Are robo-advisors a good idea?

If you are interested in investing, you have probably heard of robo-advisors. Find out what they are, and how they can help.

Robo-advisors are popular with many different types of investor. Robo-advisors simplify your investments, automate your deposits, and do much more. Whether you are a passive investor or you like to take more control, you’ll find a robo-advisor that meets your needs. 

If you are wondering how robo-advisors work if they are legitimate, and if they are a good idea to invest in then you are in the right place.

If you would like to learn about the top robo-advisors, check out this great robo-advisor comparison for 11 of the most well-known. Read on to learn about some advantages of robo-advisors and some of the top robo-advisors on the market.

If you do not know what robo-advisors means, take a look at this article that explains what a robo-advisor is

Advantages of robo-advisors

As robo-advisors are almost fully automated investment platforms, there are many benefits they offer. If you wish, you can do a set-it-and-forget-it method and just automate your investments at a set schedule after setting it up initially. 

Robo-advisors can be a great tool for a novice investor; read this great novice investor guide if you are a beginner. 

While you may find lots of benefits of robo-advisors, the top three are the automatic investing tools, automated rebalancing, and the low fees the robo-advisors offer. 

Automatic investments

The greatest benefit of robo-advisors is the ability to set up automatic investments. You can set up automatic purchases ranging from every day of the week to once a month.

To make the most of their cash, savvy investors will schedule their automatic investments to occur on the day(s) they get paid. That way their cash is never just sitting, it is always working on growing.

If it’s your goal and you invest consistently over a number of years, you can eventually become a millionaire. If this is your goal, this stock market millionaire guide outlines a path you can follow. 

Automatic investing offers many benefits in its own right. With automatic investing, you are automatically performing dollar-cost averaging (DCA), working investing into your budget, and saving time.

Automatic rebalancing

Depending on the level of investment risk you are comfortable with, you can choose your stock/bond allocation to match what you are comfortable with. The ‘risks’ of stocks and bonds vary: 

  • Stocks have more volatility, i.e. they bounce up and down over the short term. Over a long-term horizon, they have more upward growth than bonds
  • Bonds have less volatility, meaning they will provide steady, but small gains compared to stocks. 

In general terms, if the time before you cash out your investments is over five to 10 years, people tend to invest in stocks. As you get closer to the time when you are ready to cash out your investments (less than four to five years) people usually switch to bonds. 

With most robo-advisors, you can specify your stock/bond allocations. For example, you can set your allocation to be 80/20 stocks/bonds and as your investments grow, the robo-advisor will automatically rebalance the portfolio to keep it at your target allocation.

Low fees

There are many robo-advisors on the market, almost too many to choose from. For them to remain competitive with each other, most of them have very low fees.

Most offer zero transaction fees. Yes, that is correct, you can invest in the stock market without having to pay a fee for each transaction. Read this great article on why managing your own investments saves you money to understand more. 

Typically, Robo-advisors charge a very small monthly fee of around a few dollars or a small percentage fee of less than 0.5% to manage your investments. 

The top three robo-advisors 

Now that you have learned a little bit about robo-advisors, you may be wondering to what platforms to look at to get started investing.

Betterment, M1 Finance, and Acorns have the most positive feedback, largest user bases, and highest ratings out of all the robo-advisors on the market today. Here is some brief information on each.


Betterment is the ‘granddaddy’ of all robo-advisors. It is the original – the ‘O.G.’. Betterment first launched in 2010 and is arguably the best robo-advisor around. Betterment offers simple, passive investing and low fees. You can read additional details here on why Betterment is so simple.

For a standard investing account, Betterment fees are 0.25% annually. There is no minimum balance required and you can open additional accounts with Betterment: 

  • Joint accounts 
  • IRAs
  • Trusts 
  • 401(k)s
  • Checking/savings

You can do your entire banking with Betterment. Betterment is considered one of the best ways to invest. Check out this best investing methods list for other great ways to invest.

Betterment also has a diverse selection of portfolios that you can invest in. You can choose from low risk to high risk and then automate everything, including tax-loss harvesting. 

Read this excellent Betterment review to learn about all the features Betterment offers. 

M1 Finance

M1 Finance is a unique robo-advisor and it stands out for very good reasons. In M1 Finance you can invest in individual stocks, whereas with most robo-advisors you can only choose diversified portfolios that are pre-allocated to select ETFs (exchange-traded funds). 

As well as being able to invest in singles stocks, you can create your own portfolio with M1 Finance. The portfolio is called a “pie” and you can add many stocks to it. Once you create your portfolio, you can automate your investment purchases. When you buy into your portfolio, you will buy an equal amount of fractional shares each time.

With M1 Finance, you have the most control of what investments you would like to purchase.


Acorns ranks amongst the top three robo-advisors. Like M1 Finance, it has unique benefits that appeal to some investors. Acorns’ core feature is automatic investing of your spare change. 

You might be wonder how Acorns get the spare change from your purse or pocket… however interesting that thought, Acorns does not do exactly that. Instead, your credit/debit card(s) are linked to your Acorns account. When you make a purchase, Acorns rounds up your charge to the nearest dollar. So, if you spent $53.72 on pickles, Acorns would invest $0.28 in your investment portfolio. 

In addition to Acorns’ fantastic feature of investing small amounts of money every time you buy pickles, you can also set up automatic deposits of larger amounts. 

Within Acorns, you can choose from six portfolios, each with different levels of risk (and stock/bond allocations). Like Betterment, Acorns has additional accounts you can open like IRAs, checking/savings accounts, and UTMA/UGMA accounts for children. 

UTMAs/UGMAs are great ways to teach your kids how to invest, read this article on teaching kids investing if you want to learn all the best methods. 

If you would like to know more about robo-advisors, this article will teach you everything you need to know about robo-advisors. And if you are interested in investing responsibly, here is a comparison of socially responsible robo-advisors.