| |

Best Robo-Advisor Platform For Beginners (Ultimate Guide)

Are you new to investing?

Investing with the help of robo-advisor can be a great way to start investing young even if you are an absolute beginner. Not only a robo-advisor provides the option to diversify your portfolio efficiently according to your financial goals, the ever evolving AI technology helps you manage your money with a fraction of the cost of a traditional financial advisor.

Robo-advisor empowers the investors to save, invest and grow money towards financial freedom, but which robo-advisor platform is the best? Here you’ll find some key information when comparing and picking the best robo-advisor that suits you,

  • The types of fees and commission
  • The different features offered by the different robo-advisor platform providers
  • The level of user friendliness of the platform for the user.
  • The level of support provided for investors.

The robo-advisor below earn their place in this list of best robo-advisor platform with beginner investors in mind. Read out each picks with quick review on each platforms. Check out our guide below when picking the right robo-advisor for you.

PS. This opinion article is purely informative and is for entertainment purposes only, IB’s ratings are determined by our editorial team. The scoring is strictly for information only and should not be used for the decision-making process.

Best Robo-Advisor Platforms For Beginners

Robo-advisors is one of the best option for passive investing, amount the different platforms some shows immense potential for a great pick if you are looking to start investing with robo-advisor. To let you compare the different providers easier, I’ve added my thoughts regarding each platforms, and see where it shines where it don’t.

Robo-Advisor

IB Rating

Fees

Account Minimum

Learn More

WealthFront
Wealthfront

4.7 out of 5.0

0.25% management fee per year (approx.)

$0

on Wealthfront’s website

Acorns
Acorns

4.6 out of 5.0

$3-$5 management fee per month (approx.)

$0

on Acorns’s website

E*Trade from Morgan Stanley
E*Trade

4.3 out of 5.0

0.30% management fee per year (approx.)

$500

on E*Trade website

Runner-Ups

Betterment
Betterment

4.3 out of 5.0

0.25% management fee per year (approx.)

$0

on Betterment’s website

Vanguard
Vanguard Digital Advisor

4.2 out of 5.0

0.15% management fee per year (approx.)

$3,000

on Vanguard’s website

Fidelity
Fidelity

4.2 out of 5.0

0% – 0.35% management fee per year (approx.)

$0

on Fidelity’s website

Charles Schwab
Charles Schwab

4.1 out of 5.0

0% management fee per year (approx.)

$5,000

on Charles Schwab’s website

1. WealthFront

Best Overall Robo-Advisor Platform For Long-Term Investing

WealthFront

4.7 out of 5.0

Wealthfront is a financial technology company that offers automated investment solutions designed to help investors build wealth over time through an automated , diversified investment account. Together with their automated investment platform, Wealthfront let investors to put their unused investing fund in a cash account to earn interest rates while they wait for the right time to invest.

Designed for long-term investing, Wealthfront let investors to choose from 17 global asset classes which is rare amount robo-advisor platforms. With Wealthfront you can change your portfolio to change your exposure to a variety of investment according to your risk tolerance level;

  • US Stocks, foreign stock, emerging markets, dividend stocks, municipal bonds, US bonds, corporate bonds Treasury Inflation-Protection Securities (TIPS)

Wealthfront is one of the few platforms that offers tax-loss harvesting which help boost after-tax returns for serious long-term investors keeping the cost of investing low.

Best ForPeople long-term passive investors
Fees0.25% management fees per year
Account Minimum$500 for investment account
$1 for saving account/short-term cash account
Customer Service5 Days (Phone and Email Support)
24/7 Help Centre FAQ
Automated RebalancingYes, but not as frequent. Rebalancing is initiated when the asset allocation deviates from the final goals.
Mobile AppsiOS and Android
PromotionsNone.
No promotion available at this time

PROS

✔ Good investor educational resources
✔ Automatic-rebalancing (Periodically)
✔ Daily tax-loss harvesting
✔ Low-expense ratio
✔ Good 5 days customer support
✔ Earn high interest rate on cash account
✔ Available tax-loss harvesting
✔ High portfolio mix
✔ Available through mobile apps and desktop

CONS

✖ No fractional shares investing
✖ No access to human financial advisors

WHY WE LIKE IT

I personally choose Wealthfront as my preferred robo-advisor of choice if I am to choose to invest using a robo-advisor. Since, I am a long term investors, often times I will have some cash lying in my warchest ready to invest when the time is right. And during this “waiting time” the cash that is set aside are earning a low interest rate of less than 1 percent which is hardly enough to fight inflation which is at around 3 to 5 percent.

With Wealthfront, investors can opt to place their cash into the “Wealthfront Cash Account” and use it as an emergency fund or act as an high interest rate saving account when the money is not used for investing.

