Best Robo-Advisors for Investing Automatically

Best Robo-Advisor Pick: SoFi Invest

 

Robo-Advisor Runners-Up: E*Trade + Betterment

 

Robo-Advisor Comparison

 

1. SoFi Invest: Best for Automated and Self-Directed Investing

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• Platforms: Desktop web app, Apple iOS and Android App.
• Price: No stock or ETF commissions, nor AUM fees.
• Account Minimum: $0
• Available: Sign up here

SoFi Invest is a versatile stock market app that allows you to use automated investing services or make self-directed investment choices with stock, ETF and cryptocurrency trades. The well-known brand in the personal finance space recently entered into the investing world by offering free trades on stocks, ETFs, cryptos and more. SoFi doesn’t offer options trading or mutual funds.

The service provides you the ability to trade under your investment strategy. Meaning, you can invest actively or stand back and let its automated investing tools takeover as a robo-advisor. Therefore, this brokerage account might make an excellent place to hold your investment accounts because you’ll have options for investing money.

The company wants to serve all customers interested in improving their financial situation alongside participating in their other personal finance products like refinanced student loans, money management, credit cards and more.

If you’d like to start investing through SoFi’s brokerage services, they offer an added incentive for using a robo-advisor through their platform: free stocks to get you started.

Learn more about their taxable accounts (retirement accounts, too!) to get you started down the automated investing path and build your diversified portfolio.

 

2. E*Trade’s Core Portfolios (Best for Smart Beta Investing)

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• Platforms: Desktop web app, Apple iOS and Google Android.
• Account Minimum: $500.
• Price: 0.30% annual fee*.
• Available: Click “Open Account” below

E*Trade has long been seen as a leading stock trading app for retail investors. They’ve done so not only by equipping retail traders with the tools they need and access to numerous asset classes, they also provide investors access to educational resources that assist you with conducting investment research and analysis and diversifying your portfolio.

E*Trade, like most of the best stock trading apps, offers zero-commission stock, ETF, and options trading. It also has a leg up on some platforms by offering $0-commission mutual fund trading. Options still incur a 50- to 65-cent contract fee, however. Meanwhile, bond trades are $1 apiece, and future trades are $1.50 per contract per side, plus other fees.

But if you’re interested in E*Trade’s robo-advisory product, called Core Portfolios, you’ll face a different pricing structure that’s more in line with other robo-advisors. You pay 0.30% of your assets under management (AUM) with the platform on all balances $500 or more (you’ll need at least $500 to open a Core Portfolios account with E*Trade).

E*Trade’s Core Portfolios uses a simple account setup process with a straightforward planning questionnaire that asks for the type of savings goal you intend to achieve with the robo-advisory product. The majority of the questions are used to determine your risk tolerance and investment time horizon.

The product offers three different portfolios that exclusively invest in ETFs, all based on the principles of modern portfolio theory:

• Core Portfolios ETF asset allocation based on your risk profile (built with responses to your questionnaire) without any additional considerations
• Socially responsible investing ETFs that emphasize environmental, social, and governance (ESG) concerns
• Smart beta ETFs that have more active management in an effort to increase portfolio performance relative to other ETFs

Lastly, E*Trade’s acquisition by Morgan Stanley also equipped the service with tax-loss harvesting capabilities. The potential reduction in tax-drag on your returns and income could easily negate the AUM fee paid for the platform.

For a limited time, E*Trade offers a new account funding bonus when you use reward code “OFFER24” in the following amounts:

• $1,000-$4,999 earns $50
• $5,000-$19,999 earns $150.
• $20,000-$49,999 earns $200.
• $50,000-$99,999 earns $300.
• $100,000-$199,999 earns $600.
• $200,000-$499,999 earns $800.
• $500,000-$999,999 earns $1,000.
• $1,000,000-$1,499,999 earns $3,000.
• $1,500,000-$1,999,999 earns $5,000.
• $2,000,000 or more earns $6,000.

To learn more about E*Trade’s Core Portfolios product, click “Open Account” below.

 

 

3. Betterment: Best for Tax-Loss Harvesting

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• Platforms: Desktop web app, Apple iOS and Google Android.
• Account Minimum: $10.
• Price: $4/mo., or 0.25% annual fee*. Premium: Additional 0.15% annual fee.**
• Available: Click “Get Started” below

If you’re a fan of diversifying your portfolio with ETFs, a Betterment account could be a good choice. This robo-advisor platform allows you to invest in a narrow series of low-cost ETFs with different themes and purposes. For instance, you could choose to invest in its Social Impact or Climate Impact portfolios if you care deeply about social justice or the environment. Betterment also offers crypto-focused ETFs for investors interested in decentralized finance, including an ETF specifically focused on the metaverse.

