Robo-advisors are online services that build and manage an investment portfolio for you using algorithms instead of a human financial planner. You typically answer a questionnaire about your goals, time horizon and risk tolerance, and the service recommends a mix of low-cost exchange-traded funds (ETFs) or index funds, then rebalances the portfolio automatically over time. Many also offer tax-loss harvesting, direct indexing and access to human advisors for an added fee.
The features that most clearly separate one robo-advisor from another are the strength of its portfolio construction (how it diversifies across asset classes and selects underlying funds) and the quality of its tax-efficiency tools, since those two factors drive a large share of the difference in your net returns. Account types supported, minimum investment requirements, and the availability of cash management or financial planning tools are also worth weighing.
As you compare options, focus on the fee structure in relation to the services provided, the investment methodology, and any account minimums that might apply to your situation.
