Here’s the Robo-Advisor That These Personal Finance Experts Swear By

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If decision fatigue is keeping you from investing, it may be time to let the robots take over.

Our investment experts say that automated investment software, also known as robo-advisors, is a great resource for both novice and advanced investors. And according to our recent survey, they have a clear favorite.

Robo advisors use information such as your age, when you plan to retire, and your risk tolerance to make investment decisions on your behalf. Some even offer access to traditional IRAs, Roth IRAs, rollover IRAs, and SEP IRAs, which are tax-advantaged retirement accounts. The fees they charge are higher than what you would pay if you invested yourself through a cheap brokerage; but they will be lower than what you would pay for human guidance.

Today, about 8% of U.S. households use robo-advisors to invest, according to research by data and analytics company Hearts & Wallets

Here’s why you might want to consider a robo-advisor, what features and costs to look out for, and what service our experts have chosen as their favorite.

What are Robo Advisors?

Robo advisors are investment platforms that use software to determine your investment portfolio. The software asks you for personal investment information and then creates a portfolio based on your answers. Your investments are automated and managed by the robo-advisor software. They usually have relatively low costs, user-friendly interfaces and require little work on your part. Robo-advisors are generally safe, especially when you have a long-term investment horizon, and have grown in popularity for their convenience.

Pro tip

For most robo-advisors, you can ignore the first decisions they make for you. For example, if your questionnaire reveals that you are a more conservative investor, you can change your preferences to be riskier.

What to Look for in a Robo-Advisor, According to the Experts

1. Flexibility:

Julien Saunders

Co-creator of rich & REGULARa husband-and-wife-run online financial community

Julien Saunders and his wife Kiersten both use Betterment – the first and now one of the largest robo-advisors – for its flexibility, especially in portfolio design. “What we like most is the flexibility you can build on the platform,” says Saunders.

Enhancement gives users the ability to adopt or modify pre-selected portfolios if they don’t quite meet their investment requirements or preferences. Betterment also allows investors to build portfolios that help them invest in socially responsible companies, such as those that fund green projects or promote gender diversity. There are also options for investors to invest in low carbon companies.

“We are as passionate about building wealth as we are about helping to create a fair and better world for our son, so it’s helpful to know that there are socially responsible investment options available to help us achieve both goals,” Saunders said. .

2. A proven track record

Chris Browning

Founder and host of Popcorn Financea podcast about personal finance

When a friend or family member asks Chris Browning how he can save for retirement, his usual recommendation is a robo-advisor, especially Betterment.

“I lean towards Betterment because they were the first in the robo-advisor scene in 2008, have a proven track record, and there is no minimum to open an account,” Browning says. Enhancement also doesn’t charge extra for multiple accounts, and the fees are typically low.

“They charge a fairly reasonable 0.25% management fee, which adds up to about 0.35% when you add up the fees charged by the funds you invest in. This is still much better than fees charged in many 401(k) plans are paid,” Browning says.

3. A user-friendly app

Sophia White

Connecticut-based money coach, CEO and founder of The Balanced Budget LLC

White chose Betterment as her robo-advisor of choice because she finds the platform and app easy to use, easy to use, and easy to use. “To me, that makes investing and building wealth accessible and possible,” says White.

Enhancement also gives users the option to talk to a certified financial planner when using their premium account.

Honorable Mentions

Since there are tons of options for robo-advisors, there are a few more that are favorites as well. As long as you manage your fees, there are many robo-advisors that can meet your needs. The trick is to just get started.

Wealth

Haley Bags

Financial pop star, founder of Mrs. Dow JonesFinance is cool

When Haley Sacks Isn’t Creating viral Instagram videos, she looks at her finances. Her robo-advisor of choice is Wealthfront for its easy-to-use platform and financial planning tools that help users think about how they want to use that investment. “They just really got the hang of it,” Sacks says. “My only complaint is that there are no people attached to the product. Would love to have access to a financial planner!”

Compared to Betterment, Wealthfront has a wider collection of investments, including cryptocurrencies. Wealthfront also has low rates, offering traditional IRAs, Roth IRAs, SEP IRAs, and rollover IRAs. One drawback is that investment accounts require a minimum of $500 to get started.

SoFi

While most people know SoFi for its lending services, the company has recently started offering investment services, including a robo-advisor platform. There is no account minimum to sign up and there are no management fees for the automated investment accounts. You can choose from a retirement account or a taxable account and keep up to date with promotions.

Ally Invest

Ally was one of the first online-only banks and has recently started offering investment services. You need a minimum of $100 to start investing with the robo-advisor. Like Ally’s other offerings, you can take advantage of 24/7 customer service even for your investments. While your profile is based on your risk tolerance and goals, Ally says a team of human specialists is behind the diversified portfolios.

How much do Robo-advisors cost?

Fees vary by robo-advisor and some have a minimum account to get started. For example, Wealthfront requires $500 as a minimum investment, but Betterment, SoFi, and Ally Invest have no minimum investment.

The fees you pay also matter. Most robo-advisors charge a percentage of your total investments as a management fee, usually around 0.25%. If you have $10,000, that’s about $25. If you’ve invested $100,000, that’s $250. With compound interest, even small differences in fees can add up to large amounts over time.

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