Although Betterment is a robo-advisor, it does offer access to human advisors, too. This is a big plus to me—I’m a self-directed investor, but even if I convinced myself to lean on a robo-investor, I’m the kind of person who wants to learn what I can, and I’d prefer to be able to receive guidance from a financial pro. This sets Betterment apart from many other competing robo-advisors.

Alternatively, though, Betterment is primarily a robo-advisor, so this isn’t the best choice for hands-on investors.

While Betterment accounts (individual and joint taxable brokerage accounts, and Traditional, Roth, Inherited, and SEP IRAs) do have a minimum required deposit, it’s tiny, at just $10. Betterment does charge fees, however. Its accounts start at $4 a month, but that changes to a 0.25% annual fee if your balance is more than $20,000, or if you set up recurring monthly deposits that total $250 or more. Also, you can upgrade to Betterment Premium for an additional 0.15% add-on fee to receive on-demand support from a Certified Financial Planner™. Upgrading requires a $100,000 minimum balance required in cash, stocks, bonds, or crypto holdings.

The assets under management (AUM) fee might justify itself in taxable brokerage accounts through Betterment’s tax-loss harvesting feature. It works by selling positions with losses to lock in short-term capital losses and can both offset realized capital gains and potentially lower your taxable income up to $3,000 per year (any unused loss rolls over to future years indefinitely) while taking your proceeds and placing them into a similar investment. As you can see, by lowering your tax impact, the service can pay for itself.

Betterment led the way for robo-advisor services, growing from a small business to what now represents a significant book of business. Using Betterment has become a popular choice for people looking to invest toward specific goals without the need for any investing experience for a reasonable fee.

Visit Betterment’s site by clicking “Get Started” below to see if it’s the right fit for you.

 

 

4. M1: Best Robo-Advisor for a Personalized Investment Portfolio

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• Platforms: Desktop web app, Apple iOS and Google Android.
• Price: No stock or ETF commissions, $3/month on accounts under $10,000.
• Account Minimum: $0 (taxable accounts); $500 minimum deposit for IRAs
• Available: Sign up here

M1 (formerly M1 Finance) offers commission-free stock and ETF trades and provides automated stock trading according to your predetermined investment decisions. What we like most about this app is your ability to make recurring deposits that automatically get invested into your portfolio.

M1 acts as a singular personal finance app to assist with building wealth through automating your investments into diversified portfolios, having a bank account and linked debit card that provides market-beating interest rates and having access to valuable personal finance literature. Most importantly, investing with M1 can be as simple as depositing money, setting your stock and index fund selections and having the platform automate your investments on your behalf.

I’ve said it before, but this truly automates your investments if you set up recurring deposits, allowing your wealth to build. From there, M1 automatically rebalances your portfolio in line with your stated asset allocation targets. Doing this at regular intervals has been shown to improve overall portfolio performance. It moves outperforming funds into underperforming ones, capturing a value effect over time as returns revert to the mean.

Consider opening an investment account with M1. The app has no account minimum unless you choose to open an IRA, for which you’ll need to deposit at least $500. (It should be noted: if you maintain an account balance of less than $10,000, the service charges a $3/mo. fee.)

 

5. Acorns: Best Robo-Advisor for Beginners

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• Platforms: Apple iOS and Google Android.
• Price: Acorns Personal: $3/mo. Acorns Personal Plus: $6/mo. Acorns Premium: $12/mo.
• Account Minimum: $0
• Available: Sign up here

Acorns is a micro-investing app geared toward minors, young adults and millennials by offering “Round-Ups”: The app rounds up purchases made on linked debit and credit cards to the nearest dollar, investing the difference on your behalf.

For example, if you purchase a coffee for $2.60 on a linked credit card, Acorns automatically rounds this charge up to $3.00 and puts the 40-cent difference aside. Once those Round-Ups reach at least $5, they can be transferred to your Acorns account to be invested.

The Acorns investment offering itself is a simple, automated platform that uses pre-built portfolios of ETFs to keep investors exposed to stocks and bonds, which is similar to how traditional robo-advisor services work. While Acorns doesn’t have much to offer intermediate investors who want variety in their portfolios, Acorns’ basic approach makes it one of the best investment apps for beginners.

It also features a powerful way to accelerate your savings: Later Match. While most people are aware that employers will sometimes match funds you contribute to your 401(k), “matches” are virtually unheard of in retirement accounts like IRAs, where there’s no employer to kick in extra cash. However, Acorns itself will match 1% or 3% on new contributions to IRAs for Personal Plus and Premium subscribers, respectively. 

