Investing is the best way to earn a second income and secure your financial future. However, making investment decisions isn’t easy. Earlier, you would have to hire an expert and pay hefty fees for their services. This has changed entirely over the years. Today, thanks to robo-advisors, you can use your computer to receive automated financial guidance at lower rates. Read on to know what robo-advisors are and the five best robo-advisors of 2021.
What is a robo-advisor?
Robo-advisors are automated financial consultants that help you make sound investment decisions. While an in-person financial advisor would use his/her knowledge and experience, a robo-advisor uses computer algorithms to formulate an investment plan that fits your financial needs. All you have to do is enter some basic information, such as how much risk you’re willing to take, the amount you wish to invest, and the time period. The robo-advisor processes these details and generates a financial strategy.
More and more people are choosing to invest with the help of robo-advisors. This is because computer algorithms can make calculated monetary decisions pretty quickly, without room for human error. Plus, these programs are easy to use and budget-friendly. As per the predictions of Insider Intelligence, robo-advisors will be managing funds worth $4.6 trillion by 2022.
Best robo-advisors to consider
Now comes a very pertinent question: which robo-advisor to choose? The number of investors is increasing, and many players have entered the arena to exploit the opportunity. Below, we’ve listed the five best robo-advisors of 2021:
Betterment is one of the most efficient robo-advisors in our country. The company was launched in 2010, and since then, they’ve been rewriting the rules of traditional investing. As of 2021, Betterment has over 600,000 customers, and each one gets a personalized investment plan that helps create a diverse financial portfolio. According to NerdWallet, “Betterment is a clear leader among robo-advisors.” The brand believes in transforming the investment sector by bringing in new, automated investing methods. Today, it’s managing assets worth around $32 billion!
Betterment offers two payment plans:
- Digital: The cost for the digital plan is 0.25% for a year. That means you’ll pay approximately $2.50/year for every $1,000. It doesn’t require you to have a minimum balance, so you can start investing with $0. The plan offers several features. You get limitless access to automated investment managing technology and can use numerous tactics to manage your taxes.
- Premium: The annual fee for this plan is 0.40% for a year, which comes to approximately $400/year for every $100,000. You have to have a minimum balance of $100,000. However, you enjoy all the digital plan features along with additional perks. For instance, you can consult a team of CFP® professionals and are eligible for unlimited calls and emails with these financial experts and other licensed investment professionals.
Individuals just stepping into the world of investing should go for Betterment. It’s one of the best robo-advisors for beginners who wish to learn to manage their cash efficiently. Moreover, setting up an account is easy. You just have to enter your age, financial goal, and annual income, and Betterment creates an effective investment strategy based on this information.
Wealthfront uses an advanced algorithm to provide efficient investment solutions. It was launched in 2008 by Dan Carroll and Andy Rachleff. Today, the company has around 450,000 users who enjoy high-end investment management services. In 2019, Wealthfront was managing assets worth around $21 billion, and as of 2021, this number has gone up to $26 billion. Investopedia named Wealthfront the Best Overall Robo-advisor of 2020. In the same year, the brand was also awarded the Best Cash Management App title by NerdWallet.
Here are a few features and benefits of using Wealthfront:
- Charges: Wealthfront charges an advisory fee of around 0.25% per year. The company also requires you to have a minimum account balance of $500. However, there are no account-opening fees, withdrawal fees, trading charges, or account transfer fees. Users who don’t have a Wealthfront account can take advantage of the free investment tools.
- Goal-based investing: When it comes to setting specific financial goals, Wealthfront is the way to go. It allows you to set targets and achieve them with ease. Let’s say you want to save up for college or a house or build a retirement fund. The robo-advisor will help you achieve that by suggesting practical investing strategies.
- Tax-loss harvesting: Wealthfront provides the feature of tax-loss harvesting. It’s a beneficial service that helps you buy and sell assets in a way that you save money on taxes when the time comes. Taxes are an essential factor that the brand’s algorithm keeps in mind when creating a financial strategy.
- Autopilot: This robo-advisor is excellent for people who wish to put their investments on autopilot. Once you set a goal and add the required details, the automated financial tool will begin the investing process and take care of transactions on your behalf. This can save you a lot of time on the research you would have to do when investing on your own.
Since Wealthfront is entirely driven by technology, there’s minimal human intervention, thus offering error-free calculations and suggestions. However, one drawback is that the brand doesn’t provide online chat assistance to its potential or current users.
SoFi was founded in 2011 by a group of students at Stanford Business School. It started as a student loan refinancing company. Over the years, it grew leaps and bounds to branch out into other sectors, such as mortgages, personal loans, etc. Today, it offers some of the best automated investing services to help you achieve your financial goals effortlessly. As of 2021, SoFi has around 2,000,000 members. The company’s goal is to provide financial independence to individuals. They believe that when one manages their finances well, they can make money work for them.