Overall, I think Wealthfront makes long-term wealth building with investing easy, with options to highly customize your portfolio according to your current risk tolerance, and the ability to perform tax-loss harvesting, Wealthfront is a good choice for investors who want to have a higher control in their investing strategy, while having the option to take a more hands off approach in investing.

2. ACORNS

Best Hands-Off Robo-Advisor Platform

Acorns

4.6 out of 5.0

Acorns is an American financial technology (fin-tech) and financial service company specialized in micro-investing and robo-investing. With Acorns, investors are able to investing in fractional shares even with an amount of less than a dollar.

Targeting a specialized group of investors, Acorns let it’s users the opportunity to earn cashbacks while invest their spare change, transforming spenders into investors.

Depending on your investment goals, Acorns let you to invest in a diversified portfolios including ETFs (including Cryptocurrency linked ETFs), REITs and Bonds.

Best ForPeople who want a total hands-off approach to investing.
Fees$3 per month for personal account (Investment account + IRA + Checking Account)
$5 per month for family account (Investment account + IRA + Checking Account + investment account for kids)
Account Minimum$0
Customer Service7 Days from 5am to 7pm Pacific Time (Phone, Live Chat and Email)
Automatic RebalancingYes, automatically rebalance according to market fluctuations
Mobile AppsiOS and Android
PromotionsNone.
No promotion available at this time

PROS

✔ Extensive investor educational resources
✔ Cashback for selected retailers
✔ Automatic investment option for spare cash
✔ Automatic-rebalancing (Frequent)
✔ Low-expense ratio
✔ Transparent fee structure
✔ Good 7 days customer support
✔ Good portfolio mix
✔ Available through mobile apps and desktop

CONS

✖ High fee in comparison if you have small account balance of less than $10,000
✖ Lack of investor tools for more experienced investors
✖ No access to human financial advisors

WHY WE LIKE IT

Amount all the robo-advisor in this list, Acorns is the best hands-off robo-advisor for people who find it hard to save enough money to invest, their automatically save and invest with Round-Ups® feature is very innovative and especially great for people who have little control over their finance.

If you spend $3.25 on a cup of coffee, the amount will be round up to the next dollar, effectively making your transaction into $4 where $0.75 will be “spend” to invest in fractional shares in your Acorns investment account.

Overall, I think Acorns helps people who have low income to start investing, making the excuse of “not having enough money to invest” a past history, a great robo-advisor platform if you are not good at controlling your financial spending.

3. E*TRADE

Best Educational Robo-Advisor Platform For Diverse Portfolio

E*Trade from Morgan Stanley

4.3 out of 5.0

E*Trade is a financial subsidiary of Morgan Stanley, it is a financial service that offers electronic trading of Stocks, ETF, Bonds Commodities etc. With the introduction of their robo-advisor platform “Core Portfolios”, an automated investment management, their robo-advisor technology, they are able to customize personalized portfolio according to your long-term financial goals.

With “Core Portfolios” the diversified portfolios are handpicked by their team of experts according to the rate of return and the different risk tolerance levels. The robo-advisor will automatically updates your portfolio to stay on track to the goal even during the rapid change of the economic environment allowing you to have an hands off approach to investing.

Best ForAnyone who want to start learn investing with a highly diversify portfolio.
Fees0.30% management fees per year (approx.)
Account Minimum$500
Financial AdvisorYes, one of the few robo-advisor with financial advisor, but not dedicated professionals
Customer Service24/7 (Phone and Email)
Automatic RebalancingYes, automated rebalancing will be initiated when the your portfolio drift more than 10% from your investment goals.
Mobile AppsiOS and Android
PromotionsNone.
No promotion available at this time

PROS

✔ Extensive investor educational resources
✔ Wide range of investor tools
✔ Low-expense ratio
✔ Specialty portfolio options
✔ Good 24/7 customer support
✔ Access to human financial advisors
✔ Fractional shares is available
✔ Automatic-rebalancing (Frequent)
✔ Available through mobile apps and desktop

CONS

✖ No Tax-loss harvesting

WHY WE LIKE IT

I personally think E*Trade is the best overall robo-advisor platform for both beginner and experienced investors. Having a low expense ratio, E*Trade helps you to benefit from getting higher return on your investment over the long term.

What makes E*Trade special is that, you can expect to find extensive educational tools catered for newer investors helping you to learn and grow your financial knowledge as you invest. What’s more, their specialty portfolio choices let experienced investors to invest in industries where it is less accessible for normal investors.

Overall, I think E*Trade is the best recommendation for passive investing using robo-advisor.

How To Pick The Best Robo Advisor Right For You?

Picking the best robo-advisor that is right for you depends on what you want to achieve as an investor, your financial literacy in investing and ability to control your money. There are a few criteria you may want to consider when choosing the robo-advisor that can help you meet your financial goals.

