Why You Need Automated Investing (+ 4 Apps That Get It Done) was written for Playlouder by Kerry Leigh Harrison. Kerry has over 11+ years of experience as a content writer. She graduated from university with a First Class Honours Degree in Multimedia Journalism. In her spare time, she enjoys attending sports and music events. Please note that contributing opinions are that of the author. They are not always in strict alignment with my own opinions. –Joe.
The robo-advisors segment is believed to reach a market volume of $4.53 trillion in 2027, with a projected growth rate of 14.11% over the next five years. This statistic shows just how much automated investing is thriving!
In this blog post, we’ll look at automated investing in further detail, revealing its benefits and the best automated investing apps on the market today.
What is automated investing
Automated investing utilizes computer algorithms to choose and trade exchange-traded funds (ETFs), stocks, and other assets without a human, financial advisor overseeing it. These services are often referred to as robo-advisors, as mentioned above.
There are several ways that automated investing has revolutionized the financial advisory market, but primarily, the middleman (aka human) has been eliminated.
When investors sign up for an automated investing tool, they typically begin by answering some questions. This survey gathers data about the investor’s goals, risk tolerance, and financial situation.
The automated tool then uses this information to recommend different investments. Automated investing involves choosing different investments but also buying and selling based on predetermined rules that you’ve set.
How can you benefit from automated investing?
There are 3 main reasons why you should automate investing;
- It reduces emotion
- It makes investing a habit
- The cost is less than a traditional money manager
Let’s take a look at a couple of these benefits in further detail…
It takes your emotions out of investing
Automation means you can keep your investments up during times of panic and uncertainty. If you were to manage investments manually, you might be too conservative during these moments.
It’s easy to let your heart rule your head, as you may start to panic, or you can end up chasing losses. Emotions are taken out of the equation when you use an automatic investing tool, which ensures you always make the most appropriate investment decisions based on your strategy.
It ensures your investing becomes a habit
If you’re in control of your investments to the extent that you make them manually, you may not be consistent in your approach. Most people find that they don’t invest the same amount every month when using this strategy.
This is because consumerism and its temptations may win out over your investing goals. Some months you may not even have any money left for investing at all, while in other months, you may invest less than intended.
However, if your investments are automated, and you have a predefined amount you’ll invest every month, it becomes a habit. You won’t continually keep putting it to the bottom of your list.
Furthermore, if cash flow becomes a concern, you’ll be more likely to cut back on costs instead of on your automated investments.
What are the best automated investing apps?
Now that you know why it makes sense to automate the investing process, let’s take a look at some of the best automated investing apps and services. Here's s a quick overview of the 4 top robo-advisor companies that will get the job done.
First up, we have Betterment, which is a pioneer in the automated investing market. The Betterment Portfolio consists of diversified, low-cost ETFs. You cannot invest in individual funds or purchase individual stocks.
The minimum balance and deposit requirements differ based on the chosen investment vehicle. For example, you’ll need a balance of at least $100,000 for premium investing. However, you don’t need a minimum account balance for standard investments. At the same time, there is an ACH deposit minimum of $10.
Fees will also differ based on the above criteria. For example, there is an 0.40% annual fee for premium investing. There is a 0.25% yearly account fee for digital investing, so check out all the fees beforehand.
There are lots of benefits associated with Betterment, including the following:
- There are advanced features, including socially responsible investing, tax-saving strategies, and automatic rebalancing
- You can sync external retirement accounts to your retirement goal on Betterment, ensuring all accounts are in one place
- Setting up an account is quick and easy
- You can assign certain long- and short-term investing goals to each portfolio and invest utilizing various strategies
- You can customize user portfolios based on risk tolerance, timeline, and financial goals
- No transfer or trade fees
If you’re looking for a good app for automated micro-investing, Acorns is certainly a worthy contender. Micro-investing means investing small amounts of money consistently into the market over a period of time, meaning your contributions add up as time goes on. Many newbies like to go down this route when they start investing.
This financial app, in particular, gives you access to IRAs, robo-advisors, and even a checking account. Investment options include diversified ETFs, which include over 7,000 different bonds and stocks.
You don’t need a specific sum of money to open an account. However, at least $5 is required to start investing. Minimum balance and deposit requirements can then vary based on the investment vehicle chosen.
The same goes for the fees you’ll need to pay. Spend some time taking a look at the different monthly plans on offer, including:
- Personal, $3 per month
- Family, $5 per month
The benefits associated with Acorns are as follows:
- Access to educational videos and articles about investing
- Acorns Sustainable Portfolios are available for ESG investing
- You can automatically rebalance your portfolio
- User portfolios can be customized based on their risk tolerance, timeline, and financial goals
- You can invest your spare change from your daily purchases
- There’s no minimum requirement in terms of the money you need to deposit to open an account and get started
3. Fidelity Go
Next up in our robo-advisor comparison is Fidelity Go, which was launched by Fidelity in 2016 and is aimed at young and newer investors. It is the introductory account in Fidelity's suite of managed investment options and is all digital.
Opening an account is pretty simple, and Fidelity Go recently dropped its minimum account balance from $5,000 to $0 and doesn't even charge fees on accounts of 25,000 or less. Here are some of the other features of Fidelity Go:
- Open an account for free
- Minimum $10 balance to start investing
- Only able to invest in proprietary Fidelity mutual funds
- Can track a single goal
- Fees are 0.35% annually
- Offers individual and joint taxable accounts, traditional IRAs, Roth IRAs, and rollover IRAs
While not technically a robo-advisor, it does allow users to set up recurring investments, including investing with fractional shares of stocks. You can also easily make cryptocurrency, ETF, options, and stock trades.
Your chosen investment vehicle will dictate your fees and any minimum deposit and balance requirements. However, no minimum is required to start investing or open an account with Robinhood.
There’s also a great bonus deal. When you link your bank account and fulfill the promotional conditions, Robinhood will add one share of free stock to your brokerage account.
Some of the main benefits associated with Robinhood include:
- There are many different accessible learning tools
- Active traders can choose from a wide range of investment options
- Free stock welcome bonus
- Commission-free trading
- You don’t have to fulfill any deposit requirements to open an account or start investing
Take your investing efforts to new heights with automated investing apps
So there you have it: some of the best automated investing apps on the market today. If you want to make your investing efforts more efficient and successful, these apps will help you do that!
Of course, you must take the time to assess the apps and their features carefully, as it’s all about choosing a tool that best aligns with your goals and investment objectives.