The following are the key features and benefits of SoFi:
- Charges: The best selling point of this robo-advisor is the $0 annual, advisory, and administrative fees. At Betterment or Wealthfront, you would have to shell out 0.25% per year. Moreover, it will cost you just $1 to open an account and start trading at SoFi.
- Goal-based investing: Like Wealthfront, SoFi believes that every individual must have a well-laid plan to fulfill their dreams. Whether you want to travel the world, buy property, save up for a wedding, or retire early, the robo-advisor has strategies to meet all your financial needs.
- Auto rebalancing: The market can fluctuate and change rapidly, and the plans decided a few months ago may need to be revisited. SoFi’s auto rebalancing feature reviews your investments every three months to track their performance and rebalance your funds to meet your goal.
- Risk-based investing: When you sign up with SoFi, you’ll need to mention whether you want minimum risk or maximum profits. Based on this, the algorithm will assign you a portfolio. You’ll get a specific proportion of bond ETFs and stock ETFs, depending on your risk appetite.
- Useful tools: Among the many features and tools provided by the robo-advisor, the most useful ones are SoFi Money and SoFi Edmit Plus. SoFi Money is a free cash management account, while SoFi Edmit Plus is for college students to manage their education fees, scholarship amount, etc.
SoFi is a well-regulated brand with high compliance standards. Besides automated investing, you can also use some of their other products, such as SoFi Invest, SoFi Protect, and SoFi Credit Card.
4. Charles Schwab
Founded in 1971, Charles Schwab is one of the most efficient financial management companies in the market. It’s also the best robo-advisor for people who wish to have minimum involvement in their investments. The company focuses on building a strong and diversified financial portfolio. All you have to do is fill out a short questionnaire and allow Charles Schwab to do its job.
The following are the key features and benefits of Charles Schwab:
- Charges: You don’t have to pay any advisory fee for a regular plan. However, you get a premium option only after paying a one-time $300 planning fee and a $30 advisory fee every month. The premium option gives you access to expert professionals, a unique automatic advisor, and planning tools. But you must have a $5000 minimum balance.
- Great for beginners: This robo-advisor is excellent for beginners as it does all the investing and managing. It also helps individuals learn more about investing and imparts financial education. You can check the status of your portfolios every day, and the brand’s human advisor option helps resolve your investment-related queries.
- Portfolio mix: The company offers a tailored portfolio from over 80 variations based on your risk appetite. You can choose from six risk categories, ranging from conservative to aggressive growth. You can also select if you’re interested in oriented portfolios, country-specific portfolios, or global portfolios. Based on your preference, Charles Schwab offers an effective combination of cash, stocks, bonds, REITs, preferred stock, and municipal bonds.
- Smooth user interface: The application’s user interface is convenient to use and provides transparency so that you can constantly keep track of where your money is being invested. You also get access to online planning tools that you can easily use to create and modify a portfolio that suits your financial needs.
Schwab not only invests your money well but also provides tax efficiency. You can choose from different accounts, such as IRA, brokerage, trust accounts, and more.
Though open to everyone, Ellevest is a robo-advisor that mainly caters to the financial needs of women. Founded in 2014, it offers several exceptional features that women from all walks of life can use. Their investment strategies consider various factors, such as career breaks, life expectancy, and pay differences. Women can also benefit from Ellevest’s workshops and courses that provide valuable financial literacy. Moreover, the Ellevest debit card offers a 5% cashback while shopping and can be used at local as well as national stores.
Ellevest offers three pricing plans:
- Essential: This plan costs $1/month or $12/year and doesn’t require a minimum balance. Women can access a personalized financial portfolio, and the algorithm factors in the essential information like pay differences, the longevity of life, and career gaps. You also get access to information workshops, guides, and career coaches. Moreover, the plan offers banking services, free ATM reimbursements, a contactless Ellevest debit card, and a 20% discount on financial and career coaching.
- Plus: This plan costs $5/month or $54/year. It offers all the features of the essential plan, plus other perks, such as a personalized retirement plan, access to a team of experts, and around 30% discount on all coaching sessions.
- Executive: This plan costs $9/month or $97/year. You get access to all Ellevest Plus features, six different personal plans for your financial goals, and around 50% discount on coaching sessions.
Financial education is an important factor for Ellevest. There’s a dedicated team of coaches and financial planners who teach about investments. They focus on providing ample information to women who want to learn to manage their own money and become independent by creating a retirement fund for themselves. What’s more? Individuals looking to invest $1 million or more can get access to a personal financial consultant.
These are the top five robo-advisors of 2021. We suggest you visit their websites, go through every aspect of the company in detail, read all the terms and conditions, and make an informed decision.