Robo Advisory in ETFs

Robo Advisory in ETFs

Robo Advisory is a great option to consider if you're just about to begin investing. But what is Robo Advisory exactly? What does it do, and how does it work?

In a nutshell, Robo Advisory in ETFs is an automated investing service or online advisor. Simply put, it's a tool that will help you by taking much of the legwork out of picking your target investment. By giving a few moments to answer your goal, you'll receive algorithm-based advice on the best investment option.

If you plan on getting this service, you may want to dig deeper into it, so you have a better grasp of its pros and cons.

Without further ado, let's get into it!

What is a Robo advisor?

A Robo-advisor is a digital platform providing automated, algorithm-driven financial planning services. It does so with only little to no human supervision.

A Robo-advisor would collect clients’ data about the financial situation and future goals. It usually gets done through an online survey and uses the data to advise. It will also automatically invest client assets.

The things you can enjoy with the best Robo-advisor are the following:

  • Easy account setup
  • Robust goal planning
  • Account services
  • Portfolio management
  • Security features
  • Attentive customer service
  • Comprehensive education
  • Low Fees

If you plan on using a Robo-advisor to invest, it would be best to look for the features stated above. This way, you'll get the most out of the Robo-advisor you choose.

Is Robo advisor a good investment?

A Robo-advisor would be a good investment option for entry-level investors due to its low fees. It also offers a low-cost threshold and ease of use. In a way, it's something to consider if you're new to investing.

If you have about $25,000 or less to invest, Robo-advisors may be an excellent option for you as you start.

Of course, if you're an experienced investor and you know your way around things, you can feel a bit limited with it.

Robo-advisors may not have the flexibility you can enjoy if you plan on investing on your own.

Can you lose money with Robo advisors?

Like all other investments, you also face the risk of losing money with Robo-advisors.

The platform provides exposure to the broad stock market. However, even with rebalancing and tax-loss harvesting, you can still lose money.

As always, it would be best to do further research to make sure you understand the risk when it comes to investing through Robo-advisors.

Which Robo advisor is best?

If you have already decided to invest with Robo-advisors’ help, your next task would be deciding which to pick.

Here's a rundown of the best Robo-advisors you can consider.

  • Wealthfront (Best Overall and Best for Goal Setting)
  • Interactive Advisors (Best for Socially Responsible Investing and Best for Portfolio Construction)
  • Betterment (Best for Beginners and Best for Cash Management)
  • Personal Capital (Best for Portfolio Management)
  • M1 Finance (Best for Sophisticated Investors and Best for Low Costs)
  • Merrill Guided Investing (Best for Education)
  • E*TRADE Core Portfolios (Best for Mobile)

As always, the choice of Robo-advisor would depend on your preferences. Before picking one, it would be best if you already have a set of expectations and goals to make choosing easier.

Are Robo Advisors good for beginners?

Robo-advisors are good for beginners to the extent that they make the ideal starting option.

These platforms are ideal for beginners because they take a big part of the legwork. Thus, people who invest with Robo-advisors do less work researching and deciding since the platforms do it for them.

The usual Robo-advisor would simply need a survey form or questions to determine your goals and status. Afterward, its algorithm will give you advice and recommend actions to take.

Which Robo investor has the best returns?

Each Robo-investor varies in performance, such as returns. While it's only a portion of the fundamental factor, it's still something to look into as you go. Below is a rundown of some of the Robo-advisors with the best return rates.

  • Acorns 3.49%
  • Ally Financial 3.22%
  • Axos Invest 4.38%
  • Betterment 1.80%
  • E-Trade 3.54%
  • Ellevest 2.90%
  • Fidelity Go 3.88%
  • FutureAdvisor 3.34%
  • Merrill Edge 2.83%
  • Personal Capital 1.72%
  • Schwab 0.81%
  • SigFig 4.71%
  • SoFi 4.03%
  • TD Ameritrade 3.62%
  • TIAA 4.20%
  • Vanguard 3.42%
  • Wealthfront 2.77%
  • Wealthsimple 3.20%
  • Wells Fargo 3.52%
  • Zacks Advantage 3.49%

As always, the choice of Robo-advisor would depend on your preferences.

What is the disadvantage of using a Robo advisor?

While Robo-advisors are low-cost and often don't have minimum balance requirements, they also have downsides you need to know.

For instance, Robo-advisors do not offer many options for flexibility. Thus, they tend to throw mud in the face of traditional advisory services. Further, they lack human interaction if you seek one.

In general, this platform is not an excellent option for people who want to do the legwork and those who need human interaction.

Should I use a financial advisor or a Robo advisor?

Choosing between a financial advisor or a Robo-advisor can be difficult. However, it would depend on your preferences when it comes to investing.

For instance, Robo-advisers can automate investing strategies. Such strategies optimize the ideal asset class weights for a given risk preference.

On the other hand, financial advisors are often more than investment managers. They can be communicators, educators, planners, and even coaches to clients.

If you think you would want a more personal touch of assistance, you can opt for the latter. However, if you want a more strategic approach and advice, you can opt for the former.

How much should I invest in Robo advisor?

Robo-advisors would give you minimum investment requirements. Some may ask about $5,000 or more. However, many platforms have account minimums of $500 or even lesser.

If you're a beginner and you plan to invest below $25,000, Robo-advisors can be a great starting point for you.


Robo-advisors offer an excellent solution for people who want to start investing but have no idea where to start. After answering a few surveys and determining your goals, you'll have smart advice from an algorithm. Further, you can all enjoy its benefits without getting hurt by fees.

As always, Robo-advisors are tools to help you. In the end, it's still in you to decide whether it fits your goals or not.

Published: 02/17/2021
Robo Advisory in ETFs
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