Best Robo-Advisors for Beginners for May 2024

It wasn't that long ago that there were only a couple ways to build a diverse investment portfolio. You could hire a financial advisor, or you could do the research and choose investments yourself. But these aren't practical or desirable options for everyone.

Fortunately, the automated investing industry has exploded, and there are some excellent robo-advisor services available that can put your investing on autopilot. With the stock market reaching record highs in 2024 already, now could be a great time to start, so read on for our favorite beginner-friendly robo-advisors.

2 Featured Picks From Our Best Robo-Advisors for Beginners

There are a lot of options to compare. It can be overwhelming! If you're looking for a place to start, here are some robo-advisors our experts recommend for beginners and why they like them:

• SoFi Automated Investing: Fantastic robo-investing platform for keeping all your finances in one place
• M1 Finance: Standout mobile investing platform

Our 4 Best Robo-Advisors for Beginners for May 2024

How do I choose a robo-advisor for beginners?

The bottom line is that while we feel our list above represents the best robo-advisors for beginners, the best choice for you depends on the features that matter the most to you. Just to name a few, here are some of the things to look for:

SoFi Automated Investing

Best robo-advisor for beginning investors who: Want to avoid fees without sacrificing features.

SoFi offers a financial ecosystem of deposit accounts, loan products, and investment accounts. SoFi Automated Investing is the robo-advisor platform, and has some unique features that could make it an especially strong choice for beginners.

Why beginning investors might love SoFi Automated Investing

• No management fee: SoFi Automated Investing doesn't charge a management fee. It is one of the few robo-advisors that doesn't.
• CFP® Access: SoFi is one of the few robo-advisors that offers access to Certified Financial Planner™ professionals, and without an additional cost.
• Relationship discounts: SoFi Automated Investing customers may get discounts and special offers for other SoFi products, such as loans and deposit accounts.

Why beginning investors might not choose SoFi Automated Investing

• Not great for large accounts: Other robo-advisors may have tax optimization strategies (tax-loss harvesting), which can be especially helpful for large accounts.SoFi Automated Investing doesn't offer this.
• Some account types not available: SoFi supports individual and joint accounts, as well as traditional, Roth, and SEP IRAs. If you want a different account type, such as a custodial account for a minor, SoFi might not be a good fit.

Read our full review of SoFi Automated Investing.

M1 Finance

Best robo-advisor for beginning investors who: Want a mix of automated and active investments.

M1 Finance is an investing and banking app that combines some excellent features of robo-advisors and self-directed investing. Its automated investing tools are unique and could be especially appealing for beginners who want a little more variety or choice than most robo-advisors offer.

Why beginning investors might love M1 Finance

• Pie-based portfolio: Unlike most robo-advisors, M1 Finance investors lets investors choose their investments, but automates the actual process of buying stocks and maintaining allocations. It offers more than 60 model portfolios investors can choose from, or you can choose your own stocks and ETFs with desired allocations.
• One-click rebalancing: If your investments start to deviate from your desired allocations due to market performance, you can choose to rebalance your portfolio whenever you want.

Why beginning investors might not choose M1 Finance

• Not a typical robo-advisor: If you're looking to completely put your investing on auto-pilot, where you simply answer a few questions and the robo-advisor does the rest, M1 Finance isn't for you.
• Low fee: M1 Finance charges a $3 monthly platform fee, but this is waived for accounts with $10,000 or more.

Read our full review of M1 Finance.

Wealthfront

Best robo-advisor for beginning investors who: Want a feature-rich robo-advisor with the ability to buy individual stocks.

Wealthfront is one of the largest and most feature-packed robo-advisors in the market, and can be a great fit for experienced and beginning investors alike. Unlike some rivals, Wealthfront allows investors to trade individual stocks as well as automate their portfolio. It has some excellent features that might appeal to beginners in particular, and has strong customer service.

Why beginning investors might love Wealthfront

• Management fees: Wealthfront charges a low 0.25% management fee, which isn't the lowest in the industry. But considering the quality of the platform, it's reasonable, and is a fraction of what you would likely pay a human advisor.
• Individual stocks: Wealthfront allows investors to trade individual stocks and even offers the ability to buy and sell fractional shares.
• Tax optimization: Wealthfront is one of the few robo-advisors that implements tax-loss harvesting strategies on accounts of all sizes.

Why beginning investors might not choose Wealthfront

• Minimum: Wealthfront's $500 new account minimum isn't a massive one, but can be an obstacle for beginners.
• No human advisors: Beginners may want access to real-live financial advisors, but Wealthfront is entirely automated.

Read our full review of Wealthfront.

Betterment

Best robo-advisor for beginning investors who: Want to fully automate their investments.

Betterment was one of the pioneers of the robo-advisor industry, and it remains one of the best in the business, especially for beginners. It offers a reasonable investment fee, no minimum balance, and an excellent mobile app.

Why beginning investors might love Betterment

• Management fees: Betterment offers a choice of a 0.25% annualized management fee or a flat rate of $4 per month.
• No minimum: A lack of a minimum initial deposit can be a big deal for new investors. You can start an account with any amount, and can get started investing with as little as $10.
• Tax optimization: Betterment is a rare example of a robo-advisor that uses tax-loss harvesting strategies on accounts of all sizes, which can save you money on your tax bill each year.

