What Is a Robo-Advisor — And Should You Use One?

For most of my 20s, investing felt like something other people did. People with more money, more knowledge, more confidence than me. I knew I should be doing something, but the gap between "knowing" and "actually opening a brokerage account" felt impossible to cross.

A robo-advisor was what finally got me there.

If you're in that same stuck place — you know you should be investing, but you're not sure where to start or whether you're doing it right — this is for you. I'll explain what a robo-advisor actually is, how it works, and whether it might be the right fit for your situation.

What a Robo-Advisor Actually Is

In plain terms: a robo-advisor is an app or platform that invests your money for you, automatically, based on your goals and risk tolerance. You answer a few questions when you sign up — how long until you need the money, how comfortable you are with risk — and it builds and manages a portfolio based on your answers.

You don't pick stocks. You don't rebalance manually. You don't need to know what a P/E ratio is. (That's the price-to-earnings ratio, and honestly, you still don't need to know it.)

That last part was what got me.

How I Got Started

I signed up for Betterment in 2019 after months of telling myself I'd "figure out investing eventually." The whole process took about 15 minutes. I answered their risk questions, connected my bank account, and set up a $50 weekly auto-deposit.

That's it. No research rabbit holes. No stock picking paralysis. It felt almost too easy — which made me suspicious at first, but the platform was genuinely doing the work behind the scenes.

What Robo-Advisors Are Good At

Here's where they genuinely shine:

Automatic rebalancing. When one part of your portfolio grows faster than another, the robo-advisor adjusts things to keep your risk level where you set it. This is something I'd never have done manually — I'd have just let it drift.

Tax-loss harvesting. Some platforms (Betterment and Wealthfront both offer this) automatically sell investments at a loss to offset your tax bill. It sounds complicated, but you don't have to do anything — it just happens.

Low barrier to entry. Most robo-advisors let you start with very little. Betterment has no minimum. Wealthfront starts at $500. Acorns rounds up your purchases and invests the spare change.

The Honest Downsides

I'm not going to pretend robo-advisors are perfect.

Fees exist. Most charge around 0.25% annually on your balance. That's low compared to a human financial advisor (who typically charges 1%), but it's not zero. If you're comfortable managing your own index fund portfolio, you can avoid this fee entirely.

Limited customization. You can't pick individual stocks or make tactical bets. If you want that level of control, a robo-advisor will feel restrictive. For me, that limitation was actually a feature — it kept me from making impulsive decisions.

They can't plan your whole financial life. A robo-advisor handles investing, but it won't help you figure out whether to pay off debt first, how much life insurance you need, or when to buy a house. For those bigger questions, a human advisor or fee-only financial planner is worth the money.

I'm not a financial advisor — this is what worked for me. Your situation might be different, and it's always worth talking to a professional if you're making big financial decisions.

Who Should Use One

A robo-advisor is a great fit if you:

• Know you should be investing but haven't started
• Don't want to research individual stocks or manage a portfolio
• Want a set-it-and-forget-it approach
• Have even a small amount to start with

It's probably not the best fit if you:

• Already have a solid investment strategy you manage yourself
• Want to pick individual stocks
• Have complex financial needs that require a human advisor

Where to Start

If I were starting from scratch today, I'd look at two options:

Betterment — No account minimum, solid interface, good tax-loss harvesting. This is where I started and it felt like the easiest on-ramp.

Wealthfront — $500 minimum, but excellent features including a free financial planning tool. Slightly more features than Betterment if you have a bit more to start with.

Both are solid. You really can't go wrong with either.

Getting started with a robo-advisor isn't a big commitment — most let you open an account with as little as $1. If you've been on the fence, that's a pretty low-stakes way to find out if hands-off investing works for you. I'd start with Betterment or Wealthfront and see how it feels after 90 days.