Understanding Your Financial Goals

Different individuals have different idea on how they want investing to help them reach their financial goals. Each financial goals will prompt a different investment strategy which the robo-advisor can help you to increase your changes to succeed.

Examples of financial goals are:

  • Invest young so they can build a retirement fund when they reach the age of 60 or 70.
  • invest using their retirement pension so that it will generate more cash during their retirement.
  • Invest to have enough to cover their daily expenses and reach financial independence.
  • Invest to become wealthy enough to achieve financial freedom and not having the need to work in the future.
  • Invest to generate passive income to help them build wealth.
  • Invest to have enough to buy a house, a car or a big ticket item.
  • Invest because they need to find a way to save or invest before they spend all their money.

An investor who is in the 20s have very different investing goals from another who are in their 30s, or 50s. A person who is single will have very different investing goals from another who is married or having kids.

Every investors have different investing goals, and depending on your age, and stage of life, your investing goals changes as time goes. The better you are able to identify your most prioritized investing goal the better it is for you to know which robo-advisor platform will suit you.

Understanding Your Risk Tolerance Level

Risk tolerance level is the level of risk you are willing to take in order to gain an positive return from an investment. Higher the risk tolerance, the more willing you are in risking your capital for a potential higher return, whereas, a lower risk tolerance level will mean you will be reluctant to exchange the risk of losing your capital for potential of higher return.

Although the level of risk is not correlated to the level of return, as most of these “risk tolerance” is calculated using these few factors,

  • Beta of an investment, meaning the level of fluctuation of an investment.
  • Types of investment such as; securities, bonds, REITs, commodities, crypto assets, real estates etc.
  • Region where the investment is located such as; frontier markets, emerging markets and developed market.
  • Size of the companies where the portfolio consist such as; large-cap, mid-cap and small-cap.

These are just some of the many factors where professional analyst consider when determined the “risk level” of each investment. As a general guideline, the allocation of the risk tolerance level will be according to your different age and stage in life.

  • Young investors who have a higher level of risk tolerance may want to invest in higher risk investing products where they may see an double-digit return on their investment.
  • Investors with families who want to earn money through investing while having high level of assurance on the capital protection may have an moderate risk tolerance level.
  • Older investors or investors who are focusing on and capital protection may have a low risk tolerance and want to invest in safe and diverse portfolio.

Although a high-risk investment doesn’t mean it is a “bad” investment and a low-risk investment doesn’t mean it is a “good” investment, the different risk-tolerance level provides a generally good measure for investors to assess how they want to allocate their capital.

Compare Robo-Advisor According to Their Management Fee Structure

Robo-advisor are know to be one of the most affordable form of passive investing, and with the use of technology, robo-advisor are generally one of the cheapest in terms of their management fee.

A human advisor generally charge at least 1% of the assets under management (AUM) per year, in additional to retaining fees, hourly fee and per-plan fee. This can quickly added up to a few thousand dollars to tens of thousands of dollars in fees regardless of how much you earn or lost through the investment.

Robo-advisor on the other hand have more standardized approach to their fee structure gives you the opportunity to invest in a professionally managed portfolio with a fraction of the cost of a human advisor.

  • Account management fee (AUM)
  • Investment expense ratio

Robo-advisor typically charge around 0.25% to 0.50% per year for the assets under manage (AUM). While some may charge a flat rate according to the amount of assets you let the robo-advisor manage.

With a fee calculated to be approx. $5 a year for each $1,000 invested, this make robo-advisor some of the cheapest way for passive investing, while having the benefit of letting your investment managed by professional analyst which helps guide you towards your financial goals.

Portfolio Management And Performance

Each robo-advisor manage the portfolio differently, depending on the algorithm, each robo-advisor platforms designed their system according to there own modern portfolio theory (MPT) where it select investments in order to maximize the over returns.

Although most robo-advisor will get a similar rate of return through a diversified portfolio, certain robo-advisor platforms which offers a more diversified range of investment products may have an edge over average robo-advisor which only offers a limited range of investment.

  • An average robo-advisor may offer portfolio management of different market cap of stock such as; small-cap, mind-cap and large-cap stock.
  • An good robo-advisor may offer portfolio management of different market cap stocks as well as the option of bonds, REITs, TIPS, commodities and emerging markets.

Some robo-advisor may offers portfolio management that includes ETFs of crypto assets which personally I don’t think investing in crypto assets is my preferred style of investing as it is more of a form of forex trading. Nonetheless, buying crypto assets can be quite profitable.

Against popular believe you see on some renown investing related resources, different robo-advisor can have very different returns from another due to the different approach in their portfolio management.

Read Also



Similar Posts

What are your thoughts?