Market swings remind us why emotional investing decisions can hurt your long-term returns. When stocks unexpectedly drop or surge, the urge to panic sell or chase hot trends becomes almost irresistible. Managing investments used to make this problem even worse, requiring you to sift through thick financial newspapers or pay substantial fees to meet with advisors just to make basic portfolio decisions.

But investing has evolved dramatically. Today, you can easily invest with the help of a robo-advisor — a digital investment platform that automatically take care of selecting and managing your investments. These digital platforms use algorithms to build and manage your investment portfolio automatically, keeping you invested through market volatility without the emotional baggage that derails so many investors.

The process couldn't be simpler. Answer a few questions about your goals and risk tolerance, fund your account, and let the platform handle everything else. No researching individual stocks, no timing the market and no second-guessing your decisions when headlines get scary. Let's dive right in to explore each step of automating your investments.

Investing used to feel like a full-time job of researching stocks, analyzing market trends and second-guessing every decision. However, Wealthfront forever changed the investing scene after it introduced the first robo-advisor in 2008.

This robo-advisor and many more that followed offered investors a new way to manage their portfolios with minimal effort. These new investment platforms quickly gained traction, making professional investing accessible to more people.

A robo-advisor is an online platform that uses advanced investing algorithms to handle your money and investments with little input from you. These automated platforms create a mix of different investments for you based on three main factors:

The resulting investment portfolios typically use exchange-traded funds (ETFs) and mutual funds, which work as large baskets of hundreds or even thousands of stocks and bonds. This diverse mix spreads your investments across various sectors, which can help smooth out market volatility.

Robo-advisors simplify the work you need to invest by using several automated processes:

While these processes don’t fully replace human financial advisors, they handle many daily investing tasks without needing your constant attention. This allows you to “set it and forget it,” as your robo-advisor works 24/7 to keep your portfolio on track.

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Robo-advisors can be a powerful tool for investors. But like every investment platform, they have their own set of benefits and drawbacks.

Robo-advisors offer competitively low advisory fees. Some robo-advisors charge no advisory fees. This is a great perk for both new or experienced investors, as it puts more of your money toward your future goals. Most robo-advisors also have low minimum balance requirements, making it easy to start investing with less than $100. Plus, the simple setup process makes it even easier to get started.

However, robo-advisors lack the personalized touch you’d get with a human financial advisor. This also means you typically won’t work with a dedicated advisor who knows your personal financial situation. For example, you might have a 401(k) plan, a house and savings in a bank account. Your robo-advisor would have limited insight into these external assets, while a human advisor could consider your overall financial picture when making recommendations.

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I was pleasantly surprised by how simple the setup process was when I first used a robo-advisor. Here are the steps you can take — even with no investment experience.

When choosing a robo-advisor, consider these key factors:

🔍 ETFs and mutual funds have their own fees, typically called expense ratios that generally range from 0.01% to 0.40%. However, most robo-advisors use funds with low expense ratios. For example, my robo-advisor mostly uses funds with annual expense ratios below 0.10%.

I initially chose Charles Schwab for its tax-loss harvesting, round-the-clock access to investing professionals and zero advisory fees. However, I later switched to SoFi when it launched its robo-advisor in 2019 since I also banked at SoFi.

You’ll follow three general steps to set up your account with your chosen robo-advisor,:

Setting up a robo-advisor account took me less than 30 minutes, with account approval arriving within one or two business days.

The name of the game with robo-advisors is hands-off investing. But how can you grow your investments without getting caught up in complicated strategies?

One tried-and-true strategy that many hand-off investors use is dollar-cost averaging. This is a fancy term for a simple four-step strategy:

Let’s take a look at how this strategy plays out in real life. Let’s say you decide to transfer $100 each week. In the first week, your robo-advisor buys 10 shares at $10 each. The following week, the price increases to $20 per share, so your robo-advisor buys only five shares. In the third week, the price drops to $5 per share, allowing your robo-advisor to buy 20 shares.

You’ve now invested $300 in 35 shares. This averages $8.57 per share, well below the $20 per share you’d have paid if you had invested a lump sum when the market was high.

The beauty of this approach is that it frees you from monitoring the market or predicting its movements, which helps limit emotional reactions and rushed decisions. Plus, you can automate it all, from regular transfers to share purchases. As someone who values time, I appreciate how robo-advisors save me time while providing peace of mind.

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Here are five of the most popular robo-advisors on the market today. These robo-advisors offer low or no advisory fees and useful features for hands-off investors.

Acorns offers a unique approach by rounding up your everyday purchases and investing the spare change automatically. The platform also includes banking features and cashback rewards that you can automatically invest.

Sign up at Acorns

Betterment is a one-stop shop that offers automated investment management, socially responsible investing options and retirement planning.

Sign up at Betterment

Wealthfront launched the first robo-advisor back in 2008. Today, it remains one of the most popular robo-advisors, offering access to various account types including IRAs and 529 college savings plans.

