The rise of investing robo-advisors

understanding robo-advisors

Robots and artificial intelligence are the hot topics for technology circles and scientific researchers. Robots in some form are already a huge part of our lives, but who hasn’t dreamed of a world like the famous cartoon The Jetsons, where we all could have a robot maid to do our cooking and cleaning? While we might not be that far in our technology, we do have robots serving as financial advisors.

Thanks to the Internet, a new technique has entered in the investing world, and it’s making a splash with new and experienced investors. The days of hiring an investment adviser could be a thing of the past.

Okay, these “robo-advisors” may not be exactly what you are thinking. They aren’t an actual robot sitting behind a desk, they are more of an online tool that can handle your investing for you, and if you’re looking for a new way to diversify your portfolio, they could be perfect for you.

Robo-advisors use algorithms to invest your money based on your risk-tolerance and financial goals. They usually have much smaller fees than using a human adviser.

The Big Robo-Advisors on the Block


The idea of using these automated online tools are still pretty new to the financial world, but there are a few websites that are becoming popular with investors. Sites like Betterment, Personal Capital, Wealthfront, Motif Investing, and now even E*TRADE have changed the game with online investing, and investing in general.

So, if you’re looking to start using automated investing with one of these robo-advisors, how do you start? Don’t worry, it’s simple. For example, to start investing with Betterment all you have to do is create a profile, pick which kind of investing account you want to open (Roth IRA, Traditional IRA, or SEP IRA), set your financial goals, and then verify all of you basic information and financial information. After that, you can sit back and watch as the fancy algorithms make you money.

Just about all of the websites have a similar format of setting up an account and setting your investment goals. But there are a few differences in the online auto-investors. For example, Personal Capital has actual advisors available if you need them, while Betterment doesn’t. Wealthfront has a $500 account minimum, and Betterment doesn’t have any at all. There are unique qualities of each robo-advisor site, but all of them are great for diversifying your portfolio with a  few simple clicks.

These robo-advisors have changed the way that individuals look at investing, and a lot of brokerage firms are taking notice. As DIY investing becomes easier and easier, these firms are starting their automated programs to keep up with the new trend.

Thinking of Using a Robo-Advisor?

Robo-investing has only been around for less than a decade, but the industry is already holding more than $50 billion and continues to gain popularity. These websites are great for both new investors and investing pros, but they aren’t perfect for everyone. If you’re the type of person that likes to have full control of your finances and how your investments are being handled, you should probably keep looking for another venue.

For anyone that is comfortable having another person (or robot) handle a portion of your finances, these websites are easy to use and highly effective. Or maybe you’re an investor that is tired of paying the high fees of a professional investment advisor. With most of the robo-advisors, you’ll pay half the amount of fees or even less than you would with a traditional advisor. Because these websites don’t have to pay salaries and have lower overhead costs, the cost to the consumer is much lower.

Rise of the Machines

We could be light years away from having flying cars and robot butlers, but the world of robo-investing is here, and it’s something many investors are embracing.  Even the most anti-technology type of investors are finding it hard to argue with the numbers of these internet advisors. Betterment, for example, boasts over a 4% higher return on investment compared to other DIY investors.


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