase exchange-traded funds on your behalf, so all you have to do is tell your robo-advisor your financial goals and how much you are willing to risk. Then you can just relax and let your money go to work with minimal thought and effort!
So if you want to get in on the robo-advising game then keep reading below and check out the breakdown of the best robo-advisors that’s currently on the market!
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Why Consider Robo-Advisor?
Although the program is not free, Robo-advisors will perform difficult tasks like tax optimization and portfolio re-balancing automatically, which means higher net returns for you.
Robo-advisor is a good fit for you, if you prefer to have every little involvement in your investments and would rather have someone else doing all the work. If you don’t have quite enough assets to hire a human financial advisor and if you have a simple financial profile that doesn’t need the expertise of a human advisor then this is a great option for you!
Factors To Consider
- Management fee: This is paid annually and the fee is usually a percentage of your assets with your robo-advisor! So if you’re annual return is 7% and your management fee is .25%, then your gross return that year will be 6.25%. This fee is deducted from your account balance!
- Expense ratio: This amount goes towards the investments your robo-advisor utilizes, like mutual funds, index funds, and exchange-traded funds (ETFs), to cover their costs.
- Account types: Investments fall under two of the following categories:
- Retirement accounts include IRAs and 401(k)s and have tax advantage for your contributions. But there are limits to contribution and stiff distribution rules.
- Nonretirement accounts also known as taxable accounts have no contribution limits or distributions rules.
- Tax-loss harvesting: Using this strategy, will help sell investment assets at a loss in order to reduce your tax liability at the end of the year.
- Rebalancing: You can get your portfolio in periodical order. Failing to do so, you’re taking on added risks as your portfolio becomes heavily weighted by one or several types of investments. But many robo-advisors check for opportunities to rebalance on a daily basis and adjust your portfolio when an allocation varies by a set amount.
- Access to human advisors: The level of access can vary from personal advisors for each individual client to a team of professionals readily available via email or online chat.
- Assets under management (AUM): The more AUM, the more stable the company is! So you can trust it more!
- Socially responsible investing (SRI): Also known as impact investing or values-based investing! It’s a way for y ou to align you investment with your values. Companies that don’t promot social good are excluded from the SRI funds and portfolios.
Best Robo-Advisors List
Betterment: The Best For Taxable Accounts
- Management Fees 0.25% for Digital Plan
- Minimum Investment: $0
Betterment is the largest independent robo-advisor, they manage $13.5 billion in assets, while offering a powerful belnd of goal based tools, affordable management fees and no minimum account requirement. If you need assistance from a human advisor then you have a choice to do so, but that ill cost you higher in management fees.
PROS
- No account minimum
- Fractional shares limit un-invested cash
- Robust goal-based tools.
CONS
- No direct indexing
ALLY INVEST: BEST FOR SMALL BALANCES
Ally Cash-Enhanced Managed Portfolio
- Minimum Deposit: $100
- Annual Fee: 0% advisory fee for Cash-Enhanced Managed Portfolio
- Pros: No advisory fees for Cash-Enhanced Managed Portfolio
Why we like Ally Cash-Enhanced Managed Portfolio for small balances:
- No advisory fees no matter your account size. Small balances won’t lose any money to fees.
- Only $100 minimum to get started.
- Choose from 4 different portfolios: core, income, tax-optimized, and socially responsible.
- Automatic account rebalancing.
- 24/7 customer service by phone and online chat.
Wealthfont: Best for New Robo-Investors
- Management fees: 0.25%
- Minimum investment: $500
Wealthfront relies on its Modern Portfolio Theory to build portfolios from low-cost ETFs. It offers direct indexing for account over $100,000 which mimics ETFs with direct investments to stocks in order to achieve the most tax-loss harvesting benefits.
PROS
- Great for beginners
- Lower fees
- Easy learning curve
- Daily tax-loss harvesting
- Automatic rebalancing
- Direct indexing on accounts over $100,000
CONS
- No fractional shares
- No large-balance discounts
Personal Capital: Best for High Ballers
- Management Fees: 0.89%
- Minimum investment: $100,000
Personal Capital utilizes hybrid robo-advisor experience with free access to a powerful personal finance management platform! Because of the human advising feature, pricing for this management service is a bit more expensive than most other robo-advisors on the market.
PROS
- Smart indexing
- Dedicated financial advisors
- Great investment tools.
CONS
- High management fee
- High account minimum.
Fundrise: Best for Real Estate Investment
- Management Fees: 0.85%
- Minimum Investment: $500
Fundrise is an online real estate company that lets average investors buy into private commercial and residential properties by pooling assets via their investment platform. With Fundrise, you can gain access to real estate deals without having to pay the entire bill. But know that these distributions are taxed as ordinary income so make sure you take that into account.
PROS
- Low minimum investment
- 90-day money-back guarantee
- Diversified portfolio
- A user-friendly platform
CONS
- Fees are not transparent
- Investment commitment
- Tax consequences
Wealthsimple: Best For Socially Responsible Investment
- Management Fees: 0.50%
- Minimum investment: $0
Wealthsimple is a good option for beginners who are taking their first steps in investment. There’s a large variety of SRI portfolio to choose from if you’re big on value-based investing. And a final thing, if you’re going to be working with taxable accounts, Wealthsimple provides free tax-loss harvesting.