Here’s more about what you can expect from Acorns’ varying subscription options:

• Acorns Personal ($3 per month): Includes an Acorns Invest investment account, as well as Acorns Later for tax-advantaged investment options such as Roth IRAs. Also includes Acorns Checking, a bank account that has no account fees, lets you withdraw fee-free from more than 55,000 ATMs nationwide, and Smart Deposit, which allows you to automatically invest a bit of each paycheck into your Acorns accounts.
• Acorns Personal Plus ($6 per month): Everything in Acorns Personal (Acorns Invest, Later, and Checking), plus Premium Education, which are live onboarding sessions covering account setup, Round-Ups, setting up recurring investments, and more; Emergency Fund; and a 25% bonus on Acorns Earn rewards (up to $200 per month).
• Acorns Premium ($12 per month): Everything in Acorns Personal Plus, plus Acorns Early, which allows you to open a custodial investment account for your child so you can begin investing for them while they’re a minor; custom portfolios that allow you to hold individual stocks; live Q&As with financial experts; a 50% match on Acorns Earn rewards (up to $200 per month); $10,000 in life insurance; even the ability to set up a will for free.

 

6. Wealthfront (Best Robo-Advisor for Small Balances)

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• Platforms: Desktop web app, Apple iOS and Google Android.
• Account Minimum: $500
• Price: 0.25% annual management fee; no opening or closing fees
• Available: Sign up here

Wealthfront is a popular robo-advisor that offers numerous account types, including individual, joint, and trust taxable brokerage accounts, Traditional, Roth, SEP, and Rollover IRAs and 529 plans.

While some of its robo-advisor competitors have a relatively high minimum balance requirement of a few thousand dollars or much more, Wealthfront requires a fairly small initial deposit of $500 to open an account. (Again, that’s high for an investment account, but low for a robo-advisory product.) So if you don’t have a huge sum invested already to move into the account or to rollover from an existing account like a 401(k) or other IRA, this account might be a good choice.

Wealthfront offers some valuable perks with its accounts, including automatic tax-loss harvesting, automatic rebalancing, automatic trading, and the option to customize your expert-built portfolio. This top robo-advisor also offers access to a 529 plan (or the ability to link an external one to your account) to help with saving for educational expenses. This is an uncommon feature for most standalone robo-advisors outside of a traditional brokerage, so it’s well worth noting.

If you’re considering putting this on your shortlist, just note that Wealthfront does charge a 0.25% annual management fee across the board. That’s more affordable than some robo-advisors, but it’s also not free. Learn more on Wealthfront’s website.

 

The Best Robo-Advisors

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Robo-advisors offer a low-cost way to diversify your portfolio, rebalance it regularly and keep on track toward financial goals. Previously, accessing the stock market with tailored investment advice often came to you if you were prepared to shell out money for a professional or had the time and know-how to do it yourself. Further, you couldn’t start investing with little money like you can with most robo-advisors—you needed a decent sum to justify the management fee or maintain a minimum account balance.

Thanks to financial technology (fintech) advancements, this is no more. These automated investing services act as a free or low-cost investment advisor in your pocket. Even more, most of these services allow you the same ease of access as standard online brokers but add doses of automatic rebalancing of your portfolio and valuable financial planning help.

Above, we cover the best robo-advisors for your needs below. Our ratings considered available portfolio customization, costs, account minimums, access to other services like a cash account or banking products, educational resources, sign-up bonuses, customer support, unique features and included tools. All of the robo-advisor options found on the above list offer diversification, automatic rebalancing at a regular cadence and assist in planning your investment goals.

You can rest assured that these robo-advisors will help you build wealth for free or at a reasonable management fee compared to a traditional human advisor.

Features to Consider When Selecting the Best Robo-Advisors

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Have a look at the features below to understand what you should consider when looking for a robo-advisor to manage your investments.

Fee Model

Robo-advisor offerings come with two primary methods for assessing management fees and account fees:

1. Fixed monthly account fees. The service charges a fixed monthly fee regardless of your portfolio size
2. Fixed fund management fees. Using an assets under management (AUM) approach, you might find small balances pay very little relative to fixed monthly account fees. In contrast, more significant balances pay far more. A standard fee ranges from a 0.20% management fee to a 0.25% management fee or even a 0.35% management fee. The level of service and features offered often drive this management fee.

