Best Robo-Advisors for New Investors: Your Top 8 Picks
Starting your investment journey can be exciting but also a bit overwhelming.
With so many options out there, it’s important to choose tools that make the process easier and more efficient.
Robo-advisors offer a practical solution, especially for those new to investing.
Why should you consider using a robo-advisor? They provide automated financial advice based on algorithms, helping you manage your investments with minimal effort.
Designed to cater to various needs and preferences, these platforms are becoming increasingly popular for their ease of use and affordability.
In this article, we’ll look at some of the best robo-advisors for new investors, giving you a solid foundation to start your investment journey.
1) Betterment
Betterment is a popular choice for new investors.
It offers an easy-to-use platform that automates your investments.
You can start investing with as little as $10.
You pay a 0.25% annual fee, but if your balance is below $20,000, you need to set up recurring monthly deposits totaling $250 or more.
This makes it accessible for people who are just beginning their investing journey.
The platform also provides access to human advisors if you’re willing to pay extra.
Betterment Premium users can schedule sessions to discuss their investments.
For example, you can pay $299 for a 45-minute session to go over your Betterment investments, or $399 for a 60-minute session.
Betterment’s goal-based investing feature is great for setting and tracking your financial goals.
You can create different buckets for goals like retirement, buying a home, or saving for a vacation.
The automated system manages your portfolio based on your risk tolerance and goals.
This means you don’t have to constantly monitor or adjust your investments.
If you’re looking for a robo-advisor with a mix of automation and human advice, Betterment is a solid pick.
You can read more about it in this Betterment Review.
2) Wealthfront
Wealthfront is a great option if you’re new to investing.
It’s easy to use and has a lot of helpful features.
You can start with as little as $500.
One cool feature is the line of credit for accounts with $25,000 or more.
You can borrow up to 30% of your portfolio with no fees or credit checks.
Wealthfront charges a 0.25% annual management fee.
This is pretty competitive among robo-advisors.
It also offers tax-loss harvesting, which can help you save on taxes.
If you’re interested in planning for your future, Wealthfront has some handy tools.
Their financial planning tool can help you set goals and see how your investments are working towards them.
It’s like having a financial advisor that you can access anytime.
Another nice feature is the customization options.
You can choose from different types of investments based on your risk tolerance.
Wealthfront does a good job of balancing growth and safety.
You also get access to financial experts if you have any questions.
It’s like a little safety net for those times when you need a bit more guidance.
The platform integrates with your bank accounts, giving you a full picture of your finances.
If you’re just starting out or even if you’re a bit experienced, Wealthfront provides a lot of value and ease of use.
3) Ellevest
Ellevest is a robo-advisor that aims to help women achieve their financial goals.
It offers personalized investment portfolios tailored to your specific situation.
One of the standout features is its low expense ratios, which range from 0.05% to 0.10%.
These fees are quite competitive compared to other robo-advisors.
If you sign up for the Ellevest Executive tier, it costs $108 per year.
This translates to a fee of 1.1% on a $10,000 investment.
The service does have a higher monthly fee of $12, which equals $144 a year.
For smaller accounts, this can be a significant percentage of your portfolio.
Ellevest also focuses on impact investing, which means your money can support initiatives you care about, such as sustainability and gender equality.
In addition to investment services, Ellevest provides educational resources and tools.
These can help you better understand your investments and financial options.
One thing to note is that there are no commission fees for specific transactions, which can help you save on costs.
Ellevest is especially appealing if you’re looking for a robo-advisor that aligns with your values and offers a range of financial services.
For more details, you can read the full review on NerdWallet and Forbes Advisor.
4) Robinhood
Robinhood makes investing super easy for beginners.
It stands out with its zero-commission trades, so you won’t be paying extra fees.
This makes it great for those just starting with smaller amounts of money.
You can buy and sell stocks directly from your phone.
The app is intuitive and user-friendly.
It’s designed to help you learn as you go.
This can be a huge plus when you’re new to investing.
Another cool feature is the fractional shares.
You can buy a piece of a stock, even if you don’t have enough to buy a full share.
This way, you can diversify your portfolio without needing a lot of money.
Robinhood also offers educational resources.
You’ll find articles and tips right in the app.
They help you make better investment decisions.
Although the app is user-friendly, always make sure to do your research before making any big moves.
One thing to note is that Robinhood primarily offers stocks and ETFs.
If you’re looking for a broader range of investment types, like mutual funds or bonds, you may need to look elsewhere.
Robinhood has gained popularity due to its accessibility and straightforward approach.
For more details and to sign up, check out Robinhood.
It’s a solid option if you want to jump into the world of investing with ease and little upfront cost.
5) M1 Finance
M1 Finance is a great option for new investors.
