You’d like to be a confident investor, but you’re overwhelmed. And why wouldn’t you be?

In a given year, you see thousands of advertisements, all promising the best way to invest. And if you go it alone, you have to choose among tens of thousands of investment funds.

I’m skeptical of studies that suggest Millennials are scared of the stock market. But I do believe it intimidates us. In robo-advisors, technology may have found the answer.

The best robo-advisors offer an affordable alternative to picking stocks or mutual funds on your own or shelling over a lot of money to a wealth manager to invest your money for you.

They’re a responsible way to take hold of your financial situation without needing to understand the ins and outs of stocks, bonds, ETFs, and more.

The best robo-advisors overview

Robo-Advisor Best For
M1 Finance Automated and/or hands-on investing
Betterment Simple platform, competitive pricing
Wealthfront Strong financial planning component
Ally Invest Easy application process
Acorns Beginner savers and investors
Wealthsimple ETF investors
Personal Capital High net-worth, access to human advisors
FutureAdvisor Free investing resources
Vanguard Mutual fund investors

The best robo-advisors for new investors compared

Here at Money Under 30, we frequently herald the benefits of starting to invest as soon as you can, even in amounts as little as $50. Traditionally, however, investing has been a losing proposition until you’ve amassed a few thousand dollars, simply because trading and minimum balance fees would eat any potential gains on smaller amounts.

Some automatically-managed investment accounts are changing that by offering low minimums and low (or even non-existent) fees on small portfolios.

M1 Finance

M1 Finance offers the best of both worlds—a simplified robo-advisor platform with the capability of selecting your own individual stocks. Get a pre-made portfolio, customize your own or do a bit of both.

Other M1 features:

  • M1 is completely free.
  • Using a methodology they call “Pies” and “slices”, you can pick and choose a variety of investments and the percentage of your portfolio you want it to make up.
  • M1 has a stunning app.

Who is M1 for?

M1 Finance is great for anyone who wants a simplified investment experience, but also wants the option to choose at least some of their investments.

Open an account with M1 Finance or read our full M1 Finance review.

Betterment

Investing really doesn’t get easier than Betterment.

I’ve been a fan of Betterment for years because of its simplicity and it’s many features.

Betterment features

  • Customers get Betterment’s core product AND human access to their team of licensed financial experts and CFPs via the mobile messaging interface.
  • Open sub-accounts that use different portfolios for reaching multiple goals.

Betterment’s pricing:

  • Digital plan charges 0.25 percent annually. You’ll have access to a full suite of services as well as mobile messaging to an advisor.
  • Premium plan charges 0.40 percent annually if you have a balance over 100k. It includes all features of the Digital plan, plus unlimited calls to Betterment’s team of CFPs.

Open an account with Betterment or read our full review of Betterment.

Wealthfront

Wealthfront isn’t just one of the largest robo-advisors in the U.S., it also tops our list of best robo-advisors for new investors along with Betterment.

Many robo-investing competitors charge fees that can be especially burdensome to new investors with small balances.

Wealthfront fees:

  • $500 minimum investment and its fee is 0.25 percent fixed a year on portfolios over $5,000—a very competitive fee structure.
  • Free financial planning. This service can help you determine what kind of home you can afford based on your finances, figure out when you can retire, and plan for your kids college expenses.

Open an account with Wealthfront or read our full Wealthfront review.

Ally Invest

Ally Invest offers two options for investing: self-directed trading for hands-on investing and also managed portfolios. The managed portfolios are automated investing similar to robo-advisors where they recommend and manage a professionally designed portfolio based on your personal financial goals, risk level, and timeframe for investing.

Ally offers 24/7 support where you can call, chat or email around the clock with a ‘real person’ offering assistance.

Ally’s fees:

  • Minimum investment of $100 for managed portfolios
  • For self-directed trading, no commission fee on U.S. listed stocks and ETFs
  • There are no advisory fees, annual charges, or rebalancing fees

Learn more about Ally Invest.

Acorns

Acorns is an app-based robo-advisor that makes it easy to invest amounts as little as $5 a month and is free for investors under 24 and students with a valid .edu email address.

Choosing a portfolio is simple; Acorns only gives you five choices. You can also choose to link a credit or debit card, round up purchases, and invest the difference.

Acorns pricing:

  • 0.25 percent a year on accounts over $5,000.
  • Under $5,000 is $1 a month.

If you can take advantage of the fact that Acorns is free for students, it’s a great choice for starting to invest small amounts. Just make sure you can save $5,000 before you graduate.

Open an account with Acorns or read our full Acorns review.

Wealthsimple

Wealthsimple is a simple automatic investing platform. They make sure that you have a balanced portfolio of ETFs, which are low-fee funds. ETFs help make sure you’re invested across the whole stock market.

Wealthsimple also offers socially responsible investing options.

Wealthsimple fees:

  • No trading, account transfer, or rebalancing fees.
  • 0.5 percent fee for portfolios of $0-$100,000.
  • Any portfolio larger than that has a fee of 0.4 percent.

Open an account with Wealthsimple or read our full Wealthsimple review.

Wealthsimple Disclaimer: MoneyUnder30 has entered into a referral and advertising arrangement with Wealthsimple US, LTD and receives compensation when you open an account or for certain qualifying activity which may include clicking links. You will not be charged a fee for this referral and Wealthsimple and MoneyUnder30 are not related entities. It is a requirement to disclose that we earn these fees and also provide you with the latest Wealthsimple ADV brochure so you can learn more about them before opening an account.

If you already have $5,000, $10,000 or $25,000 to invest, there are some other automatically-managed investment accounts to consider.

