If you’re new to investing, even the thought of starting can feel intimidating. Is investing just for wealthy people? For older people? For people who are wiling to dive into all things cryptocurrency, to start trading stocks, and to buy NFTs? No, no, and definitely not a requirement.
There are so many different ways to invest your money, and the key to successful investing is to jump on a lot of them. This is otherwise known as diversifying your investment portfolio. But that doesn’t mean you need to become a stocks-and-bonds expert overnight—and you certainly don’t need to go it alone. You can easily get started investing—even without a ton of money—with the help of a robo-advisor.
What is a robo-advisor?
Robo-advisors are automated investing managers that are used through digital platforms. They are offered by various financial institutions and are a great alternative to a traditional advisor for beginner investors. Once you pick which one to start with, you get started by answering a questionnaire about your investment goals so the robo-advisor can create a customized portfolio that meets your needs.
How much do I need to start investing?
The best thing about using a robo-advisor is you don’t need thousands of dollars to get started. In fact, platforms such as Betterment let you begin with just $10. Acorns, meanwhile, lets you start with $5 and will invest your spare change too. Depending on your starting amount, there are various options to choose from that will help you reach your investment goals.
The best robo-advisors for beginners
Investing is easier than ever for beginners, thanks to robo-advisors. Check out these top five robo-advisor platforms for beginners—and get started making money on your money.
The great thing about investing with M1 Finance is it’s free to use. You can get started investing with $100 for investment accounts or $500 for retirement accounts. It allows you to invest in ETFs and individual stocks; stock-only portfolios incur no management fees, but portfolios that contain EFTs can incur some fees that range from 0.06 percent to 0.20 percent.
M1 Finance uses a “Pie investing” process. You are offered a suggested “pie” during the setup, with pre-selected investment categories. Each pie contains up to 100 “slices” that are made up of investments such as EFTs or stocks. The customizable pie is how you manage your portfolio. Another bonus of investing with M1 Finance? You can purchase fractional shares as well. So, if you have an extra $100 lying around, get started.
If you’re searching for a diversified portfolio that is cash-enhanced, then Alley invest is perfect for you. With this portfolio, 30 percent is set aside as a cash buffer to protect your investments against market volatility. Your cash buffer is placed in an interest-bearing account, so you are still earning money without the risk. If you choose this investment option, there are no fees. However, if you opt to invest in another option besides the cash-enhanced portfolio, there is a 0.30 percent fee.
Alley Invest offers many diverse portfolio options of exchange-traded funds. There are 17 asset classes and 32 portfolios of EFTs offered. The allocations you can choose from are Core, Income, Tax Optimized, and Socially Responsible. You can start investing with Ally Invest for just $100.
Who says loose change can’t build wealth? Acorns makes investing fun and easy. This robo-advisor takes your spare change and automatically invests it for you. For example, if you purchase $1.50 on your card, it will round up to the next dollar. So Acorns will invest 50 cents into your portfolio.
With Acorns, your money will be invested in a diversified portfolio of stocks and bonds. The asset classes range from real estate to large companies to ensure your money is invested in different classes to help with any market changes. You can choose from a conservative to an aggressive portfolio depending on how risk-averse you are with your money. Acorns even offers cash-back from select retailers, so you have even more money to invest.
Depending on which level you choose, Acorns has membership fees that range from $1 to $5 per month. However, you can get started investing with only $5.
Although Wealth Simple has management fees of 0.40 to 0.50 percent, one big perk is you have access to human advisors for financial help in addition to the robo-platform. There is no account minimum to get started, and there are no transfer fees. The five diverse portfolio plans to choose from are Conservative, Balanced, Growth, Halal, and SRI.
Like Acorns, Wealth Simple will link your credit or debit card and invest your spare change. The brand also offers a smart savings account that pays about 1.3 percent interest; this is a brokerage account that is covered by the Securities Investor Protection Corp. There’s a 0.25 percent cash management fee on this account that is deducted at the end of every month.
Betterment offers two service options: Betterment Digital and Betterment Premium. The digital package is best for beginner investors because there is no account minimum and only a 0.25 percent management fee. The brand offers various investment portfolios to choose from, depending on your investment goals and risk tolerance.
The brand even offers a Climate Impact Portfolio for those interested in investing in companies with lower carbon emissions, and it helps fund green projects too. For those who prefer lower-risk options, Betterment offers an all-cash or all-bond portfolio. You can start investing with Betterment with only $10.
The benefits of robo-advisors
Although there are pros and cons to robo-advisors (versus hiring an IRL professional), they are an excellent way to start investing. One of the biggest perks? You can get started with very little money. Also, robo-platforms that let you invest spare change and get cash back can even add more money to your investments.
Plus, many robo-advisors offer low fees, low minimum balances, and free rebalancing of portfolios. The best part, of course, is that they help you diversify your portfolio—and tailor it based on your goals for investing and risk.
All in all, a robo-advisor can be an easy, low-cost, key partner as you get started investing and working towards your financial goals. Once you’ve built up some investments and earned money over time, you can always switch over to a human financial advisor when you’re ready (and can afford it). Or, hey, maybe you’ll love robo-investing so much, you’ll become a lifer.