Robo-advisors are a relatively new phenomenon. Until a few years ago, if you wanted to put your investment strategy on autopilot, you had to hire a financial adviser to invest on your behalf. And in most cases, you would pay an annual management fee equal to 1% or more of your assets in exchange for their services. In fact, most investors who automate still do it this way.
In this guide, we'll discuss some of the things to know before opening your first investment account with a robo-advisor. To start, here's our list of picks for the best robo-advisors for beginners to achieve their investment goals.
2 Featured Picks From Our Best Robo-Advisors for Beginners
There are a lot of options to compare. It can be overwhelming! If you're looking for a place to start, here are some robo-advisors our experts recommend for beginners and why they like them:
- SoFi Automated Investing: Fantastic robo-investing platform for keeping all your finances in one place
- M1 Finance: Standout mobile investing platform
Our 4 Best Robo-Advisors for Beginners for March 2024
Broker/Advisor | Best For | Commissions | Next Steps | |
---|---|---|---|---|
2024 Award Winner SoFi Automated Investing Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | Best For: Diversified investing and banking needs | Commission: $0 per trade, expense ratio 0.03%-0.08% | Read Review |
M1 Finance Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | Best For: Mobile investing | Commission: $0 commissions and no management fee. M1 Plus membership costs $3 per month. | Open Account for M1 Finance |
2024 Award Winner Wealthfront Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | Best For: Diverse account types | Commission: $0 per trade, management fee 0.25% | Read Review |
2024 Award Winner Betterment Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | Rating image, 4.5 out of 5 stars. 4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | Best For: Simple-to-use platform | Commission: $0 per trade, management fee of $4 per month or 0.25% per year | Read Review |
How to pick the best robo-advisor for beginners
The bottom line is that while we feel our list above represents the best robo-advisors for beginners, the best choice for you depends on the features that matter to you the most.
For example, if you're planning to invest a large sum of money in a taxable account, you may want to narrow your search to robo-advisors that offer tax-loss harvesting. Or, if you want professional help with other aspects of financial planning beyond your investment portfolio, such as budgeting, you could look for a robo-advisor that has a human financial advisor you can talk to.
In short, start with our list, and then narrow it down based on your personal investing situation. If you want to be a bit more hands on as you start your journey as an investor, check out our list of the Best Online Stock Brokers for Beginners to learn more.
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Compare robo-advisors for beginners
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- Diversified investing and banking needs:SoFi Automated Investing
- Mobile investing:M1 Finance
- Diverse account types:Wealthfront
- Simple-to-use platform:Betterment
Ratings Methodology
2024 Award Winner
Our Rating:
Rating image, 4.5 out of 5 stars.
4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
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Bottom Line
SoFi Automated Investing has no management fee and offers free access to Certified Financial Planners. It automatically rebalances portfolios and has no minimum investment, and the app is very easy to use. With a suite of banking and lending products, SoFi is ideal for people who want to keep their finances in one place.
Fees:
$0 per trade, expense ratio 0.03%-0.08%
Read Review
Our Rating:
Rating image, 4.5 out of 5 stars.
4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
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Bottom Line
M1 Finance's robo-advisor integrates with the company's checking accounts and offers customers a line of credit backed by their investments. M1 is one of the only robo-advisors with no management fees and even offers a linked debit card with reimbursed ATM fees.
Read Full Review
Fees:
$0 commissions and no management fee. M1 Plus membership costs $3 per month.
Account Minimum:
$100
Open Account for M1 Finance
OnM1 Finance'sSecure Website.
2024 Award Winner
Our Rating:
Rating image, 4.5 out of 5 stars.
4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Bottom Line
Wealthfront has a $500 account minimum, but it has a lot of features that make it a good fit for beginners. Its management fee is on the lower end of the spectrum, especially for robo-advisors that offer tax-loss harvesting to all customers.
Fees:
$0 per trade, management fee 0.25%
Account Minimum:
$500
Read Review
2024 Award Winner
Our Rating:
Rating image, 4.5 out of 5 stars.
