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Millions of Americans turned into investors last March thanks to some boredom and stimulus money. Many bought the dip in markets last March and picked up Tesla, ARK ETFs and meme stocks at a discount. One year on from the COVID crash, volatility and uncertainty has motivated many first-time traders to seek professional assistance managing their money. The only problem? Help from a wealth planner or Certified Financial Planner (CFP) generally comes with a high cost of admission. Take Vanguard for example: you need over $50,000 in assets just to get in the door. 

This is one reason behind the rise of low-minimums, low-cost robo-advisors. Robo-advisors are a lot like their money-managing human counterparts. They send your money to work in low-cost exchange-traded funds which track indexes like the S&P 500, automatically balance your portfolio holdings and cater your portfolio to your long-term plan. The last part deserves distinction because a new CNBC survey claims that 75% of Americans “are winging it when it comes to their financial future.” 

There will always be room for YOLOing your money on momentum stocks, options from Wall Street Bets or speculating on individual stocks. But if you lack a long-term plan, robo-advisors may allow you to tee off a tax-advantaged plan like a Roth IRA. 

Let’s dive in and take a look at three of the best robo-advisors out there right now:

1. Wealthfront

Pros of Wealthfront: Approximately 0.25% management fee, beautiful design, many account types supported

Cons of Wealthfront: $500 account minimum, no fractional shares, little customization for small account holders

If you’ve got a little money and are looking to put it to work, your best bet is to go with Wealthfront. Wealthfront is a robo-advisor that offers options for general investing, retirement accounts and investing for education. It also might be one of the easiest, most satisfying personal finance products you can find. They allow you to set goals, monitor all your financial accounts and turn your money on autopilot. It’s also extremely cheap, only costing $25 per $10,000 (0.25%) in an account.

When kicking off an account on Wealthfront, your portfolio will be developed based on the “risk level” you select. A risk level is a number between 0.5 and 10, with 0.5 being most conservative and 10 being most aggressive. Once you’ve selected your risk level and made a deposit, your money is used to buy ETFs based on the recommended weight that the robo-advisor selects for each class. If you selected a lower risk score, your portfolio will mostly consist of conservative assets such as bonds. If you selected a higher risk score, your portfolio will consist more of riskier assets like stocks and real estate. Wealthfront helps people to compare the historical performance of different risk scores on their website

One meaningful point of emphasis for Wealthfront is their tax-minimization approach for taxable accounts. For example, say you set up a “general investing account” to save for a vacation or a car. Wealthfront will peer into your portfolio, find funds which are losing money, and then sell funds in order to collect a tax write-off for the loss. Since there are so many near-identical funds out there, they will just replace the sold ETF with another ETF with nearly identical holdings.

No matter how much money you have, Wealthfront is an ideal robo-advisor to use. However, for folks with big pocketbooks, Wealthfront unlocks additional features for people with holdings above $100,000 and $500,000. Among them are direct indexing, which buys stocks directly to circumvent funds. All-in-all, Wealthfront is a go-to for anyone looking to make investing easy.

2. Vanguard Digital Advisor

Pros of Vanguard Digital Advisor: Approximately 0.15% management fee, brand name, debt payment calculator

Cons of Vanguard Digital Advisor: $3,000 account minimum, still being developed, design is lackluster

Vanguard offers their own “digital advisor” through their own robo-advisor product for those who would feel more comfortable with a brand name. If you have $3,000 sitting around, you can hop on Vanguard Digital Advisor and open a general investing or retirement account. One upside of Vanguard’s product is the astonishingly low 0.15% management fee, which is well below nearly every other robo-advisor product. According to Vanguard, that means you’re only paying $15 a year on every $10,000 in your portfolio

Like other robo-advisors, Vanguard does a good job of demystifying where they’re putting your money to work. You’re run through a questionnaire to gauge your risk, age and other factors and then they will show you an asset mix consisting of U.S. stock, international and emerging market stock, U.S. bonds, and international bonds. Sometimes they’ll even throw in real estate. It all depends on your screener.

The strong point of Vanguard’s product unfortunately has nothing to do with their robo-advisor. Their platform’s “debt payoff calculator” helps people with credit lines prioritize their highest-interest debts, pay off credit faster and invest in the meantime.

Altogether, this product is still under development and some parts of setting up an account can be a little confusing. Overall, Vanguard Digital Advisor is already a step above the rest for individuals with smaller balances and a desire to work with a brand name.

3. Marcus Invest by Goldman Sachs

Pros of Marcus: More investment strategies and portfolios than other robo-advisors, impact and smart beta fund options are hard to find in other robo-advisors, brand name, design

Cons of Marcus:  $1,000 minimum account balance, 0.35% management fee higher than others

Marcus Invest is the newest robo-advisor on our list, launching in February 2021 as part of Goldman Sachs’ new consumer banking push. Goldman Sachs is also the banker behind the Apple Card. So if you like a familiar face, Marcus Invest might already feel better than Vanguard. You can get started with just $1,000.

Marcus Invest also might be the one for you if you’re someone who likes choices. The robo-advisor has three investing strategies: one dedicated to traditional indexing, an impact fund which focuses on the “good” stuff (ESG) and a smart beta strategy that might warmly welcome people who can handle some volatility in exchange for more gains. Behind those three strategies lay over 50 managed portfolios, which they recommend based on your sign-up process. 

There’s only one small problem with Marcus. Its price is higher than other robo-advisors. In fact, it’s even higher than Vanguard’s financial advisor tier. For that reason, it might be better for folks with over $50,000 in assets to go with a CFP or RIA rather than a robo-advisor like Marcus. But if you’re open to options, enjoy customization and don’t mind the cost, Marcus Invest is still an excellent option.

So, How Should You Choose a Robo-Advisor?

Now that we’ve taken a look at three of the best robo-advisors out there, you might be wondering: “How should I choose one?” 

Ultimately, the selection is up to you, and it’s something that should consider your long-term goals, reasons for investing and comfort with investing. If you’re not very comfortable with investing or need exposure to a more time-tried strategy, a robo-advisor is a step above stock-picking in almost every case. Not all stocks go up forever, but for the entire history of U.S. markets, index strategies have grown. That doesn’t mean you have to give up stock-picking, but this might help you think about the long-term.

On the other hand, robo-advisors still might add value for you if you wouldn’t otherwise invest in long-term strategies and you are comfortable with investing. You might not find traditional index investing or bonds interesting, but you might find Marcus Invest’s Smart Beta or Wealthfront’s risk score turned up to 10 to be a value-add. If that doesn’t sound appetizing to you, then maybe you’re up for the challenge of choosing a broker and self-managing your portfolio.

Regardless, robo-advisors are here to stay and do a lot of heavy-lifting that has historically been done by professionals and certified advisors. Whether they will replace human advisors in the future is untold, but for now they will offer a convenient and inexpensive way for folks to gain access to the markets.

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Noah Weidner

Noah Weidner is a restless self-starter with a vehement interest in all things that make the world go around: culture, politics, economics and all the people in between. He writes the Bullish Rippers series and covers other interesting trends and happenings at Bullish.

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