Sit back, relax and let the robots handle your finances!
Are you ready to revolutionize your investment approach and maximize your profits? Consider robo-advisors—the AI-powered automated investment advisor that uses algorithms to provide financial advice and manage investments. They are typically much cheaper than traditional advisors, and they can be a good option for investors—even beginners—who are looking for an automated and efficient way to manage their portfolios.
With numerous options available, it’s crucial to choose a reliable and top-performing robo-advisor that aligns with your investment goals. In this article, we’ll explore the top investment robo-advisors and provide an objective analysis of their features, costs, advantages and disadvantages. By understanding these key aspects, investors can make informed decisions and select the robo-advisor that best aligns with their investment goals and preferences.
Wealthfront, rated Best Overall Robo-advisor by Investopedia, is a well-known robo-advisor that has been providing automated financial guidance to users since 2008. The platform offers a range of tools and a portfolio of exchange-traded funds (ETFs) and index funds that align with users’ financial goals and risk tolerance, helping them manage finances effectively. Its self-reported average annual return is 5.57% over the past five years with a risk score of 9.0 on a scale of 0.5-10.
- A minimum initial investment of US$500.
- Wealthfront Cash (its cash management account) offers an annual percentage yield (APY) of 4.55% (as of March 2023).
- A portfolio mix of ETFs, index funds and individual stocks.
- In-house socially responsible investing (SRI) portfolio available; users can also customize their portfolio to include SRI options.
- Supports 529 college savings plans, individual or joint retirement accounts, trusts, Roth/traditional/rollover/SEP IRAs and high-yield cash accounts.
- Allows trading of digital coins and investing in Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE).
- Access to Wealthfront’s risk-parity fund for accounts with more than US$100,000.
- Access to Wealthfront’s smart beta feature that can yield higher returns for accounts with more than US$500,000.
- No account fee.
- 0.25% annual advisory fee, which is standard in the robo-advising industry.
- Average investment expense ratio (i.e. how much an investor has to pay to cover a fund’s expenses) at 0.08%; 0.11% for portfolios that include Wealthfront risk parity fund.
- Offers tools like “Self-Driving Money” and “Path” to help users automate bills, savings and investing goals.
- Offers daily tax-loss harvesting at no additional cost for all taxable accounts.
- It may be difficult to reach a live product specialist.
- No human financial advisor available.
M1 is a financial platform that combines the functionalities of a robo-advisor and an online broker, aiming to serve both hands-off and hands-on investors. The platform boasts a selection of over 6,000 equities and ETFs, providing ample choices for investors. Overall, M1 Finance is most suitable for intermediate-level investors who prefer managing their investment plans, as it allows very flexible customization options compared to other robo-advisors.
- A minimum initial investment of US$100 (US$500 for retirement accounts).
- M1 Plus users earn 1.7% APY on balances held in M1 Spend (i.e. M1’s cash management account); M1 Basic users do not earn any APY on deposits.
- Wide range of investment options with over 6,000 equities and ETFs.
- Supports individual and joint taxable brokerage accounts, Roth/traditional/rollover/SEP IRAs, custodial accounts and trust accounts.
- Trades for M1 Basic accounts are made once per day, in the morning.
- M1 Plus account offers additional benefits, including a second trading window and discounted margin borrowing rates.
- Offers M1 Borrow and M1 Spend services.
- No annual fees for M1 Basic accounts.
- M1 Plus costs US$125 per year.
- Average investment expense ratio ranges from 0.06% to 0.20%.
- Low account minimum.
- Hybrid models combining automated investing with self-directed trading.
- Highly customizable portfolios to suit individual preferences.
- Users can obtain loans using existing account balance as collateral (8.50% annual interest rate for M1 Basic accounts and 6.95% for M1 Plus for M1 Margin Loan).
- No tax-loss harvesting strategy.
- No financial advisors or planning services.
E*TRADE Core Portfolios
E*TRADE Core Portfolios provides a solid choice for investors who prefer a passive approach to investing. Overall, E*TRADE Core Portfolios is a user-friendly and affordable option. However, investors should consider the relatively higher management fee and the absence of tax-loss harvesting before making a decision.
- US$0 fee per trade.
- A minimum investment requirement of US$500.
- SRI option available at no additional cost.
- Provides the option to target tax-advantaged portfolios or invest in socially-responsible ETFs.
- Provides automatic portfolio rebalancing to maintain the desired asset allocation.
- Customer support is available at flexible hours.
- 0.30% annual management fee.
- Average investment expense ratio ranges from 0.06% to 0.12%.
- US$75 fee for a complete transfer out; US$25 for a partial transfer out.
- Satisfying customer service.
- Human investment advisor representatives are available for consultation.
- No tax-loss harvesting strategy.
- Portfolio mix does not adequately include international bonds and other non-market-correlated assets like real estate investment trusts and commodities.
Empower is a well-established financial services company that has been providing insurance and financial planning services since 1891. The company has expanded its offerings to include retirement planning and cash flow management tools, along with personalized investment management services. Overall, Empower may be a good fit for high-net-worth individuals and families looking for a personalized investment process. However, other investors may prefer a more affordable or accessible option.
- A minimum investment amount is US$100,000.
- A suite of money management tools and personalized investment management services for high-net-worth individuals and families.
- Offers free financial tools and reports, including calculators and a financial roadmap.
- A portfolio mix of ETFs and individual stocks for accounts with a minimum deposit of US$200,000.
- SRI options available.
- Provides personalized investment management services—users holding funds from US$100,000-199,999 can access an advisory team, while those with US$200,000 or more benefit from the assistance of two dedicated advisors.
- Supports non-retirement accounts, Roth/traditional/rollover/SEP IRAs, trust accounts, cash accounts and active 401(k) plans; Can advise on 401(k), HSA and 529 plans.
- Management fees range from 0.49% to 0.89%.
- Average investment expense ratio at 0.08%.
- Offers tax-loss harvesting strategies on portfolios that include ETFs and individual stocks.
- Human advisors available via phone, email and video call.
- High minimum investment amount and management fee.
- Users are required to schedule a call with a financial advisor before signing up, which may be seen as an inconvenience for those who prefer a more streamlined onboarding process.
Risks of using robo-advisors
Robo-advisors have emerged as a game-changing alternative for hassle-free investing, with a market value of US$4.13 billion in 2021 and projected to hit US$42.89 billion by 2030. While robo-advisors have many advantages, such as affordability, ease of use and diversification, it’s important to be aware of their potential risks and drawbacks as well.
One of the main concerns is that they lack the personal touch of a human financial advisor and may not be able to take into account your unique financial circumstances or goals. Additionally, technical glitches or errors can occur, potentially resulting in mismanagement of your portfolio and financial losses.
Furthermore, robo-advisors may not be suitable for all investors, especially those with complex financial needs or who prefer a more hands-on approach to investing. It’s crucial to weigh the pros and cons of each option and choose the one that best fits your situation.
To reach your financial goals, it is crucial to select the right investment robo-advisors. Through our exploration of the top investment robo-advisors, we have shed light on their features, cost, pros and cons. Conducting further research and considering personal investment preferences and risk tolerance is crucial before making a final decision. By utilizing the best robo-advisor platforms accessible now, investors can maximize their returns and achieve their financial objectives with ease.
This article is meant for informational purposes only. Please make investment decisions based on your own discretion.
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