Best Robo-Advisors of February 2024 – Newsweek Vault (2024)

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Best Robo-Investors of 2024

Best Overall: Betterment

Betterment

Best Robo-Advisors of February 2024 – Newsweek Vault (1)

Betterment

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Fees

0.24%* – $4 a month or 0.25% annual account management fee; 0.40% annually for premium; $299 to $399 for CFP advice

Account minimum

$0* – $0 to open; $10 to start investing

Promotion

N/A

Why We Chose It

Why we chose it: Betterment is one of the original robo-advisors that came onto the scene in 2010. You only need $10 to start investing and monthly fees are low, making it very easy to get started.

Pros

  • Easy to customize and tweak as necessary
  • Other investing options available, including crypto
  • Fractional shares available
  • Tax-loss harvesting and automatic rebalancing

Cons

  • High cost to talk to a professional
  • Crypto investing offered as a separate tool

Best for Financial Planning: Wealthfront

Wealthfront

Best Robo-Advisors of February 2024 – Newsweek Vault (2)

Wealthfront

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Fees

0.25% management fee

Account minimum

$500

Promotion

N/A

Why We Chose It

Why we chose it: Wealthfront is a popular option thanks to an impressive list of tools and services. This includes diverse portfolio options, tax-loss harvesting and financial planning tools,

Pros

  • Tax-loss harvesting, automatic rebalancing and reinvestment
  • Offers 529 account, IRAs and 401(k) rollover
  • Can invest in individual stocks, including fractional shares
  • ESG/socially responsible investing available

Cons

  • $500 minimum to open and fund account
  • No human financial advice

Best for Women-First Investing: Ellevest

Ellevest

Best Robo-Advisors of February 2024 – Newsweek Vault (3)

Ellevest

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Fees

$12 a month

Account minimum

$0

Promotion

N/A

Why We Chose It

Why we chose it: Ellevest is open to everyone, but to recognize the different financial realities of women, it focuses on creating investing plans using “women-centric data points.” There’s no minimum investment requirement, and the easy-to-use platform lets you invest in up to five goal-specific investment accounts.

Pros

  • Female-centric platform, investing and advice
  • No account minimum to start investing
  • Low flat fee rather
  • Automatic rebalancing

Cons

  • No tax-loss harvesting
  • No fractional shares

Best for Bank Customers: Ally

Ally

Best Robo-Advisors of February 2024 – Newsweek Vault (4)

Ally

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Fees

0.0%* – 0.0% advisory fee for cash-enhanced portfolio; 0.30% annual advisory fee for market-focused portfolio

Account minimum

$0* – $0 to open, $100 to invest

Promotion

N/A

Why We Chose It

Why we chose it: If you’re already an Ally customer, they make it easy to move into investing. You may not have as many options as some other robo-advisors on our list but Ally makes it simple to keep all your money in a well-diversified portfolio at a low cost.

Pros

  • Cash balance earns interest
  • Great customer service
  • Large educational library
  • Socially responsible investing available

Cons

  • No tax-loss harvesting
  • No customizable portfolios

Best for Micro-Investing: Acorns

Acorns

Best Robo-Advisors of February 2024 – Newsweek Vault (5)

Acorns

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Fees

As low as $3* – $3 for Acorns Personal; $5 for Acorns Personal Plus; $9 for Acorns Premium

Account minimum

$0* – $0 to open, $5 to start investing

Promotion

N/A

Why We Chose It

Why we chose it: The major selling point for Acorns is its savings tool. With automatic roundups, you can put your spare change into an investing account.

Pros

  • Automatic rebalancing and dividend reinvesting
  • Fractional shares available
  • Other products available, like high-yield checking and savings accounts

Cons

  • No tax-loss harvesting
  • Flat fee is high for customers with lower balances

Best for Promos: SoFi Automated Investing

SoFi

Best Robo-Advisors of February 2024 – Newsweek Vault (6)

SoFi

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Fees

0% management fee

Account minimum

$0* – $0 to open, $1 to start investing

Promotion

2% match* – 2% match on all your IRA contributions up until Tax Day; various referral bonuses for other SoFi products

Why We Chose It

Why we chose it: Unlike many other robo-advisors, SoFi doesn’t charge a management fee, and you only need $1 to start investing. Along with low-cost ETFs and free access to financial advisors, SoFi offers exclusive member discounts (like 15% off estate planning products and rate reduction discounts on eligible loans).

