Investing with a robo-advisor

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Not all financial help comes in human form.

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Robo investing is an automated way to manage your money in the market—ideal if you’d rather not research, monitor, and periodically rebalance your portfolio all by yourself. To get started, you’ll answer a few simple questions—not about investing, but about your goals, time horizons, and how much risk you’re comfortable with (i.e., your “money personality type”).

Some robo platforms go further, asking about your values, personality, interests, and stance on social and sustainability issues. Using your answers, the system creates a personalized investment profile, invests your money accordingly, and monitors and readjusts your portfolio over time.

More recently, artificial intelligence (AI) has become part of the robo-advisor toolkit, helping these platforms tailor investments, identify market patterns, and manage portfolios in real time.

There are a host of robo investing options available today. They all come with different features, investment minimums, strategies, and fee structures. Make sure you understand the specifics of the program, as well as the company managing the platform, before investing. Ask questions about:

Once you’ve selected a robo investing platform, you need to create an account. Once approved, you’ll be invited to the questionnaire. Answer as honestly as possible. If you feel there’s something the robo-advisor should be asking but isn’t (or, on the flip side, you think the platform is getting too personal), either contact the company or consider another platform. The answers to those questions are designed to set up an investment plan that will be in effect for a long time.

You may want to try robo investing for just a portion of your overall financial life or a particular investing goal, such as a child’s education. In that case, you should answer the robo-advisor’s questions only in the ways they pertain to that goal.

Once the robo-advisor compiles and analyzes your answers, it will set up a robo investment portfolio designed to fit your profile. Over time, as you get closer to your goals and as the markets fluctuate, that portfolio will likely change—but the target will remain the same.

The term robo-advisor is no mistake. These platforms are designed to act like a financial advisor by creating and executing a long-term investment plan.

Robo investing platforms are designed with younger investors in mind, as many financial advisors won’t take on clients who have less than a certain amount—such as $100,000 of investable assets.

At the same time, some robo-advisors have options that cater to sophisticated investors who are attracted to the platforms’ lower fees. A robo-advisor may charge far less in annual fees than a professional financial advisor, who might charge 1% or more of the assets they advise on per year—triple or quadruple that of most robo-advisors.

Although no investment should be completely hands-off, robo-advising might come close. You answer questions, deposit your money, and get instant access to a low-cost diversified portfolio that’s consistent with your profile.

You can typically add to your assets periodically, and the robo platform will allocate your deposits accordingly. When it comes time to withdraw your funds, the platform will divest and make the proceeds available. You can even take withdrawals in monthly increments if you want.

When choosing a robo-advisor, consider the investment mix, strategy, and fees. You should monitor the investments periodically to make sure they’re what you want, and make changes to the plan if your goals shift over time.