How to Invest with Robo Advisors

Posted by: TheGuarantors on November 18, 2021

The fastest way to grow your money is to invest it smartly. However, you might not know the best way to do that. To understand the world of investing, you will need to employ a financial advisor who can guide you and help you invest in the right stocks and funds. In the digital age, robo advisors have emerged as an essential tool to help investors with financial advice and financial planning. In this article, we want to tell you all about the best robo advisors on the market.

But first off, what are they? Robo advisors are digital platforms that use market data and AI to invest on your behalf. They allow beginners to grasp difficult concepts which will help them invest efficiently. Since they have no human supervision, the fees are lower compared to traditional financial advisors. So, let’s take a deep dive into what makes a good robo advisor.

How robo advisors can help you invest

How you can start investing with the best robo advisors

Before we look at the best robo advisors for you, let’s first understand how to start investing with a robo advisor.

Open your account and answer some questions

Once you find a suitable robo advisor, you sign-up to their platform. After signing in, the robo advisor will ask you several questions about:

Deposit money to fund your robo advisor

After answering these questions, it's time to deposit the amount of money you want to invest. The robo advisor will give you two different investment options at this point. You can make a one-time payment or monthly deposits as part of a systematic investment plan. Moreover, remember that you can deposit and fund your robo advisor at any point in time.

Let the robo advisor do it’s magic!

After you have answered their questions, your robo advisor does the financial planning and allocates your money automatically. To minimize the risks of the market, robo advisors usually invest in mutual funds and exchange-traded funds (ETFs).

Robo advisors allocate your cash according to your risk appetite. For example, if you want good returns at lower market risk, the robo advisor diversifies your investment. If you have an appetite for higher returns at higher risk, the robo advisor allocates your money to specific portfolios which give higher returns.

The best robo advisors help you customize, re-allocate and open new avenues to investing

Apart from financial advice and investing your money automatically, robo advisors can re-allocate or re-balance your investments when markets change. This way, you are still working towards your financial goals, while avoiding potential market risks.

Additionally, some of the best robo advisors allow you to invest in the latest trends in the market—for example, sector-specific ETFs, real estate investment trusts (REITs), and cryptocurrencies.

Robo advisers open new avenues to investing

The best robo advisors for beginners

Now that you have a rough idea of how robo advisors work, let’s look at some of the best robo advisors for beginners.

Betterment

Betterment was founded in 2008, and it’s one of the pioneers of robo advisors-based investment platforms. This robo advisor provides a user-friendly interface and educational resources, which makes it a great investment platform for beginners. Furthermore, Betterment suggests different portfolios and explains the risks associated with them. Using Betterment, you can also switch to a diverse portfolio based on your investment goals. Betterment also informs you about taxes when you change portfolios. This makes it our top choice for the best robo advisors.

What we like:

It’s easy to set up your account. You can add new goals anytime and change portfolios easily. You get the benefit of tax-loss harvesting.

What we don’t like:

It costs $199 to talk to a financial planner. You don’t get margin lending or secured loans against your account.

SoFi Invest

SoFi Invest is an automated all-in-one investment platform. You can trade stocks, ETFs, cryptos, and apply for Initial Public Offerings (IPOs). If you’re new to investing, you can let SoFi’s automated investing do the job for you. It’s also one of the best robo advisors for beginners thanks to its user-friendly interface.

What we like:

There are no management fees or commission fees for trading stocks. Additionally, you can start investing with as little as $1. You get access to financial advice at no extra charge. You can also trade cryptocurrencies for a fee of 1.25%. SoFi also provides customers bonuses on their products like loans, credit cards, and insurance.

What we don’t like:

SoFi doesn’t provide tax-loss harvesting. You don’t get the stop-loss orders option for trading.

The best robo advisors for beginners

Wealthfront

Wealthfront is one of the best robo advisors for financial planning, banking, and setting goals. They provide their users with a robust personal banking experience. In fact, they recently launched Autopilot, which can monitor your bank account, spendings, and allocate money automatically into high-interest savings and investments.

What we like:

Wealthfront lets you see the bigger financial planning picture. It shows you the advantages and drawbacks of your portfolios.

Wealthfront has tax-free harvesting. Plus, your Wealthfront account also carries FDIC insurance.

What we don’t like:

The minimum balance to open a Wealthfront account is $500. There’s no online chat for customer support.

Robo advisors are pretty affordable - generally, you don't need huge funds to open an account with one. If you are a beginner who wants to invest and grow your wealth, a robo advisor is the cheapest and the best way to get yourself started.