Pros

  • Only $1 to start investing
  • Access to fiduciary certified financial planners
  • Automatic rebalancing

Cons

  • No tax-loss harvesting
  • No customizable portfolio
  • Crypto investing separate

Best for Advisor Assistance: Fidelity Go

Fidelity

Best Robo-Advisors of February 2024 – Newsweek Vault (7)

Fidelity

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Fees

0% to 0.35% management fee

Account minimum

$0* – $0 to open, $1 to start investing

Promotion

N/A

Why We Chose It

Why we chose it: Fidelity offers personalized planning, coaching and unlimited 1-on-1 calls for all your financial needs, including investing. Even though your portfolio management is run by a robo-advisor, there’s no shortage of human assistance. This is a good hybrid option if you want a hands-off approach but would appreciate some assistance along the way.

Pros

  • Financial advisor assistance
  • No annual management fee if you have under $25,000 invested
  • No minimum balance requirement

Cons

  • No tax-loss harvesting
  • Limited portfolio options
  • Only get access to human help after you’ve invested $25,000

Best for Beginners: Stash

Stash

Best Robo-Advisors of February 2024 – Newsweek Vault (8)

Stash

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Fees

$3 or $9 monthly fee

Account minimum

$0* – $0 to open, $5 to start investing

Promotion

N/A

Why We Chose It

Why we chose it: With Stash, you get access to a robo-advisor as well as do-it-yourself investing. While many other robo-advisors offer ETFs and mutual funds, Stash has access to crypto and real estate investment trusts (REITs). Beginner investors have more options than some others on our list, especially if they want to move into active investing.

Pros

  • Flat monthly fee
  • Hybrid active and robo-advisor management
  • Ability to invest in stocks, bonds, ETFs and crypto
  • Offers fractional shares

Cons

  • No tax-loss harvesting or tax strategy
  • No access to human advisors
  • Monthly fee is high for investors with lower balances

What Is a Robo-Advisor?

A robo-advisor is an investment platform that uses automated technology to help build and curate your investment portfolio. Because you’re working with a robot and not a human, robo-advisors tend to be more cost-effective for investors who want to minimally manage their portfolios.

Robo-advising is a type of passive investing. This is different from active investing, which is a more hands-on approach where you hand-select your investments and manage them on your own. You can usually do this through a brokerage. In some cases, brokerages offer their own robo-advisors as well.

How Do Robo-Advisors Work?

When you sign up with a robo-advisor, you’ll get asked a few different questions to figure out what type of investor you are and your investment goals. After a few questions, the algorithm figures out if you’re more of a conservative or aggressive investor (or somewhere in the middle) and builds your portfolio off of that. Based on that as well as your age and priorities, you’ll get set up with a portfolio that fits you right now.

You don’t have to keep that recommendation, or you can tweak it how you see fit. And you can also make changes regularly, depending on your income, life changes or other factors. After you’ve approved the portfolio, you can add a bank account and start making deposits into your investment account. You can also set up auto-pay to make regular contributions based on what type of account you have.

Are Robo-Advisors Safe?

All investments carry risk and working through a robo-advisor is no different. Robo-advisors are programmed to work like human advisors, so your money is meant to be invested in a way that works best for you.

Robo-advisors are safe for managing your money and selecting investments with your best interest. They are regulated by the Financial Industry Regulatory Authority (FINRA) and a lot of their income goes towards making sure their platform is secure for investors.

While security breaches are extremely rare, they can happen. So make sure your login has a strong, unique password that you don’t use anywhere else. Set up two-factor authentication so every time you sign in, your robo-advisor knows it’s you.

Why Would You Need a Robo-Advisor?

A robo-advisor is a great tool for a lot of investors, but they aren’t a good fit for everyone. There are some people who may prefer to have a hands-on approach to investing, so active investing with a brokerage might be best for them. Other folks might be on the cautious side and prefer savings accounts over the stock market.