Portfolio Options

Many start your assessment with a questionnaire to understand essential items like your age, income, investment goals, marital status and more. Based on these answers, you will have several portfolio options recommended to you. This can include diversified portfolios of index funds with low expense ratios offered through proven portfolio allocations.

It can also offer the ability for you to customize your portfolio and automatically rebalance it as you go.

Access to Human Financial Planners

Some robo-advisor options allow you to pay additional fees or management expenses to access a human financial planner. Likewise, you may need to make a minimum investment on the platform to unlock this access automatically.

Having a human financial advisor can help you with non-investment-related questions a traditional financial advisor might provide.

Ability to Trade Individual Stocks

Not all robo-advisor options allow you the ability to trade individual stocks. Some require you to purchase index funds only.

If individual stock buying serves as a requirement for your investing needs, make sure you choose services like M1 Finance, SoFi, Stash or Charles Schwab.

Account Minimum Requirements

The central sticking point for many people looking to start investing for the first time is the available money they have to put into the market. In the past, working with a traditional broker might require some hefty minimums, but this hurdle has largely gone the way of the dodo: extinct.

Many of the robo-advisor choices shown on this list require no account minimum to begin investing. For those that do, the threshold amounts to a few thousand dollars.

Tax-Loss Harvesting

Tax-loss harvesting gives you the chance to lower your tax bill but not necessarily your investment returns. This feature, when used in a taxable brokerage account, can lead to significant cost savings.

Banking Services

Some options in the market offer other services to complement your investing needs. This can mean offering you access to a savings account, credit card or debit card, personal loans, student loan refinancing and more.

Retirement Accounts

Many of these services offer multiple types of investment accounts, such as individual and joint taxable brokerage accounts, individual retirement accounts in multiple flavors (e.g., Traditional, Roth, SEP, SIMPLE).

Automatic Rebalancing

These automated investment services should work to keep your portfolio balanced over time, meaning you answer questions at the start and maintain ongoing contributions to build your balance over time. SoFi Automated Investing, Betterment, Marcus Invest, and more all offer such features.

Low-Cost Exchange Traded Funds

Make sure the index funds in your portfolio charge the lowest expense ratios possible if they have the same investment objective: to mimic the performance of a stock or bond index. If they all deliver the same intended result, why pay more for an index fund than you must?

Target the lowest expense ratios you can, typically from providers like Vanguard, Schwab, Goldman Sachs and Fidelity.

Robo-Advisor FAQs

How does a robo-advisor work?

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Robo-advisors work by first gathering necessary information from you related to your investment goals, age, risk tolerance and investment suitability, among other valuable questions. Based on your responses, it will create a portfolio tailored to your answers and provide two significant functions investing by yourself might not: diversification and making programmatic, emotionless decisions.

One of the best ways to outperform the stock market is not making mistakes when everyone else does. Often, emotion drives these mistakes (such as selling when the market bottoms and missing the upside when it resumes its ascent higher). Robo-advisors don’t fall prey to emotions, instead relying on programmatic investment selections and asset allocations.

How are the best robo-advisors different from human financial advisors?

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The best robo-advisors can deliver better monitoring and performance than a human advisor, such as a traditional financial advisor. However, where the value differs between even the best robo-advisors and human financial planners comes with personalized advice extending beyond your investment portfolio.

Human financial planners can assist with portfolio management just like the best robo-advisors, but they cannot offer advice on other financial questions you might have. This can include insurance, savings rates, educational expense planning, helping with building an emergency fund and much more. Certified financial planners can offer value-added investment advice alongside a personalized retirement plan and financial plan.

Robo-advisors invest your money following your questionnaire responses and some have even sought to offer free financial planning (or for a one-time fee) to match the service offerings of a human financial advisor.

When would it make sense to consider consulting human advisors for your financial planning needs?

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You may want to consider consulting a human advisor when you want more individualized recommendations and hand-holding. Robo-advisor options use artificial intelligence and rules to place your money in optimized portfolios for the masses. You might want something different than this generic advice.

Further, human advisors might offer you more value-added services beyond investment management like wealth management strategies from other financial products like life insurance, annuities and more.

Consulting with human financial planners might be more advisable if you seek a more comprehensive financial management arrangement. If you just need investment advice, a robo-advisor can handle most of your needs in all likelihood.

What is tax-loss harvesting?

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Generally, you engage in tax-loss harvesting when selling some of your investments at a taxable loss and using this loss to offset capital gains earned elsewhere in your investment portfolio. Because of the wash sale rule from the IRS, you can’t sell a stock or other security for a loss and then immediately add it back to your portfolio.

