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Compare robo-advisors

These automated investment platforms are ideal for newbies and hands-off investors.

Name Product Asset types Annual fee Signup bonus
Vanguard Digital Advisor
ETFs
0.15%

0.2%
N/A
A robo-advisor backed by Vanguard's proven methodology and strong track record.
Douugh
Bonds, ETFs
0%
N/A
Easy to use diversified portfolios designed and managed by experts.
Acorns
$1 per month
$10 bonus investment
When you open an account with at least $5
Invest your spare change. Anyone can grow wealth.
SoFi Automated
Stocks
$0 per month
N/A
Put your money to work. Let SoFi build and manage a portfolio for you. Pay zero SoFi management fees.
Titan
Stocks
1% on balances of $10,000+
N/A
While not technically a robo advisor, Titan offers a hands-off investment platform that seeks to outperform the market.
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How do robo-advisors work?

A robo-advisor is a digital service that picks and manages your investments on your behalf. When you sign up, you answer a series of questions about your financial goals and investment experience. Your responses are used to create your portfolio strategy.

Following the signup process, all you need to do is fund your account. Then, the robo-advisor uses a sophisticated algorithm to pick and manage your investments.

Go deeper: Humans vs. robots: Which adviser is better?

Who is a robo-advisor best for?

Robo-advisors are best for hands-off investors: investors who want to grow their wealth but don’t want to actively manage their portfolios.

Robo-advisors are also a solid pick for newbies exploring their investment options for the first time. If you’re hesitant to enter the market, a robo-advisor can provide the support and guidance you need to start learning the ropes.

How much does a robo-advisor cost?

The cost of your robo-advisor depends on its fee structure. You’ll generally encounter one of two types of fees when using a robo-advisor:

  1. Percentage-based fees. These fees are expressed as a percentage of your overall portfolio and are usually charged on a monthly basis.
    How much? Typically 0.25% to 0.50%.
  2. Flat-rate fees. These are flat-rate management fees charged on a monthly basis.
    How much? Typically $1 to $9.

Most robo-advisors charge a fee for their services — but not all. Some robo-advisors are free to use, like M1 Finance and SoFi.

How do free robo-advisors make money?

Robo-advisors need to make money to stay in business — so if they offer their services free of charge, how do they make money?

Free robo-advisors turn a profit by taking advantage of the following revenue streams:

  • Cash holdings. Brokers can make money by lending out investor cash holdings and earning interest on what it lends.
  • Premium features. While some platforms may offer a free tier of service, they may supplement this with monthly fees for premium features.
  • Banking and lending products. Some platforms also offer banking products, like savings accounts, checking accounts, loans and lines of credit — all of which may contribute to its revenue stream.
  • Payment for order flow. Many brokers route customer orders to market makers for execution. These market maker middlemen help execute and fill the trade. In exchange for business, market makers pay brokers for trade orders.

How to choose an account

As you compare robo-advisors, weigh the following:

  • Fees. From platform to platform, fees vary. Percentage-based fees may be more advantageous for smaller portfolios, while flat fees are more likely to benefit large portfolios.
    • Why it matters: Any fee, no matter the size, takes from your bottom line and reduces your return.
  • Human support. Those new to investing may feel uncomfortable leaving their money in the hands of a digital algorithm. If that’s the case, seek a platform that offers human customer support.
    • Why it matters: Human support can help clarify questions and concerns about the digital investment process.
  • Mobile app. Most robo-advisors are accessible by mobile app, so review feedback on Google Play and in the Apple App Store to get a feel for how the app is received by investors.
    • Why it matters: If you prefer to manage your accounts from your mobile device, a poorly designed, poorly reviewed mobile app may be a dealbreaker.
  • Tax-optimization. Some robo-advisors offer tax-loss harvesting: a feature designed to lessen the impact of capital gains tax. But not all advisors are equipped with this feature.
    • Why it matters: In truth, it may not. Tax-loss harvesting is really only beneficial if you make more than $40,000 annually — if your income sits below this threshold, you don’t need to worry about capital gains tax.

How to open an account

When you sign up with a robo-advisor, be prepared to supply your full name, date of birth, contact information, residential address and Social Security number. You’ll also need to answer a handful of questions about your financial goals. These questionnaires tend to have 10 to 15 questions and typically take no longer than five minutes to complete.

The signup process differs from advisor to advisor, but you’ll generally need to follow these steps:

  1. Provide your name, contact details and proof of identity.
  2. Complete the financial questionnaire.
  3. Review the portfolio strategy generated by your robo-advisor.
  4. Provide your bank account details to fund your account.

Alternatives to robo-advisors

A robo-advisor won’t be appropriate for everyone. In fact, there are many types of investors that won’t benefit from an automated digital service like a robo-advisor.

For example, suppose you want to exercise more autonomy over your investments. So much autonomy, in fact, that you’re ready to buy and sell your own stocks. If that’s the case, you may want to explore your self-directed platform options.

Or perhaps you like the idea of having someone handle your portfolio for you but you’re uncertain about the whole digital algorithm business. In that event, consider a wealth advisory service like Facet Wealth or Personal Capital: Both offer access to human financial advisers.

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