Written by 1. How They Work
Meet Laura, a busy professional who wants to invest but doesn’t have the time to manage her portfolio actively. She turns to Betterment, a popular robo-advisor, to handle her investments. Laura answers a few questions about her financial goals and risk tolerance, and Betterment creates a diversified portfolio tailored to her needs. The platform automatically rebalances her investments and reinvests dividends, allowing Laura to grow her wealth effortlessly.
How to Do It:
- Sign Up: Choose a reputable robo-advisor such as Betterment, Wealthfront, or Vanguard Digital Advisor.
- Complete the Questionnaire: Answer questions about your financial goals, time horizon, and risk tolerance.
- Deposit Funds: Transfer money into your robo-advisor account to start investing.
- Monitor Performance: Periodically check your portfolio’s performance and make adjustments to your goals if necessary.
2. Popular Robo-Advisors
David, a retiree, wants a low-cost solution to manage his retirement savings. After researching various options, he chooses Wealthfront for its user-friendly interface and tax-efficient investment strategies. Wealthfront offers features like tax-loss harvesting and direct indexing, which help David maximize his after-tax returns.
How to Do It:
- Research Options: Compare different robo-advisors based on fees, investment options, and additional features.
- Consider Your Needs: Choose a platform that aligns with your investment goals, whether it’s for retirement, general savings, or specific financial objectives.
- Set Up Automatic Contributions: Automate your investments by setting up recurring deposits to take advantage of dollar-cost averaging.