You can start with just $100 for taxable accounts or $500 for retirement accounts.
This makes it easy to begin investing without needing a lot of money upfront.
One of the best features of M1 Finance is its customizable portfolios.
You can choose from a variety of pre-built portfolios or create your own.
This allows you to tailor your investments based on your goals and preferences.
Another benefit is the lack of transaction and trading fees.
You can buy and sell investments without worrying about additional costs.
This can help you save money as you grow your portfolio.
M1 Finance also offers a user-friendly mobile app.
You can manage your investments on your computer or on the go.
This flexibility ensures you can keep track of your portfolio anytime, anywhere.
Founded in 2015, M1 Finance has quickly risen to become one of the top automated investment platforms.
It combines the benefits of robo-advisors with the flexibility of traditional brokerage accounts.
For more information, you can check out this M1 Finance review or visit Bankrate’s page on M1 Finance.
6) Acorns
Acorns is a great choice if you’re new to investing.
It focuses on helping you grow your savings by rounding up your spare change from everyday purchases.
This means that each time you buy something, Acorns rounds up the amount to the nearest dollar and invests the difference.
You can start investing with as little as $5.
This makes it super accessible for beginners who don’t have a lot of money to invest.
Plus, it’s easy to use with its straightforward app interface.
Acorns provides a mix of different portfolios based on your risk tolerance.
You can choose from conservative to aggressive options, depending on how much risk you’re willing to take.
It offers the option to allocate up to 5% of your investments toward a Bitcoin-linked ETF.
This allows you to dip your toes into cryptocurrency if you’re interested in diversifying a bit more.
One thing that stands out about Acorns is its educational content.
The app includes articles and tools to help you learn about investing and personal finance.
This makes it a good way to get more comfortable with the world of investing.
There are some fees to consider.
The basic plan starts at $3 per month, which covers your investment account, Acorns Later (IRA), and Acorns Checking.
For $5 per month, you get the Family plan, which includes investment accounts for kids.
If you’re looking for a simple and automated way to start investing, Acorns might be the perfect fit for you.
For more detailed information, you can check out this Acorns Review.
7) Stash
Stash is an excellent choice if you’re new to investing.
It offers a mix of DIY and robo-advisor services.
This means you can pick and choose your investments, or let Stash automate the process for you.
One standout feature is the low account minimum.
You can start with just $5.
This makes it very accessible for beginners.
Stash also has tools to help you learn.
You’ll find advice and tips on different types of investments.
This can help you make more informed choices.
When compared to other robo-advisors, Stash offers more flexibility.
You can manage your investments according to your comfort level.
This is useful if you want more control over where your money goes.
Stash also provides a banking feature.
This is handy if you want to keep all your financial activities in one place.
It simplifies managing your money.
According to a NerdWallet review, Stash is highly rated for its ease of use and educational content.
It’s a good option if you want to learn while you invest.
While fees can be a bit higher than some other robo-advisors, the value you get from the educational resources can balance this out.
It’s worth considering if you’re starting out and want some guidance.
For more details, check out this NerdWallet guide and the CNBC review.
8) Fidelity Go
Fidelity Go is great for beginners.
It’s a robo-advisor from Fidelity Investments that aims to make investing simple and affordable.
One of the best parts? There’s no management fee for accounts with balances under $25,000.
When your balance goes over $25,000, it charges a 0.35% fee.
This fee covers both management and investment expenses.
This way, you know exactly what you’re paying for.
With Fidelity Go, you only need a minimum investment of $10.
That’s a low bar to get started.
The platform constructs a diversified portfolio for you based on your goals and risk tolerance.
It’s straightforward and user-friendly, making it easy for you to navigate.
This is a nice perk if you’re new to investing and want something that won’t be too complicated.
Additionally, you get access to Fidelity’s financial advisors if you have questions or need guidance.
This can be really helpful as you build your investment knowledge.
Overall, if you’re looking for an easy, low-cost entry into investing, Fidelity Go is worth considering.
How Robo-Advisors Work
Robo-advisors use algorithms to manage your investments based on your financial goals and risk tolerance.
They usually offer user-friendly interfaces, making it easy for anyone to start investing.
Algorithms and Technology
Robo-advisors employ advanced algorithms to create customized investment portfolios.
These algorithms analyze data, such as market trends, asset performance, and economic indicators.
They then allocate your funds across various asset classes like stocks, bonds, and ETFs to match your risk profile.
The technology ensures continuous monitoring and automatic rebalancing of your portfolio.
This keeps your investments aligned with your goals without you having to lift a finger.
Some platforms use machine learning to improve performance over time.
User Experience and Interface
One of the most appealing aspects of robo-advisors is their user-friendly design.
These platforms are typically easy to navigate, even for beginners.
