Robo-advisors are a fantastic option for investors looking to streamline their investment management while keeping costs low compared to traditional financial advisors. Some robo-advisors even offer their services without charging an annual management fee.
Here’s everything you need to know about robo-advisors and five of the best options that will manage your money without charging a fee.
Understanding Robo-Advisors
Robo-advisors utilize algorithms to create an investment portfolio tailored to your risk tolerance and investment objectives based on a few key questions. Many robo-advisors also provide additional features like tax-loss harvesting and automatic rebalancing, which can enhance your returns and make investing more hands-off.
The top robo-advisors have significantly lower fees compared to traditional financial advisors, and you can typically get started with a modest investment amount. Some robo-advisors offer free management for small sums, while others do not charge a management fee at all. However, keep in mind that you may still incur fees for the funds used in constructing your portfolio.
Top Free Robo-Advisors
1. Schwab Intelligent Portfolios
Charles Schwab, known for being one of the top online brokers, also offers a high-quality robo-advisor service through Schwab Intelligent Portfolios. The basic tier is free and includes portfolio management, automatic rebalancing, and tax-loss harvesting (requires a minimum of $50,000 in assets for tax-loss harvesting).
Schwab selects from a wide range of funds to construct your portfolio, with most fund fees ranging from 0.02 percent to 0.19 percent. While Schwab utilizes its own funds in portfolio construction, it also includes funds from low-cost providers like Vanguard to ensure you are not overpaying in fund fees.
An upgraded tier provides access to financial advisors for a one-time planning fee of $300 and $30 per month thereafter.
- Management fee: Free for basic tier
- Fund fees: 0.02 percent to 0.19 percent
2. Fidelity Go
Fidelity Go is another excellent robo-advisor option, particularly for beginners. There is no advisory fee for assets up to $25,000, and assets above that threshold incur a 0.35 percent annual fee.
One of the advantages of Fidelity Go is that there are no additional fees for the funds in which you are invested, as Fidelity uses its own no-cost mutual funds for portfolio construction. This means that the total costs for assets up to $25,000 are zero, making it a great deal for those starting with small investments.
- Management fee: Free up to $25,000 in assets
- Fund fees: Free
3. Interactive Advisors
Interactive Advisors is a cost-effective robo-advisor, but it is only free if you manage the portfolio yourself, which may not be suitable for all investors. If you opt for Interactive Advisors to manage your portfolio, the annual fee is 0.20 percent, below the industry average of 0.25 percent.
You have the option to select from various themed funds with expense ratios ranging from 0.10 percent to 0.75 percent. Interactive Advisors caps fund expenses at 0.75 percent to ensure you do not pay more than that. Fund choices encompass a mix of active and passive strategies, industry funds, ESG funds, and more.
- Management fee: Free if self-managed
- Fund fees: Capped at 0.75 percent
4. SoFi Automated Investing
SoFi Automated Investing is one of the most economical robo-advisor solutions available. There is no management fee, so your only costs are the expense ratios of the funds in your portfolio, which are also kept low. Your total annual costs could be around 0.10 percent or $10 per $10,000 invested.
You also have access to financial advisors who can assist you with financial planning or other aspects of your finances.
- Management fee: Free
- Fund fees: 0 percent to 0.35 percent
5. Ally Invest Robo Portfolios
Ally Invest Robo Portfolios does not charge an advisory fee, but there is a condition: you must opt for the “cash-enhanced” portfolio, which allocates 30 percent of your funds in cash. The cash earns a competitive interest rate that has increased in recent years, but your returns may lag behind a market-focused portfolio. If you choose the more fully invested option, the annual fee is 0.30 percent.
Upon selecting your desired account type, you have four portfolio options constructed with low-cost ETFs. Fund fees range from 0.03 percent to 0.25 percent, with most falling below 0.10 percent.
- Management fee: Free for “cash-enhanced” portfolio
- Fund fees: 0.03 percent to 0.25 percent
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Additionally, past performance of investment products does not guarantee future price appreciation.