Sign up at Wealthfront

SoFi stands out with its low minimum of $50. It provides access to diverse assets, including real estate and commodities.

Sign up at SoFi

Charles Schwab is a well-established brokerage service that pioneered lower investment fees in 1974. Today, it maintains its commitment to minimizing fees by offering its robo-advisor with zero advisory fees.

Sign up at Charles Schwab

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There are various investment options that give you varying degrees of automation or direct control. These options include traditional financial advisors, target-date funds and self-directed investing.

Robo-advisors use algorithms to manage individual investment portfolios. These algorithms do a pretty decent job at allocating your money toward ETFs that cover broad markets, including U.S. companies, bonds and international stocks. Due to their high level of automation, robo-advisors typically charge low annual advisory fees of 0.25% or less.

In contrast, traditional human financial advisors provide highly personalized advisory services that consider your entire financial situation. They’re better equipped to handle complex financial situations and provide tailored advice around financial guidance, estate planning and taxes. Many financial advisors charge an annual fee of about 1% of the assets they manage.

Robo-advisors assess your goals and risk tolerance to offer personalized investment portfolios. They continuously monitor and rebalance your portfolio based on market conditions and changes to your goals and risk preferences. Robo-advisors typically charge low annual advisory fees of 0.25% or less. However, remember that the funds they use may have additional expense ratios.

Target-date funds focus on retirement savings with a straightforward approach that offers less personalization than robo-advisors. They gradually shift your investments from riskier assets like stocks to safer ones like bonds as you near retirement. Though less flexible, target-date funds offer a truly hands-off approach for people who prefer simplicity. They also typically have no advisory fees, but their average annual expense ratio is 0.44%, according to Vanguard.

Robo-advisors are ideal for those with limited investment experience or who prefer a hands-off approach, saving time on research and portfolio management. Depending on the robo-advisor you choose, you may pay little or even no annual advisory fees. However, robo-advisors typically limit your ability to make specific investments in individual stocks or assets.

Self-directed investing gives you full control over your investment portfolio through your own brokerage account. This option suits those who enjoy investment research and understand market dynamics well. With self-directed investing, you avoid advisory fees by relying on your own knowledge. Plus, many brokerages now offer commission-free trading, making self-directed investing highly cost-effective.

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Still not sure whether a robo-advisor fits your budget and needs? Learn more with these common questions about automatic investing and saving money. And take a look at our growing library of personal finance guides that can help you save money, earn money and grow your wealth.

Yes, robo-advisors are generally as safe as traditional investment methods. To confirm that your robo-advisor is legitimate, make sure it’s regulated by the Securities and Exchange Commission (SEC) by searching the SEC database. Also check that it’s regulated by the Financial Industry Regulatory Authority (FINRA) using FINRA’s BrokerCheck. Additionally, get an additional layer of protection against brokerage failure by using robo-advisors that offer insurance from the Securities Investor Protection Corporation (SIPC). Lastly, look for robo-advisors that use bank-level encryption to secure your information and account.

Yes, your investments with a robo-advisor can lose value due to market conditions. As with all investments, your robo-advisor portfolio may decline in value during market downturns. This can affect both your profits and initial investments. Remember, protections such as SIPC insurance don’t safeguard against losses from market movements.

Tax-loss harvesting is a strategy that helps reduce your tax burden by selling losing assets to offset profits you made from other investments. For example, if you made a profit of $1,000 in a year, you could partly offset this gain by selling an asset that lost $200. This effectively reduces your total profit, lowering your tax liability.

Robo-advisors don’t guarantee outperforming the S&P 500, a market index that tracks stocks of the biggest 500 U.S. companies. However, many robo-advisors use ETFs or mutual funds that closely track the S&P 500’s performance. For instance, Vanguard Digital Advisor might invest some of your money in the Vanguard 500 Index Fund, which mirrors the S&P 500.

Annuities are a popular investment for many retirees, helping you to create reliable retirement income that can last as long as you do. While they come with higher fees than many other retirement savings, they offer unique tax advantages that can appeal to retirees in higher tax brackets. But each type of annuity carries its own risks and costs, and you'll want to make sure you're buying from a reliable source. Learn more about annuity types, how to buy them and how to avoid scams in our comprehensive guide to annuities.

Editorial disclaimer: Information on this page is for educational purposes and not investment advice or a recommendation to buy any specific asset or adopt any particular investment strategy. Independently research products and strategies before making any investment decision.

is a personal finance writer at AOL with over a decade of experience in finance and investing. As a certified educator in personal finance (CEPF), he combines his economics expertise with a passion for financial literacy to simplify complex retirement, banking and credit topics. He loves empowering people to make informed financial decisions that improve their everyday and long-term wellness. Yahia's expertise has been featured on FinanceBuzz, FX Empire and EarnForex. Based in Florida, he balances his love for finance with freediving, hiking and underwater photography.

Article edited by Kelly Suzan Waggoner

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