4 Little-Known Perks of Robo-Advisors

These automated investing tools have several features you should know about.

For beginners and hands-off investors, robo-advisors are a popular choice. Many online stock brokers have robo-advisors available, which figure out how to invest your money based on information you provide about your goals and risk tolerance. They also tend to cost much less than traditional human advisors.

While many investors know the basics of what top robo-advisors offer, there are also some benefits that aren't common knowledge. If you're not sure whether to use a robo-advisor, here are four little-known perks they can offer.

1. Tax-loss harvesting

Several robo-advisors offer tax-loss harvesting to help you lower your tax bill. The basic idea behind tax-loss harvesting is that you sell losing investments to lock in capital losses that you can include on your tax return.

You then use these capital losses to offset your capital gains, and if you have losses left over, you can apply up to $3,000 of them per year against other forms of income. It's one of the few silver linings of a down market.

Robo-advisors that have this feature handle the tax-loss harvesting for you. After selling a losing investment, the robo-advisor may also reinvest in a similar fund. That way, you can deduct the losses on your taxes, and since you have a similar investment, you can still benefit if it later increases in value.

2. Socially responsible investing

Socially responsible investing has become a hot topic in recent years. Many investors want to use their money to support companies that match their values.

To better serve these investors, some robo-advisors provide socially responsible portfolio options. These portfolios typically avoid companies that are considered irresponsible because of social or environmental issues. They focus on investing in companies that are known for making a positive impact.

3. A line of credit against your account

One of the more unique benefits available with select robo-advisors is the option to borrow against your account. If you meet the minimum requirements with a platform that offers this feature, you can get a line of credit up to a certain percentage of your portfolio's value. For example, if you have a $50,000 portfolio, you may be able to get a $10,000 or $15,000 line of credit.

If you need to borrow money, this can be a convenient option. There are a few benefits to borrowing against your investment account instead of getting a loan:

• There's typically no credit check to borrow against your investments.
• Interest rates tend to be lower than personal loan rates, since your investments serve as collateral.
• You can borrow from a line of credit multiple times as needed.

4. Access to human advisors

Robo-advisors are useful for building and rebalancing an investment portfolio. They can handle a lot of the same things human financial advisors do for you, and at a lower cost. But in some situations, you might need advice that a machine can't give you.

Fortunately, this isn't always an either-or situation. There are quite a few robo-advisors that also provide access to human financial advisors when needed. They usually charge a bit extra for this, either through a premium plan or with a consultation fee. If you have complex financial issues to navigate, such as balancing short-term home savings goals with long-term retirement planning, then talking to a financial advisor could be worth it.

There's a lot more to what robo-advisors can do than just setting up a portfolio with the right mix of stocks and bonds. If you don't want to spend too much time managing your brokerage account, a robo-advisor could be a great way to reach your investing goals.