Personal Capital

Personal Capital is a bit different than the robo-advisors above as it offers a hybrid approach: Investors get award-winning online tools to gain deep insights about their portfolios but also personal attention from licensed financial advisors.

The great thing about Personal Capital is the online tools are completely free to use (and I recommend you do—they’ll help you gain a deeper understanding of your existing investments). Try it here.

Personal Capital fees:

  • 0.89 percent a year on accounts up to $1 million.
  • Lower fees are available for clients with $3 million or more.
  • There is a $25,000 minimum required for advisory services.

Learn more about Personal Capital or read our full Personal Capital review.

FutureAdvisor

As an automatically-managed investment account, FutureAdvisor’s flat fee of 0.5 percent is higher than the competition, but the company offers a couple of features others don’t.

First, while FutureAdvisor portfolios are automatically managed, clients can call a real advisor with questions.

Second, FutureAdvisor offers everybody free tools to help you manage your 401(k), something other robo-advisors can’t do. At FutureAdvisor, anybody can create an account and get investment recommendations—you only have to pay if you want FutureAdvisor to implement those recommendations automatically on your behalf.

Learn more about FutureAdvisor.

Vanguard Personal Advisor Services

 

Vanguard is the world’s largest mutual fund company and is responsible for

making low-cost, passive investing the trend it is today. (In fact, many of the robo-advisors mentioned above construct their portfolios using mostly Vanguard funds).

Earlier in 2015, Vanguard got into the robo-advisor game with its Vanguard Personal Advisor Services. Like Personal Capital, Vanguard Personal Advisor Services is a hybrid approach in which you’ll initially and occasionally work with a licensed advisor to define your goals and balance your portfolio.

Vanguard fees:

  • $50,000 minimum portfolio (the largest of the robo-advisors mentioned here).
  • An annual fee of 0.30 percent a year (that’s competitive with fully automatic accounts but includes personalized advice from a human being).

Learn more about Vanguard Personal Advisor Services.

Summary of the best robo-advisors

Robo-Advisor Minimum Investment Required Fees Unique Features
M1 Finance $100 None Pick and choose investments and the percentage of your portfolio you want it to make up, or let M1 make a portfolio for you
Betterment Betterment Digital has no minimum Betterment Digital: 0.25%
Betterment Premium 0.40%
Ability to open sub-accounts that use different portfolios for reaching multiple goals
Wealthfront $500 0.25% annual fee Free financial planning
They offer a Cash Account with a high APY
Ally Invest $100 $0.00 No advisory fees, annual charges, or rebalancing fees
Acorns $5 $1-$3/month depending on the package you choose Acorns is free for students (up until age 24)
Wealthsimple None 0.50% for accounts of $99,999 or less
0.40% for accounts over $100,000
Wealthsimple also offers Wealthsimple Save, which offers a 1.93% yield
Personal Capital Free financial tools; $100,000 minimum for access to a financial advisor 0.89% for up to $1 million Free financial tools and app
FutureAdvisor $5,000 0.5% annual fee Free tools to help you manage your 401(k)
Vanguard $3,000 for most Vanguard funds; Vanguard Personal Advisor Services requires a $50,000 minimum portfolio $20 annual fee for brokerage and mutual-fund-only accounts Vanguard has the longest history of any of these options, and their founder created mutual funds

What is a robo-advisor?

A robo-advisor is a diversified investment account that is automatically managed by a computer algorithm (as opposed to a human money manager).

To an investor, how robo-advisors work is actually quite simple:

  • You choose a goal and how much to invest.
  • An algorithm chooses the right asset allocation to get you there using a collection of low-cost mutual funds or exchange-traded funds (ETFs).
  • The computers keep your portfolio balanced automatically over time and whenever you invest more money.
  • For this service, the robo-advisors collect a modest fee that’s between a quarter and half of what you’d pay to an individual wealth manager.

Why should (or shouldn’t) you use a robo-advisor

Robo-advisors are great for beginners

If you’re new to investing, and aren’t afraid of a few fees, robo-advisors are a great option. Why? Well, robo-advisors do all the investing work for you.

Most robo-advisors even help you figure out exactly what your investing goals are and then they’ll take it from there.

Setting up an account couldn’t be easier

With a robo-advisor, you’ll have easy access to your account through websites and mobile apps.

This also makes setting up an account extremely easy (as long as you are phone savvy).

You still have to pay fees

While robo-advisors may seem like a no-brainer, keep in mind that robo-advisors still have fees that can add up over time.

To give you a sense of how robo-advisors compare to other popular types of investing (index funds, target date funds, and financial advisors), here’s a handy table:

Years Portfolio Value* Robo-advisor Index Fund Target Date Fund Financial Advisor
5 31185 $30,989 (-$196) $31,146 (-$39) $31,076 (-$109) $29,651 (-$1,534)
10 70986 $70,072 (-$914) $70,803 (-$183) $70,473 (-$513) $64,025 (-$6,961)
20 186615 $181,524 (-$5,091) $185,584 (-$1,031) $183,744 (-$2,871) $150,068 (-$36,547)
30 374964 $358,790 (-$16,174) $371,663 (-$3,301) $365,806 (-$9,158) $265,704 (-$109,260)
40 681763 $640,737 (-$41,026) $673,326 (-$8,437) $658,436 (-$23,327) $421,109 (-$260,654)

Pros and cons of investing with robo-advisors

Pros

  • Automated investing
  • Easy to use
  • Low fees (on most)
  • Typically they offer a low minimum investment

Cons

  • Still more expensive than some funds
  • No in-person advice
  • Limiting if you’re a more advanced investor

Read more

  • Robo-Advisors Vs. Human Financial Advisors: Which Is Right For You?
  • 5 Easy Ways To Begin Investing With Little Money