Can These 7 New “Robo-Advisors” Help You Grow Your Money Automatically?
Investment advisors are expensive and often unreliable. Remember when the famed Jim Cramer advised his viewers to buy Lehman Brothers? It collapsed a week later.
One way to succeed as an investor is to invest in a diversified pool of companies, bonds, and ETFs. Still, selecting the right assets is not easy. Also, you might not have the time to do this.
This is where robo-advisors come in. These are companies that offer people low-cost methods to invest in multiple assets.
In this article, I review some of the leading robo-advisors that you can try.
Wealthfront
Started in 2008, Wealthfront was one of the earliest companies in this industry. The company offers a platform where people can grow their savings, plan for retirement, and even borrow with ease.
Today, the company has more than $7.5 billion in assets under management. It charges an annual fee of between 0.25% of total savings above $10,000. Funds below that are managed for free.
Also, the company’s PassivePlus platform offers clients services in tax-loss harvesting, direct indexing, and advanced indexing. All these are geared to helping you save money and realize gradual returns over the years.
The minimum amount to open an account is $500.
You can learn more about this account here.
Betterment
Betterment is another robo-advisor that I really like. Started in 2009, the company has grown to have more than $10 billion in assets under management.
The company invests in a diversified portfolio that includes stocks, bonds, mutual funds, and ETFs among others.
The company offers transparent pricing whereby, it charges a 0.25% for the digital account with minimum balance of $0 and 0.40% for the premium account which has a minimum balance of $100,000.
Using the two packages, users have access to personalized financial advice, low-cost globally diversified portfolios, automatic rebalancing, and advanced tax-saving strategies.
For more details about this account, follow this link.
Wealthsimple
Wealthsimple is a robo-advisor headquartered in Canada. It was started in 2014 and has about $1 billion in assets under management.
The company uses the modern portfolio theory to create risk-adjusted portfolios which are made up of nine assets like dividend stocks, Canadian stocks, emerging markets, short-term bonds, real estate, US stocks, high-yield bonds, and government bonds.
Users can select any of the three strategies: conservative, balanced, and growth based on their investment goals.
The company charges 0.5% management fee with $0 minimum. Also, the first $5,000 is managed for free.
You can learn more about this account here.
Acorns
Acorns is a robo-advisor with a different approach than those mentioned. The company aims to simplify the way you manage your spare change.
The company does this by rounding off your card transactions. For example, if you buy an item on Amazon for $36, the company will round off this figure to $40 and take the remaining $4 and invest it.
The company charges just $1 per month to offer the service if your account is less than $5,000. For accounts larger than this, the company charges just 0.25% of assets.
If you are a student with a valid .edu email address, the company does not charge you any fee.
The company invests in 6 asset classes including real estate, stocks, emerging markets, government bonds, small companies, and corporate bonds.
You can learn more about the account here.
Ellevest
Ellevest is a robo-advisor that brings a different angle to it. It caters to women and has more than $54 million in assets under management.
The financial industry is usually skewed against women. Most advisors are men who are usually more than 50 years old. Also, women have different goals than men.
Elllevest solves this by having a personal approach to robo investing by talking to the investor about her financial goals. Then, they recommend the amount of money the person should invest annually based on their goals and their income.
The account has no minimum balance, and you can withdraw at any time.
The company offers low fees of just 0.5% of total assets under management.
You can learn more about Ellevest here.
Schwab Intelligent Portfolios
Yes. The good, old Charles Schwab is in the robo-investing industry.
Shwab Intelligent Portfolios was started a few years ago and has managed to attract more than $10 billion in assets under management.
To get started, you just need to visit the website, fill a short questionnaire based on your goals, risk tolerance, and timeline. Then, the company builds a diversified portfolio of ETFs, stocks, commodities, and fixed income, and then you can monitor your money grow.
The company charges no fee for this account, but you need a minimum investment of $5,000.
You can learn more about the product here.
Fidelity Go
Yes. Even Fidelity is in this business.
Fidelity offers the Fidelity Go product that is similar to one offered by other robo-advisors.
To start, you just need to answer a few questions about your financial goals and duration of investments. Then, Fidelity will allocate the money to a combination of stocks, mutual funds, and short-term investments.
The minimum investment for this account is $5,000, and the annual advisory fee is 0.35%.
Please note.
The day-to-day management of your money is done by Geode Capital, a company that has partnered with Fidelity for 14 years.
You can learn more about this account here.
The truth is, the financial industry was not created to be fair. It is because of this unfairness that investment managers are able to make a fortune, even as their investors suffer losses.
These robo-advisors are changing this. By offering low-cost investing, they are bringing mainstream products to the mass market. And to date, they have succeeded.
However, the robo-advising industry is still a relatively young industry. These companies have only operated during a time when stocks and bonds have done well. They have not been tested by a recession.
Therefore, I recommend that instead of putting all your money in one advisor, you diversify into multiple companies.
