You may have heard about “robo-advisors” like Betterment and Wealthfront. Robo-advisors are investment firms that use computer algorithms to invest your money (“robo” refers to a computer investing for you versus an expensive adviser).
You’re probably wondering if they are a good investment and if you should use one. As a NYT best-selling author on personal finance, let me break it down for you.
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Why Robo-Advisors Became Popular
Robo-advisors took the elite financial planning services offered to clients of financial advisers and full-service investment firms like Fidelity and made them accessible to the average person.
You know how Uber made private cars more accessible and convenient than taxis? That’s sort of what robo-advisors have done to the investment industry.
Robo-advisors implemented new technology to offer investment recommendations for low fees. They improved the user interface so you can sign up online, answer a few questions, and know exactly where to invest your money in a few minutes.
And they personalized the experience so you can add in your goals—like when you want to buy a home—and automatically allocate money aside for it.
Are Robo-Advisors a good Investment?
I have a strong opinion on robo-advisors:
While they are good options, I don’t think they are worth the costs, and I believe there are better options.
As an example, I specifically chose Vanguard and have stuck with them for many years.
Let me explain the pros and cons of robo-advisors so you can make your own decision.
Pros & Cons Of Robo-Advisors
Pros To Using A Robo-Advisor
In the last few years, robo-advisors have become increasingly popular for three reasons:
■ Ease of use. They…