4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Bottom Line
Betterment has a reasonable management fee and no minimum investment requirement. It offers a no-fee checking account and interest-bearing cash management account, plus tax-loss harvesting for accounts of all sizes. It also has the highest rated mobile app we've seen.
Fees:
$0 per trade, management fee of $4 per month or 0.25% per year
Account Minimum:
$0
Read Review
Editor's Note: TD Ameritrade is transitioning to Charles Schwab
TD Ameritrade has been acquired by Charles Schwab, and the company expects all accounts to be transitioned by the end of 2024. We've removed TD Ameritrade from our best-of lists to align with this development. Here at The Ascent, you can trust that we're constantly evaluating our top broker picks to bring you current recommendations.
What to consider when choosing a beginner-friendly robo-advisor
A lower fee is better than a higher one, all other things being equal. But that's not the only factor to consider. Here are some other features that the best robo-advisor for beginners will have.
Low deposit requirements
Some robo-advisors will let you get started with $1, while others have minimum initial investment requirements of $500 or more. If you're just starting out and don't have a ton of money to invest right away, this can be a major factor to consider.
Human advisor access
It's rare to find a robo-advisor that gives all clients access to human financial planners, especially without any additional charge, but this feature does exist. Even if you have to pay for their advice, it can be a valuable feature if your robo-advisor has a staff of Certified Financial Planner® professionals who can offer you guidance.
Educational resources
Investing is only one part of a solid financial plan. Good robo-advisors offer lots of resources to help you master the art of budgeting, save for college expenses, buy your first home, learn about the stock market, and much more to help you achieve all of your financial goals.
Easy-to-use platform
Most robo-advisors are relatively easy to navigate, just by the nature of their product. But it could be worth reading reviews of their apps or websites to see which are the most user-friendly.
Learn more: Best Robo-Advisors
Customer support
This is different from human advisor access. Not all robo-advisors offer the ability to simply pick up the phone and talk with a representative if you have a question about your account. When picking the right robo-advisor for you, consider what level of customer service you're most comfortable with. Many offer phone support, live chat, social media help, and help through email.
Integrates with other accounts
Robo-advisors offered by the best stock brokers can often be paired with a self-directed investment account if you want to choose some of your own investments. Those operated by banks can seamlessly integrate with checking and savings accounts. These can be major advantages, especially if you like to keep all of your finances in one place.
Automatic rebalancing
Most robo-advisors offer this. Automatic rebalancing essentially means that the robo-advisor will re-evaluate your portfolio every so often to make sure it is still aligned with your goals and risk tolerance. For example, if the stock market performs exceptionally well, a robo-advisor with automatic rebalancing might move some of your money out of stocks and into fixed-income funds to maintain your target asset allocation.
Tax-loss harvesting
This is more important for high-balance accounts, but robo-advisors that offer tax-loss harvesting will make strategic moves in client accounts that maintain the same investment goals while simultaneously maximizing the tax efficiency of the portfolio. It's a method that can help people pay less taxes.
What does a robo-advisor do?
A robo-advisor, which is also referred to as an automated investing platform, aims to do essentially the same thing as a traditional financial advisor, but without any direct human involvement.
These services create an appropriate investment portfolio based on factors such as your:
- Age
- Investment goals, such as retirement
- Risk tolerance
And they will automatically adjust your portfolio based on these over time. Because there isn't an advisor's salary to pay, robo-advisors charge a fraction of the management fee of traditional financial advisors.
By nature, most robo-advisors are appropriate for beginners. But there are a few things to look for that makes a robo-advisor a great fit for beginning investors.
Here are a few things you'll find with the best robo-investors for beginners:
- A low minimum investment requirement
- Educational tools
- Live human support if needed
How do the best robo-advisors for beginners work?