When you sign up, you usually answer a series of questions about your financial situation and goals.
The interface then guides you through the process of setting up your investment account.
You’re able to track your portfolio’s performance in real-time and adjust your goals if needed.
Many robo-advisors also offer educational resources to help you understand investing better.
Their straightforward approach makes investing accessible to those who might find traditional financial advising intimidating or expensive.
Benefits of Using Robo-Advisors
Robo-advisors offer a convenient and cost-effective way to manage your investments.
They bring several advantages, especially for new investors, by simplifying complex financial processes and making investing accessible and affordable.
Low Fees
One major benefit of robo-advisors is their low fees.
Traditional financial advisors can charge high fees for their services, often as a percentage of your assets.
In contrast, robo-advisors have much lower management fees, sometimes as low as 0.25% per year.
Some even offer no management fees for certain balances, such as Fidelity Go, which provides free management for balances below $25,000.
These lower fees can make a big difference in your overall returns, especially over the long term.
With robo-advisors, you keep more of your investment gains because you’re paying less in fees.
Accessibility and Ease of Use
Robo-advisors are extremely accessible and easy to use, which makes them perfect for new investors.
You can set up an account online without needing to meet with a financial advisor in person.
Everything is digital and can be done from the comfort of your home.
These platforms use algorithms to create and manage your investment portfolio based on your risk tolerance and goals.
This automation means you don’t need to have deep financial knowledge.
For example, Betterment’s user-friendly interface guides you through the setup process, making it simple to get started.
Additionally, many robo-advisors offer helpful educational resources to further support new investors.
This combination of easy setup and user-friendly management tools takes the intimidation out of investing, making it a smooth experience for beginners.
Things to Consider Before Choosing a Robo-Advisor
Choosing a robo-advisor is a big decision.
Your choices should depend on your investment goals, risk tolerance, and the features and tools available.
Investment Goals
Think about why you want to invest.
Are you saving for retirement, a house, or just trying to grow your money? Your goals will help you pick the right robo-advisor.
Some robo-advisors are better for long-term goals like retirement.
Others might be great for short-term goals or specific plans.
Long-term goals usually need a different approach than short-term ones.
For example, investing for retirement might involve low-cost index funds.
For short-term goals like buying a car in a few years, low-risk investments might be better.
Make a list of your goals and consider which robo-advisor has the right mix of investments for those goals.
Check if they offer specific portfolios or services that align with what you want to achieve.
Risk Tolerance
Your comfort with risk is crucial.
Different robo-advisors cater to various risk levels.
Some might put your money in safer, low-risk investments.
Others might recommend more aggressive options.
Assess how much risk you’re okay with.
If market fluctuations make you anxious, you might want a more conservative approach.
If you’re okay with ups and downs for the chance of higher returns, a more aggressive portfolio might suit you.
Many robo-advisors offer quizzes or tools to measure your risk tolerance.
They will then suggest investment strategies that match your comfort level.
Always choose a robo-advisor that respects your risk preferences.
Features and Tools
Look at the features and tools each robo-advisor offers.
These can make a big difference in your investment experience.
Check if they have easy-to-use mobile apps or educational resources that help you learn about investing.
Some robo-advisors offer tax-loss harvesting or automatic rebalancing.
These features can save you money and keep your investments on track.
Other tools might include financial planning, goal tracking, and even human advisory services.
Compare the features and tools across different platforms.
Consider what’s important to you and pick a robo-advisor that offers what you need.
Check user reviews and demo the tools if possible to see if they fit your style.
Frequently Asked Questions
Choosing a robo-advisor as a new investor can be confusing.
Here are some common questions to help you decide if they are right for you.
What should a new investor look for when choosing a robo-advisor?
Consider ease of use, low fees, and educational resources.
Betterment offers a user-friendly interface, while Wealthfront provides excellent planning tools.
Can robo-advisors be a good match for those nearing retirement?
Yes, especially those focusing on low-risk strategies.
Wealthfront and Betterment are known for their retirement planning options.
How do beginner-friendly robo-advisors stack up against traditional investing?
They offer automated, low-cost solutions with less need for managing individual stocks.
Ellevest and Robinhood are simple and cater to new investors.
Across various robo-advisors, which one has the lead in returns as of 2024?
Performance can vary, but Wealthfront has been noted for strong returns due to its vast customization and tax-efficient strategies according to Investopedia.
What are the common drawbacks to using robo-advisors for investment management?
They may not offer the personalized touch a human advisor can.
Options like M1 Finance have customization, yet some investors miss direct interaction.
Have robo-advisors consistently beaten the market indexes like the S&P 500?
Robo-advisors aim to match market returns rather than beat them.
Consistent outperformance is rare, and market conditions can affect results.