You might need a robo-advisor if:

  1. You want to start investing. If you’re interested in investing in the stock market but don’t know where to start, robo-advisors are a great first step. They’re best for new investors who aren’t sure of how the markets work but want to try and earn better returns than what is found with other products, like high-yield savings accounts and certificates of deposits (CDs).
  2. You don’t want to manage too much. Active investing requires a lot of work. If you don’t want to put in the time and research to find individual investments, let a robo-advisor to do it. You can change or tweak as you see fit, but you aren’t obligated to manage your entire portfolio with every click.
  3. You want to keep fees low. Because you rarely deal with a human, robo-advisor companies can keep costs down. Some charge nominal fees to talk to a human but if you don’t want or need those services, you don’t have to pay much more than account management fees.
  4. You don’t mind everything being online. Even though many brick-and-mortar financial institutions let you visit in person, robo-advisors are a bit different. A platform is handling your money and everything is managed online. While some companies have human advisors and assistance for you to reach at times, it usually comes at an extra cost and with set hours of availability.

How to Choose a Robo-Advisor

There is no shortage of available robo-advisors on the market right now. While they all have a lot in common, they aren’t all the same. It’s important to evaluate each potential advisor to see which one is in line with your needs, goals, and expectations for investing.

Automatic Rebalancing

Auto rebalancing (or sometimes called portfolio rebalancing) is when your advisor recalibrates your portfolio to match your original investment allocations. This is to make sure it’s on pace for your initial risk and goals. Not all robo-advisors offer this, but the best ones manage it for you.

Tax-Loss Harvesting

Tax-loss harvesting is when an investment is sold at a loss but that loss offsets the taxes you’ll get charged from capital gains. In most cases, the investment or security that gets sold gets replaced with a similar investment.

Some companies don’t offer tax-loss harvesting, which means when it comes time to pay your taxes, you could owe more on your income taxes because of capital gains tax. If you want to lower your tax bill, look into robo-advisors that offer tax-loss harvesting.

Fees and Charges

There’s no true free robo-advisor option. Most make their money through regular account management fees, whether that’s monthly, quarterly or annually. The fewer the fees, the more money you get to keep in your account.

See what fees potential robo-advisors charge and how much it costs to manage your account with them. Some work on a flat monthly fee structure while others charge a percentage of how much you have invested in your account.

Robo-Advisors vs. Index Funds

Robo-advisors tend to do all the lifting for you. If you’re a hands-off investor, then robo-advisors might be your investing choice. But for some, you may want to hand-pick your own index funds rather than have an algorithm do it for you.

Index funds are a type of exchange-traded fund (ETF) or mutual fund that tracks a market index, like the S&P 500. It carries a basket of securities representing a specific market sector (like healthcare or tech). While investing in index funds on your own is still passive income, you take the reins rather than a robo-advisor.

Diversification

When you complete your robo-advisor questionnaire, you’ll get a portfolio with your risk tolerance in mind. While you can tweak and make changes as necessary, some robo-advisors may have some limitations on what you can and can’t change.

If you have your own index funds, you can diversify as you see fit, since you’re in charge of your own selection. You may find you want a specific type of mix of index funds and have even more diversification than what a robo-advisor offers. It’s ideal for folks who have a bit more understanding of investing and how the stock market works. But people who don’t want to micro-manage their portfolios may want to head to a robo-advisor.

Cost

Robo-advisors tend to charge a monthly fee, whether that’s a flat fee or a percentage of assets under management. Some also charge for expense ratios of the funds that your robo-advisor invests on your behalf.

Index funds also charge expense ratios, but since you’re managing it on your own, you may not have to pay a monthly maintenance or annual fee. But you may be subjected to other fees from your brokerage, which vary based on which brokerage you work with.

Investment Management

While robo-advisors have some level of involvement, they are mostly hands off. You can, for the most part, set it and forget it. This is one of its biggest advantages for folks who want to invest but don’t want to do a lot of the work themselves.

But if you like the idea of selecting some of your own index funds and aren’t fully sold on the idea of actively managing an entire portfolio, directly investing in index funds might be a good in-between for you and your portfolio.

Frequently Asked Questions

Are Robo-Advisors a Good Idea?

Not everyone wants to or knows how to actively manage their investment portfolios. For those who want to get into investing because they want to take advantage of the stock market returns, robo-advisors are a great introduction into the market. It’s passive investing for those who may not have time to put into their investments.

Why Would You Use a Robo-Advisor Instead of a Financial Advisor?

Robo-advisors handle a lot of the heavy lifting for your investments. Because you’re not dealing directly with a human, you don’t have to pay for the services of one. Some folks like the hand-holding of financial advisors and in some cases, using one is a good idea. But not everyone needs a financial advisor to manage their investments.

What Is the Average Return on A Robo-Advisor?

Every robo-advisor is different. Some have average annual returns around 4% to 8% while others may return 12% to 16% or higher. Try to find the ones that are as close to 10% as possible, which is the average annual stock market return.