All robo advisors automate the construction of an investment portfolio. You'll open an account following the general procedure outlined in the previous section, and the robo-advisor will invest it in the stock market and fixed-income instruments allocating it in investment funds, usually in the form of ETFs. These are usually index funds, but not always. (An index fund is a passively managed mutual fund).
In exchange for their automated investing services, robo-advisors charge a management fee. We'll get into the fees in more depth a little later, but the key takeaway is this: Because robo-advisors automate most, if not all, investing tasks, the fees are significantly lower than human financial advisors typically charge.
What fees are charged by robo-investors?
Most robo-advisors charge a management fee in the 0.25% ballpark for their services, but fees can range from 0% to 0.40% for the top firms. Even on the higher end, this is significantly more cost effective than the 1% average management fee charged by financial planners for advice and investment guidance.
Just like with human financial advisors, robo-advisor management fees are generally based on a percentage of assets in your portfolio and are assessed annually.
For example, a 0.25% management fee means that for every $1,000 you have in your robo-advisor account, you'll pay $2.50 per year in management expenses.
It's also important to mention that the individual investment funds your robo-advisor uses typically have their own annual management fees (known as expense ratios). These are usually quite low, but they do add to the total cost of your investments. It's still usually much cheaper to use a robo-advisor -- just be aware that an advertised 0.25% management fee can be 0.30%-0.35% when including the expenses of the individual funds your money is invested in.
How to open a robo-advisor account
The exact process for opening a robo-advisor account varies from company to company. But the general process is the same:
- Fill out an account application: This includes information about the type of account you want to open (for example, individual, retirement, or joint), and identifying information about yourself.
- Answer some questions: This helps the robo-advisor determine how to best invest your money. Questions tend to be about your age, investment objectives (such as saving for college or retiring with $1 million), and how much risk you're comfortable with.
- Make a deposit: Or better yet, set up an automatic deposit. Generally speaking, the best way to make sure you meet savings goals of any kind is to automate the process as much as possible. The easiest way to do this with most robo-advisors is to link your bank account, but you may also be able to mail a check, wire money, or transfer assets from an existing investment account, such as a former employer's 401(k).
That's basically it. The robo-advisor will then use the money you contribute to construct an appropriate portfolio of investment funds for you.
The Ascent's best robo advisors
You could be on the path to financial independence with just a few clicks. Our fully-vetted picks for the best robo advisors offer simple-to-use services that automate your investing needs. Learn more about our top picks by clicking below.
Best robo advisors
FAQs
Robo-advisors allow investors to put their money to work in a diverse portfolio of stocks and bonds, which it usually does through exchange-traded funds, or ETFs. The exact funds vary by robo-advisor, with most choosing to offer passive, low-cost index funds.
Some robo-advisors are more user-friendly than others. As a general rule, these types of companies tend to have the easiest platforms to use:
- Companies whose primary business is operating a robo-advisor: Such as Betterment and Wealthfront
- Companies that are tech-focused and designed for simplicity: Such as SoFi
By nature, all robo-advisors should be easy to use for most investors. The general idea behind robo-advisors is that they allow people who don't have the time, knowledge, or desire to choose their own investments to put their strategy on autopilot.
Our Brokerages Experts
By:Matt Frankel, CFP®
Writer, Analyst
Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice for The Ascent and its parent company The Motley Fool, with more than 4,500 published articles and a 2017 SABEW Best in Business award. Matt writes a weekly investment column ("Ask a Fool") that is syndicated in USA Today, and his work has been regularly featured on CNBC, Fox Business, MSN Money, and many other major outlets. He’s a graduate of the University of South Carolina and Nova Southeastern University, and holds a graduate certificate in financial planning from Florida State University.
Fact CheckedAshley Maready
Writer and Editor
Ashley Maready is a former history museum professional who made the leap to digital content writing and editing in 2021. She has a BA in History and Philosophy from Hood College and an MA in Applied History from Shippensburg University. Ashley loves creating content for the public and learning new things so she can teach others, whether it's information about salt mining, canal mules, or personal finance.