Why beginning investors might not choose Betterment

• Only a robo-advisor: Unlike some of the other top robo-advisors for beginners, Betterment's platform doesn't allow for individual stock investing.
• Human advisors: Betterment offers a Premium plan that includes financial advisor access, but it is only available with a minimum investment balance of $100,000 or by paying $299 or more for a financial advice package.

Read our full review of Betterment.

The exact process for a beginner looking to open a robo-advisor account varies from broker to broker. But the general process is the same:

1. Fill out an account application: This includes information about the type of account you want to open (for example, individual, retirement, or joint), and identifying information about yourself.
2. Answer some questions: This helps the robo-advisor determine how to best invest your money. Questions tend to be about your age, investment objectives (such as saving for college or retiring with $1 million), and how much risk you're comfortable with.
3. Make a deposit: The easiest way to do this with most robo-advisors is to link your bank account, but you may also be able to mail a check, wire money, or transfer assets from an existing investment account, such as a former employer's 401(k).

That's basically it. The robo-advisor will then use the money you contribute to construct an appropriate portfolio of investment funds for you.

In exchange for their automated investing services, most robo-advisors charge a management fee. Robo-advisor fees typically range from 0% to 0.40% for the top firms. Even on the higher end, this is significantly more cost effective than the 1% average management fee charged by financial planners for advice and investment guidance.

Just like with human financial advisors, robo-advisor management fees are generally based on a percentage of assets in your portfolio and are assessed annually.

For example, a 0.25% management fee means that for every $1,000 you have in your robo-advisor account, you'll pay $2.50 per year in management expenses.

It's also important to mention that the individual investment funds your robo-advisor uses typically have their own annual management fees (known as expense ratios). These are usually quite low, but they add to the total cost of your investments. It's still usually much cheaper to use a robo-advisor -- just be aware that an advertised 0.25% management fee can be 0.30%-0.35% when including the expenses of the individual funds your money is invested in.

Robo-advisors allow investors (both beginners and seasoned pros) to put their money to work in a diverse portfolio of stocks and bonds, which it usually does through exchange-traded funds, or ETFs. The exact funds vary by robo-advisor, with most choosing to offer passive, low-cost index funds. Some robo-advisors have their own proprietary ETFs that they use.

Plus, certain robo-advisors allow investors to buy individual stocks, ETFs, and/or mutual funds in their accounts. This is most common with the large, long-established brokerages, but is becoming more common among app-based robo-advisors.

This depends on the robo-advisor. Some robo-advisors have a minimum initial deposit requirement, while others will let you open an account with as little as $1. However, some of the robo-advisors without minimums have a minimum amount that needs to be in your account before your money can actually be invested, although it's usually small.

There are two different types of "safety" to consider.

First, robo-advisors are safe in the sense that your account is protected from failure of the institution or security breaches. The Security Investor Protection Corporation (SIPC), which is essentially the brokerage equivalent to the FDIC, protects investors in this way. Plus, most brokers protect investors from things like data breaches and fraudulent transactions within the accounts.

On the other hand, robo-advisor investments can be rather volatile over short periods, and it's entirely possible to lose money. While the types of ETFs used by most robo-advisors are likely to rise in value over the long term, it's a good idea to not use robo-advisors to invest money you're likely to need within the next few years.

A robo-advisor, which is also referred to as an automated investing platform, aims to do essentially the same thing as a traditional financial advisor, but without any direct human involvement.

These services create an appropriate investment portfolio based on factors such as your:

• Age
• Investment goals, such as retirement
• Risk tolerance

Robo-advisors will automatically adjust your portfolio based on these factors, as well as market fluctuations, over time.

At The Motley Fool Ascent, brokerages are rated on a scale of one to five stars. We primarily focus on fees, available assets, and user experience; however, we also take into account features like research, education, tax-loss harvesting, and customer service. Our highest-rated brokerages generally include low fees, a diverse range of assets and account types, and useful platform features.

See our full methodology here: Ratings Methodology

Brokerages we evaluated for consideration on this page: Acorns, Ally Invest, Axos Self-Directed Trading, Betterment, Cash App Investing, Charles Schwab, Delphia, Domain Money, Ellevest, Empower, eToro Brokerage, E*TRADE Core Portfolios, E*TRADE, Fidelity, Fidelity Cash Management, Fidelity Go®, Firstrade, FOREX.com, Interactive Brokers, J.P. Morgan Self-Directed Investing, M1 Finance, Magnifi, Marcus Invest, Merrill Edge® Self-Directed, Moomoo, NinjaTrader, Personal Capital, Plynk, Prosperi Academy, Public, Robinhood, Rocket Dollar, Schwab Intelligent Portfolios, SoFi Active Investing, SoFi Automated Investing, Stash, Stockpile, Tastytrade, Titan, Tornado App, TradeStation, Tradier, Vanguard, Vanguard Digital Advisor®, Wealthfront, Webull, Zacks Trade.