Instead, you can employ a tax-loss harvesting strategy by yourself by selling the security at a loss and waiting at least 30 days to repurchase the same security or a substantially similar one. You can use the capital loss to offset other capital gains or up to $3,000 of your taxable income in a year. Any unused losses roll forward indefinitely to offset future capital gains or taxable income. You can have this work by selling your investment for a loss and then having the plan to repurchase it at least 30 days later or outside of the IRS’ 30-day wash sale rule window.

Many top robo-advisors offer this feature for you in taxable brokerage accounts, lowering the cost of client assets. This can offset the costs of advisory fees or the robo-advisor’s management fee on your robo-advisor account.

Which robo-advisor has the best returns?

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Overall, the investment performance varies based on the responses you make to your initial questionnaire. The underlying assets largely overlap between robo-advisors, meaning the ability to compare performance doesn’t necessarily make sense when stacking robo-advisor against robo-advisor.

Index funds attempt to mimic an underlying index. Therefore, the best robo-advisors offer tax-loss harvesting, low fees, and other features like Smart Beta investing, and Marcus Invest offers such an investing option.

Do robo-advisors beat the market?

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Generally, no. They seek to replicate the market’s performance through purchasing low-cost index funds. Some offer the ability to invest in individual stocks alongside index funds or even use Smart Beta portfolios through a robo-advisor like Marcus Invest. Still, they by and large attempt to meet the market performance.

Is a robo-advisor good for beginners?

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Because robo-advisors represent a way for beginning investors to add money to a diversified portfolio without much knowledge of the stock market or exposure to particular stocks, robo-advisors are suitable for beginners. Based on your responses to a questionnaire at account opening, your investment funds work for you on these online brokers without knowing how they work or manage your money.

If you answered the questions accurately and honestly, the robo-advisors would purchase a combination of exchange-traded funds or mutual funds in your brokerage account aligned with your risk tolerance.

Why are robo-advisors bad?

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The answer to this depends on your investing style. If you prefer active stock picking to passive index fund investing, they present a challenge. For the vast majority of investors looking to add recurring contributions to a diversified portfolio over long periods, they make fantastic services.

Are robo-advisors a good investment?

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Yes. If you’d like an automated investing service and investment advisor to manage your money on your behalf, robo-advisors present a remarkably good investment. They manage your money without emotion, and some even offer added financial planning tools to enable your secure financial future. Many come with valuable educational resources to teach you about investing and personal finance decisions you might encounter.

If you need extra help, some also offer access to human financial advisors for a fee. Combined, this can deliver you financial peace of mind, representing a good investment. You can even invest following your consumer preferences with some robo-advisors. Some offer access to socially responsible investing, meaning you invest in companies with environmental consciousness, strong corporate governance and socially-progressive positions.

Do robo-advisors make money?

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Robo-advisors generally invest your money in index funds matching your risk tolerance and investment goals. While past performance doesn’t guarantee future results, when remaining invested in a widely-diversified portfolio matched to your risk tolerance over long periods, robo-advisors’ actions can make money for your bottom line.

These advisors overlook market downturns or market swells to maintain a diversified portfolio and transact without emotions. Remaining disciplined during critical moments can lead to the best returns when compared to other investors.

How much does a robo-advisor cost?

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Most robo-advisors use either an assets under management fee model (e.g., 0.25% of AUM) or a fixed monthly fee approach. Depending on the intended size of your portfolio, one or the other may make sense. For example, if you plan to build an extensive portfolio quickly, choosing a low-fixed fee might save you more over time.

Likewise, if you won’t have serious money to invest for a while, a percentage of assets under management might have you come out ahead. Some robo-advisors also offer value-added services beyond simply picking suitable investments. This includes making a holistic financial plan complete with insurance, drafting a will, deciding how best to save for life goals like buying a house, sending your children to college, or even tax planning. These usually cost extra or amount to a higher fixed or variable (AUM) fee to include them.

While automating your investing approach can pay off handsomely, sometimes speaking directly with human advisors who can guide you toward making better financial decisions is a great idea. Typically, for traditional personalized investment accounts, robo-advisors compare favorably. Though, as with all things, it depends on your situation and the advisor you think makes the best fit for your needs.

Many financial advisors rely on a simple AUM model, whereby they charge anywhere from 0.50%-1.5% (or more) to manage your investments, create financial plans, and generally guide you toward making sound financial decisions. Likewise, many fee-only fiduciary advisors have come to serve customers by charging a fixed fee for performing multiple services or even a la carte pricing from a specific menu of services.

Depending on the services you choose, you will need to compare their cost to those of robo-advisors.