Best Robo Advisors for 2021
Hiring someone to manage your investments isn’t something that everyone wants to do, or can even afford. For those people, there’s a great alternative: robo advisors.
The only thing these handy tools require you to do is add money into them, and they handle your investments from there. Robo advisors are increasingly popular, too, with over 16 million people expected to sign up for a robo-advising account by 2025.
If you’re looking to join their ranks, the biggest decision you’ll have to make is which one to choose. There are many robo advisors out there, and we’ve rounded up the best with the lowest fees and the top features — and a few alternative investment platforms — to help find the best option for you.
Best Robo Advisors
There’s a robo advisor for everyone depending on what you’re looking for. But we find that most people want low fees, easy management, and high returns. And for you, we recommend these robo advisors and investment platforms:
- Betterment: Best for first-time investors.
- M1 Finance: Best for no fees.
- Robinhood: Best for DIY investing.
- Stash: Best for creative ways to invest more.
- SigFig: Best for highest returns.
Robo Advisor Reviews
It’s good to do some in-depth research before choosing a robo advisor. Here’s a quick highlight of our top picks so you can decide whether they’re worth pursuing further.
- Low fees
- Easy, intuitive interface
- No account minimums, $10 minimum deposit
- Advanced tax strategies and Socially Responsible Investing (SRI) options
- Access to real Certified Financial Planners (CFPs) with premium subscription
- Not many options for customization
There are a lot of reasons we recommend Betterment, especially for newer investors. There are no account minimums, although you’ll need to deposit at least $10 to get started. Betterment also has a very user-friendly interface that anyone — even your grandmother — can understand.
Its Goal Forecaster is especially good about showing you graphs that break down in real terms what your investing decisions will mean over time. For example, you can see exactly what your expected returns will be over time if you invest more or less each month, or expand or shorten your timeline.
These visualization tools are really powerful for keeping you motivated and putting something that’s really abstract — like investing — in real terms that you can understand.
Betterment pushes you toward pre-set portfolios. You can make some adjustments, like how much to keep in stocks vs. bonds, or opting-in to a Socially Responsible Investing (SRI) portfolio. But aside from these minor customizations, there’s no real way to choose specific investments — although most people who choose Betterment don’t want that anyway.
M1 Finance Review
- No fees
- Easier diversification
- More options for customization
- Can also invest in individual stocks
- No tax-loss harvesting
- $100 minimum balance ($500 for retirement accounts)
M1 Finance is a unique investment firm that centers around “pies” — i.e., pie charts that represent your portfolios for different goals. You can customize your own pies with a mix of ETFs and even individual stocks, which is unique for a robo advisor. If you’re not ready to take those steps just yet, don’t worry — M1 Finance also has pre-set “Expert Pies” that it can help you choose, à la a traditional robo advisor.
The only downsides of M1 Finance are that there’s no tax-loss harvesting like with many other services. Tax-loss harvesting relies on buying and selling similar investments to shrink your tax bill, but since your investments are pre-set, you can’t do that with this platform.
There’s also a $100 account minimum ($500 if you’re opening an IRA) which isn’t huge, but it could be enough to prevent some new investors from getting in.
- High yields
- Access to live investment advisors
- First $10,000 is managed free; low fees after that
- Accounts are managed through TD Ameritrade, Fidelity, or Charles Schwab
- $2,000 minimum balance
- Business structure can be confusing
SigFig is a different type of robo advisor in that it doesn’t hold the investments itself. Instead, your money is held at one of three large investment firms: TD Ameritrade, Fidelity, or Charles Schwab. In this way, it functions like an add-on to your account.
If you already have an account at these firms, you just need to link SigFig up to it. Otherwise, if you transfer over an existing account or open a new account, SigFig will open up a TD Ameritrade account for you where all your investing is done.
SigFig’s big value-add is that it generates some of the highest returns of all robo advisors, according to a 2020 report from Backend Benchmarking. It was also rated as the best overall robo advisor, despite its somewhat confusing setup. SigFig also has relatively low fees, and unlike other robo advisors, you can chat with a human investment advisor at any time without signing up for a premium-level service.
How We Found the Best Robo Advisors
Since a robo advisor is literally running on autopilot, you shouldn’t be paying a lot for one. That’s why we only considered robo advisors with the lowest fees. We also looked at robo advisors with low minimum deposits, since they’re designed to be easily accessible to the average person. Finally, we looked at the amount of positive customer reviews each robo advisor has, along with what special features it offers that can help you grow your money further.
What You Need To Know About Robo-advisors
Robo advisors simplify investing a lot, but that doesn’t mean you can leave things on total autopilot. Here are some things to consider when using robo advisors:
- You’ll get a tax document at the end of the year for your account
- Robo advisors use questionnaires to help steer you towards pre-made portfolios
- Robo advisors use low-cost index funds that track the market rather than beating it
- Many robo advisors also have access to human advisors in case you have questions
- Some robo advisors offer more advanced features, like tax-loss harvesting or smart beta.
If You Prefer a DIY Investing Approach…
Robo advisors are great for people looking at buy-and-hold, long-term investments, and who aren’t too picky about what they’re invested in. If you’re looking to start more advanced investing strategies like stock picking, consider the two alternative investing platforms below.
- Free trades
- $1 minimum balance
- Stock rewards for signing up and for referrals
- Trade stocks, options, ETFs, margins, and cryptocurrencies
- Retirement accounts not available
- Company is facing criticism for some of its unsavory business practices
Robinhood has been in the news big-time over the past few years. It was founded as a company that democratized investing, by offering free trades that anyone can take advantage of. It also backfired: some people got into trouble because investing was a little too easy, and the company also played a big role in the GameStop/AMC brouhaha in early-2021.
Nevertheless, Robinhood’s still a solid option for people looking to get their feet wet with buying and selling individual stocks. Part of the reason why it’s so popular is that it offers free stock for signing up for an account, and for referring friends. It’s also just a well-designed platform that offers a lot of educational content so you can learn as you go.
- $5 minimum balance
- “Stock-back” rewards debit card
- “Auto-stash” ways to increase your savings
- Expensive for smaller investors
If you’re looking for more control over what you invest in and want creative ways to boost your savings, consider Stash. It’s not particularly cheap, ranging from $1 to $9 per month, which is pretty high for a service targeted toward new investors. Many other brokerages charge 0.25% per year, meaning that Stash is more expensive if you have less than $4,800 saved.
On the other hand, Stash offers more ways to get you there faster than most robo advisors. You can set up automatic deposits, sure, but there are two other ways to save more.
If you use your bank’s debit card, you can set Stash up to round up your purchases and invest the difference in your Stash investing account. You can also switch to using Stash’s own debit card, which offers rewards in the form of stock at the companies you shop from.
Here’s a quick summary of questions that people commonly ask about robo advisors.
Wells Fargo had the highest three-year returns at 9.18%, according to Backend Benchmarking. SigFig, Axos Invest, TD Ameritrade, and Sofi were close runners-up. Remember that published returns are never guaranteed.
No. Robo advisors use index funds to match the market returns instead of beating them.
Yes. There will be ups and downs, but over the long term, you will make money with robo advisors.