Robo-Advisor

A robo-advisor asks about your goals, timeline, and tolerance for loss, then assembles a portfolio of low-cost index funds and runs it for you — handling the allocation, the periodic rebalancing, and the reinvestment of dividends without further input.

The pricing is the point. Typical fees run around 0.25% of assets a year, against roughly 1% for a traditional human adviser. On a $100,000 portfolio that is $250 versus $1,000 annually, compounding into a substantial difference over decades. The underlying funds charge their own expense ratios on top, so the true cost is the sum of both.

Most of the value is in the discipline rather than the algorithm. The portfolios they build are not exotic — a handful of broad index funds in sensible proportions is something a determined DIY investor could replicate for less. What you are buying is that it happens automatically and that nobody panics and sells during a bear market.

Automated tax-loss harvesting is the feature most heavily marketed, and it is genuinely useful in a taxable account. It does nothing at all inside an IRA or 401(k), where losses are not deductible, so weigh it against where your money actually sits.

The main limitation is scope. A robo-advisor manages a portfolio; it does not advise on whether to buy a house, how to structure Roth conversions, or what to do about a windfall. Several now bundle access to human planners for a higher fee, which is a reasonable middle path for people who want both.