Wealthfront. Wealthfront is an automated investment service that competes with Betterment for the top spot in the robo advising market. As of 2018, Wealthfront became the first robo-advisor to offer free financial planning that is personalized for its clients.
Robo-advisors work well for people who need at least some help with their investing portfolio. And those who need a lot of expertise will likely find robo-advisors to be valuable.
“The diversification provided by robo-advisors isn't super powerful.” While robo-advisors provide exposure to the broad stock market, even with rebalancing and tax-loss harvesting, you're at risk of losing money.
Minimum investment requirements. Some robo-advisors require $5,000 or more, but a majority have account minimums of $500 or less.
Best Robo-Advisors:
Robo-advisor performance
| Robo-advisor | 2.5-year annualized return |
|---|---|
| SoFi | 4.03% |
| TD Ameritrade | 3.62% |
| TIAA | 4.20% |
| Vanguard | 3.42% |
On the plus side, robo-advisors are very low-cost and often have no minimum balance requirements. ... On the downside, robo-advisors do not offer many options for investor flexibility, they tend to throw mud in the face of traditional advisory services, and there is a lack of human interaction.
Robo-advisors will fail because most of them are not profitable. In order for a robo-advisor to be profitable at a 0.25% fee, they would need to have somewhere between $15-20 billion assets under management (AUM).
Wealthfront is one of the largest robo-advisors in the U.S., and they offer features that are great for beginners. The sign-up process is easy. You don't need any investment experience to start building a portfolio that matches your investment goals.
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