I wanted to create a distilled robo-advisor comparison for you to check out. Mainly because they are cool, but also because they are (potentially) a great step closer to financial democratization…which is also cool.
Before the internet, the cost of investing in the stock market was significant. If people wanted to invest, they would have to go through traditional brokerage firms, talk to “their guy (or gal)” and pay exorbitantly high commissions and fees for others to manage their money. In other words…not really for “everyone”.
With the internet came many significantly lower cost options for trading stocks and buying mutual funds on your own…a service also quickly adopted by the big brokerages. But even with that, if you wanted your money “managed” you likely would be paying high fees for personal service, or even via your mutual fund management team.
What are Robo Advisors?
Robo advisors are software platforms that use digital algorithms and automation to offer financial planning and investment services to investors without direct human supervision.
Typically, after people open accounts, the robo advisors will ask a series of questions and make recommendations about investment options based on the answers that are provided.
The best robo advisors offer ease of setup and use, portfolio management, automated investment, rebalancing, tax-loss harvesting, strong customer service, and low or no fees.
Robo advisors also provide an avenue for new investors to invest in the market, even if they don't have large amounts of money available to invest, while getting “intelligent” oversight.
So How Do Robo Advisors Work?
In reading this robo advisor comparison, you'll find they all offer robust online investment platforms and allow you access to your investment accounts wherever and whenever (it is 2020 after all).