What a Robo Advisor Is and When to Use One

Curious about automated investing? Learn how a robo advisor builds ETF portfolios, rebalances automatically, and charges transparent management fees. See who benefits, what to compare, and when human advice still matters.

A robo advisor is a digital platform that uses algorithms to create and manage diversified portfolios for individual investors. It simplifies automated investing by handling account setup, allocation, and ongoing monitoring.

After you answer a short questionnaire about goals and risk tolerance, the service recommends a mix of low-cost ETF funds aligned to your profile. Most offer automatic portfolio rebalancing and tax-loss harvesting where available.

Costs are transparent: management fees typically range from 0.15% to 0.40% of assets, plus underlying fund expenses. Compared with traditional advisors, you get 24/7 access and discipline, but less nuanced, holistic planning.

Consider a robo advisor if you want a set-it-and-forget-it start, modest balances, or objective rules. Compare features, fees, minimums, and human support; verify SIPC coverage and security; and review how each platform handles transfers and cash.