PROS
- Free access to human advisors
- Free portfolio analysis
- Free tax-loss harvesting
- SRI options
- No account minimum.
CONS
- Higher account management fees
- Limited personal finance tools
WiseBanyan: Best Newbie on the Scene
- Management Fees: 0% for basic plan
- Minimum investment: $0
WiseBanyan is a robot advisor tool service with no hidden charges! The basic service includes automatic portfolio re-balancing and low minimum deposit! But if you want to open an IRA, you must pay for a premium.
PROS
- Offers free services
- No minimum balance
- Great technology
CONS
- Limited account selection
- Paid tax-loss harvesting
Motif: Best for Mix Portfolios
- Management Fees: $4.95 per Month
- Minimum investment: $0
Motif is a theme based and cost efficient option for a diverse portfolio. You can invest from 20 to 30 stocks or ETFs that share similar characteristics called motifs. It is also possible to filter motifs by looking at daily charge, one year return, and even popularity
PROS
- Pre-built portfolios
- Customizable motifs
- SRI options
CONS
- Other fees like $4.95 per share and $9.95 per motif
- No dividend reinvestment and minimal trading tools.
Schwab Intelligent Portfolio: Best from A Major Brokerage Firm
- Management Fees: 0%
- Minimum Investment: $5,000
Schwab Intelligent Portfolio is a fee-free robo-investing service from Charles Schwab. With th ecompany’s array of financial services, you can choose from potions like tax-loss harvesting, automatic rebalancing and otehr tools through Intelligent Porfolios, and you can also take advantage of all the other benefits they have to offer.
PROS
- Low cost
- Diversified portfolios
- Access to financial advisors
- Automatic rebalancing
- Tax efficient.
CONS
- High minimum investment
- High cash allocation and tax-loss harvesting not available for investments lower than $50,000
Vanguard Personal Advisor Services: Best with A Human Touch
- Management fees: 0.30%
- Minimum Investment: $50,000
Vanguard Personal Advisor Services is backed by Vanguard brand! You can access human financial advisors via phone. But the minimum investment is $50,000, which usually does not apply to beginner.
PROS
- Great for advanced users
- Personal advice
- Complex financial planning
- Access to Vanguard Funds
- Savings on taxes
CONS
- High account minimum
- No tax-loss harvesting
- Possible transaction fees.
Blooom: Best for 401(k) Management
- Management fees: $10 per Month
- Minimum Investment: $0
Blooom makes the complicated task of picking the right mutual funds for your 401(k) easy with online access. But there’s a catch, this robo-advisor service only works with 401(k) and 403(b) plans.
PROS
- No account minimum
- Free analysis
- Investment expense audit
- Financial advisors
- Low cost
CONS
- Limited investor assessment
- Agressive allocations
FutureAdvisor: Best to Manage Your 529
- Management fees: 0.50%
- Minimum investment: $10,000
If you’re not sure if robo-advising is for you, FutureAdvisor lets you use test their service for free! It’s also one of the few that can manage your 529 college savings plan.
PROS
- Free tools
- Advice and financial advisor support
CONS
- High account minimum
- High management fee
- Maximum age restriction.
Fidelity Go: Best for Fidelity Clients
- Management fees: 0.35% for retirement accounts
- Up to 0.40% for taxable accounts
- Minimum investment: $10,000
Fidelity is another investment powerhouse entering the robo-advisor market! The pricing is transparent and if you have an existing account with Fidelity, it could turn into a one-stop investment shop. But Fidelity Go lacks some of the features that other robo-advisors have to offer.
PROS
- Seamless multi-account viewing
- Investment research (for Fidelity customers),
- Low “all-in” annual costs for retirement accounts and taxable accounts
CONS
- No tax-loss harvesting
- Only basic goal tracking offered
SifFig: 1st $10K Managed Free
- Management Fees: 0.25% above $10K
- Diversified income portfolio fee: 0.50%
- Minimum investment: $2,000
- $100k for DIP
SigFig fits the needs of investors that are looking to dab into automated investing with their minimum investment of $2,000 and no management fees up to a $10,000 investment.
PROS
- They have a portfolio tracking feature that is free to use
- SigFig’s financial advisors will also provide complimentary portfolio reviews
- No management fee under $10,000.
CONS
- Diversified Income Portfolio fee is high at 0.50%
- Limited investment platform options – you must use Fidelity, Charles Schwab or TD Ameritrade
Bottom Line
Now you’ve learn Robo-Advisors are and what there functions are! Let your money go to work with minimal thought and effort! This tool can help you find a middle ground from doing it to yourself and to hiring a human financial advisor!
So if you’re interested, you should check out the link we provided above and sign up for your first robo advisor! While you’re here on HMB, you should check out other brokerage offers, see our complete list of Brokerage Account Promotions!
