Why You Should Consider Letting a Robot Pick Investments for You

A robot arm holds a fan of cash.
RyanKing999/Getty Images
Some of the links in this post are from our sponsors. We provide you with accurate, reliable information. Learn more about how we make money and select our advertising partners.

This article was reviewed by Robin Hartill, CFP®.

No doubt about it: Investing is one of the best ways to build wealth and secure your financial future, especially when you’re saving for retirement.

But actually doing that investing can be time- and work-intensive. There are countless options for investing in stocks — not to mention other assets like bonds, mutual funds or exchange-traded funds (ETFs) — how on earth are you supposed to decide what’s best to buy?

Enter robo-advisors: computerized algorithms that can allocate and manage your stock market assets for you.

You won’t have to do the painstaking work needed to build a diversified portfolio, and you’ll avoid paying big bucks to a financial advisor.

How Do Robo-Advisors Work, and Should You Use One?

Robo-investing is done by handing over your hard-earned cash to robo-advisors. Instead of investing in securities a la carte yourself, you pass the job to a computer algorithm. That algorithm then allocates and rebalances your assets through an automated process.

Sound complicated? It’s not. Here’s how it works.

  • You give the robo-advisor details on your investment goals and risk tolerance — that is, how much risk you’re comfortable with and how much risk you can actually afford.
  • A computer algorithm, usually backed by professional human research, creates an investment portfolio based on your responses.
  • Depending on the specific service, you may or may not have more control over the individual assets you invest in, perhaps by choosing a portfolio of socially responsible investments, for example. Some robo-advisors offer tax-loss harvesting services, which can help minimize your tax bill. Note that tax-loss harvesting is only relevant if you have a taxable brokerage account. It doesn’t come into play if you have a tax-advantaged account like a 401(k), Roth IRA, traditional IRA or 529 plan.

Robo-advising usually comes at some expense, though some companies do have free options. While most robo-advisor services still cost money, the fees are low compared with what a human financial planner charges. Many services charge 0.25% to 0.5% of your account balance.

Along with saving you money by employing automatation rather than people, most robo-advisors double down by investing your funds in asset classes that carry low expense ratios, such as ETFs.

So what’s the catch? Well, when you hand over your assets for automated investing, you (obviously) lose some of the flexibility that comes with DIYing your portfolio. Of course, for people who don’t want to spend lots of time on stock market research, the lack of control isn’t so much a detriment. In fact, it’s kind of the point.

If you’re worried about trusting a robot with your investments, don’t be. In addition to charging low fees, robo-advisors tend to get better returns than human managers.

Here Are Some of the Best Robo-Advisors on the Market

Businessman analyze document
Pinkypills/Getty Images

If you decide to try robo-advising, you’ll quickly discover there are a plethora of options to choose from. How are you to decide which robo-advisor is right for you?

In choosing the best robo-advisors, low minimum deposits and expense ratios were key. We also looked for accounts with small minimum deposits. Here are some of the best free and low-cost robo-advisor services currently available.


Offering a personalized investment portfolio tailored to your goals and risk tolerance, Betterment stands out from the crowd with its focus on saving you money at tax time.

What makes it special?

Along with regular robo-investing services, Betterment also offers a comprehensive budgeting and financial management tool, kind of like Mint or Personal Capital — you can sync all of your accounts and get an overview of your net worth in one convenient location.

  • Basic service: Annual fee of 0.25% assets under management (AUM).
  • Minimum account balance: $0
  • Available upgrades: Premium service, which adds unlimited access to advice from certified financial planners (CFPs), is available for 0.4% per year once you’ve got $100,000 invested.

To find out more, read our full Betterment review.


Wealthfront combines robo-investing with an automated financial planning system that analyzes your linked accounts to help you make better spending decisions.

What makes it special?

Whether you’re getting ready for retirement or saving for a major purchase, like a home or a college education, Wealthfront’s custom financial plans can help you get a sense of exactly where you stand — and how far you need to travel to get where you’re going.

  • Basic service: 0.25%
  • Minimum account balance: $500
  • Available upgrades: None, really. But that’s kind of one of the perks: Wealthfront’s fee of just 0.25% AUM hods no matter how large your account balance, which factors out to just 10 cents per month at the minimum balance of $500.


Advertising itself as “investing on autopilot,” Wealthsimple makes the investment process truly painless. You can set up automatic deposits to keep your nest egg fueled for growth, and the basic service includes amped-up features like dividend reinvesting and automatic rebalancing.

What makes it special?

Wealthsimple makes it easy to dip your toes into values-based investing — that is, building a portfolio that’s aligned with your personal values. Although you don’t have hands-on control of the specific ETFs your portfolio is made up of, you can choose from curated portfolio options that support sustainable social initiatives.

  • Basic service: 0.5%
  • Minimum account balance: $0
  • Available upgrades: If your account is between $100,000 and $500,000, you’ll get all the basics plus VIP airline lounge access. And the real high rollers, with more than $500,000 invested, receive individualized portfolios and planning services.


If you’re looking for a bona fide free robo-investing account, SoFi’s got you covered with Automated Investing. And you can get started with as little as $1 per month, but we recommend a recurring deposit of $20 per month or an initial  deposit of $100.

What makes it special?

SoFi’s robo-advisor is the only one on this list that’s legitimately free. You’ll also become a SoFi member, which includes access to the company’s suite of helpful financial products, including no-fee loans to help you build your credit.

  • SoFi management fees : $0
  • Minimum account balance: $1
  • Available upgrades: Being a SoFi member comes with a host of perks, like access to exclusive in-person events and unlimited access to financial planners.

For more information, read our SoFi review, which also includes SoFi’s banking, loan and insurance products.

Not for You? Alternatives to Robo-Advising

Couple looking at new orders and bills
Anchiy/ Getty Images

Although there’s a lot to like about robo-investing, trusting your future nest egg to an algorithm can give some folks the willies. If that’s you, there are other investment strategies to consider.

Build Your Own Portfolio

Building your own investment portfolio is always an option, especially given the information available on the internet nowadays.

Although taking matters into your own hands does give you about as much flexibility as you could possibly want, it’s much riskier. If you’re frequently trading stocks, you’re more likely to incur losses and possibly higher taxes.

Invest in a Target-Date Fund

A target-date fund is a type of mutual fund that’s a common option in 401(k) plans. You specify when you plan to retire, and your money is invested and gradually reinvested as you get closer to your goal.

Choose a Total Market ETF

With a total market ETF, you’ll invest in a giant mix of companies that mirrors the makeup of the overall stock market. Because you’re investing across the stock market, you’ll avoid the risk of investing in individual stocks, but you’ll also be able to choose the ETF that works best for you.

Hire a Human Financial Advisor

A human financial advisor or financial planner will cost you, but it may well be worth it. A professional can help you look at your personal finance picture and make sure you’re making wise decisions not only with your investments, but also when it comes to things like taxes, insurance and your estate plan.

Jamie Cattanach’s work has been featured at Fodor’s, Yahoo, SELF, The Huffington Post, The Motley Fool, Roads & Kingdoms and other outlets. Learn more at www.jamiecattanach.com. Senior editor Robin Hartill contributed to this report.