As a seasoned financial expert with a deep understanding of robo-advisors and investment strategies, let's delve into the concepts and information presented in the article "Best Robo-Investors of 2024." I'll provide insights into the key elements, terminology, and considerations associated with robo-advisors.

Robo-Advisors Overview: A robo-advisor is an automated investment platform that utilizes algorithms and technology to build and manage investment portfolios for users. Unlike traditional human advisors, robo-advisors aim to provide a cost-effective and hands-off approach to investing.

Key Concepts and Information:

  1. Best Robo-Investors of 2024:

    • The article highlights various robo-advisors, each recognized for specific strengths in categories like overall performance, financial planning, women-centric investing, bank customer integration, micro-investing, promotions, and advisor assistance.
  2. Betterment:

    • Noted as the "Best Overall" robo-advisor.
    • Founded in 2010, it requires a minimum investment of $10.
    • Offers low monthly fees, ease of customization, and various investment options, including cryptocurrency.
  3. Wealthfront:

    • Recognized as the "Best for Financial Planning."
    • Requires a minimum investment of $500.
    • Provides diverse portfolio options, tax-loss harvesting, and investment in individual stocks.
  4. Ellevest:

    • Acknowledged as the "Best for Women-First Investing."
    • Employs a female-centric platform with no minimum investment requirement.
    • Focuses on creating investment plans using "women-centric data points."
  5. Ally:

    • Highlighted as the "Best for Bank Customers."
    • Offers a cash-enhanced portfolio with zero advisory fees for certain portfolios.
    • Provides socially responsible investing options.
  6. Acorns:

    • Recognized as the "Best for Micro-Investing."
    • Stands out for its savings tool, allowing automatic roundups for spare change investment.
    • Offers fractional shares and additional products like high-yield checking and savings accounts.
  7. SoFi Automated Investing:

    • Positioned as the "Best for Promos."
    • No management fees, and requires only $1 to start investing.
    • Features exclusive member discounts and referral bonuses for other SoFi products.
  8. Fidelity Go:

    • Touted as the "Best for Advisor Assistance."
    • Offers personalized planning, coaching, and unlimited 1-on-1 calls.
    • No annual management fee for accounts with less than $25,000 invested.
  9. Stash:

    • Selected as the "Best for Beginners."
    • Provides a hybrid approach with both robo-advisor and do-it-yourself investing.
    • Access to a variety of investment options, including crypto and real estate investment trusts (REITs).

Understanding Robo-Advisors:

  1. How Robo-Advisors Work:

    • Users answer questions to determine their investor profile, risk tolerance, and goals.
    • Algorithms use this information to create a customized investment portfolio.
    • Investors can make adjustments and regularly contribute funds to their accounts.
  2. Are Robo-Advisors Safe?:

    • Robo-advisors are regulated by the Financial Industry Regulatory Authority (FINRA).
    • Security measures, including strong passwords and two-factor authentication, help protect accounts.
    • While security breaches are rare, investors should be vigilant about account security.
  3. Why Would You Need a Robo-Advisor?:

    • Ideal for new investors looking to enter the stock market with minimal management.
    • Suitable for those who prefer a hands-off approach to investing.
    • Cost-effective, especially for investors who don't require extensive human assistance.
  4. How to Choose a Robo-Advisor:

    • Consider features like automatic rebalancing, tax-loss harvesting, and fees.
    • Evaluate whether the robo-advisor aligns with your investment goals and preferences.
    • Compare costs, including monthly fees and expense ratios.
  5. Robo-Advisors vs. Index Funds:

    • Robo-advisors automate portfolio management, while index funds involve manual selection.
    • Diversification in robo-advisors is based on algorithms, whereas individuals control diversification with index funds.
    • Costs, management style, and level of control differ between robo-advisors and index funds.
  6. Average Return on A Robo-Advisor:

    • Returns vary among robo-advisors, with some achieving annual returns between 4% to 16%.
    • Investors should aim for returns close to the average annual stock market return, around 10%.

Conclusion: With the information provided, individuals can make informed decisions when choosing a robo-advisor based on their financial goals, preferences, and level of involvement in managing their investment portfolios. Understanding the nuances of robo-advisors, including their features and potential returns, is essential for maximizing the benefits of automated investment platforms.

Best Robo-Advisors of February 2024 – Newsweek Vault (2024)
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