How Do I Start Investing with Robo-Advisors as a Beginner?

How Do I Start Investing with Robo-Advisors as a Beginner?

If you’ve ever wanted to invest but felt overwhelmed by complex terminology, high fees, or the pressure to pick the “right” stocks, you’re not alone. The good news? There’s a solution designed specifically for beginner investors: robo-advisors.

Robo-advisors make investing simple, accessible, and low-cost—even if you have no prior experience. In this blog post, we’ll break down what robo-advisors are, how they work, and how you can start investing with one today—even with just a few dollars.

What Is a Robo-Advisor?

A robo-advisor is an automated investment platform that uses algorithms to manage your investment portfolio. Instead of hiring a traditional financial advisor who might charge 1% of your assets or more, robo-advisors offer similar services at a fraction of the cost, often charging around 0.25% annually.

Most robo-advisors will:

Assess your risk tolerance and financial goals
Build a diversified portfolio of low-cost ETFs (exchange-traded funds)
Automatically rebalance your portfolio as markets shift
Offer tax-loss harvesting (on some platforms)
Require low or no minimum investment

Popular robo-advisors include Betterment, Wealthfront, SoFi Invest, Fidelity Go, and Schwab Intelligent Portfolios.

Why Use a Robo-Advisor as a Beginner?

Here’s why robo-advisors are especially helpful for new investors:

✅ Simplicity

You don’t need to pick individual stocks, time the market, or study hours of financial theory. Robo-advisors handle the strategy and execution for you.

✅ Low Cost

With fees as low as 0.25% (or even free in some cases), robo-advisors are far more affordable than traditional advisors.

✅ Diversification

They automatically spread your money across multiple asset classes (like U.S. stocks, international stocks, and bonds) to reduce risk.

✅ Hands-Off Investing

Once you set your preferences, the robo-advisor takes over. It’s ideal if you want to “set it and forget it.”

✅ Accessibility

Many platforms let you start investing with as little as $5–$100, removing a major barrier for beginners.

Step-by-Step Guide to Getting Started

Step 1: Understand Your Financial Goals

Before opening an account, get clear on why you want to invest.

Are you saving for retirement, a house, or just building wealth?
Do you want access to your money in the short term, or can you leave it invested for years?
How much risk are you comfortable with?

Your goals will help the robo-advisor choose the right investment strategy.

💡 Tip: If you’re just starting out, long-term goals like retirement are perfect for robo-advisors.

Step 2: Choose the Right Robo-Advisor for You

There are many robo-advisors available, but each one has slightly different features. Here’s a quick comparison of popular platforms:

Robo-Advisor	Fees	Minimum Investment	Notable Features
Betterment	0.25%	$0	Goal-based planning, tax-loss harvesting
Wealthfront	0.25%	$500	Great user interface, tax-loss harvesting
SoFi Invest	$0	$1	Free management, career coaching
Fidelity Go	$0–0.35%	$10–$25	Backed by Fidelity, no advisory fees under $25K
Schwab Intelligent Portfolios	$0	$5,000	No fees, but higher cash allocations

What to Consider:

Fees: Lower is better, especially for small balances.
Account minimums: Can you afford the required minimum?
Features: Do you want tax-loss harvesting, ESG investing, or access to human advisors?

Step 3: Open an Account

Opening a robo-advisor account is similar to opening a bank or brokerage account. You’ll typically need to provide:

Name, address, and Social Security number
Employment status
Annual income and net worth
Investment goals and time horizon
Risk tolerance (low, medium, high)

Based on your answers, the platform will recommend a custom portfolio made up of ETFs (like total market funds, bond funds, and international equities).

Step 4: Fund Your Account

Once your account is set up, you’ll connect your bank account to transfer funds. You can:

Make a one-time deposit
Set up recurring contributions (recommended)

Even small, consistent contributions—like $20 per week—can grow significantly over time through compound interest.

📈 Example: Investing $100/month for 10 years at a 7% return grows to $17,308.

Step 5: Let the Robo-Advisor Do the Work

Once you’re invested, the platform handles the rest:

Rebalancing: If your portfolio drifts from its target allocation (say, stocks rise and outweigh bonds), the robo-advisor automatically adjusts it back.
Dividend reinvestment: Dividends from ETFs are reinvested to buy more shares.
Tax efficiency: Some platforms sell losing investments to offset gains (called tax-loss harvesting).

You can log in anytime to track performance, update your goals, or make changes—but you don’t need to “manage” anything actively.

Pros and Cons of Robo-Advisors

✅ Pros:

Low fees and minimums
Passive, hands-off investing
Diversified portfolios
Goal-based investing (retirement, buying a house, etc.)
No need for stock-picking knowledge

⚠️ Cons:

Less customization than DIY investing
May not offer access to individual stocks or niche funds
Limited control for advanced strategies
No “real” human interaction unless you pay more

That said, for beginners, these limitations are often advantages. Keeping things simple reduces emotional decision-making and costly mistakes.

How Much Money Do You Need to Start?

Many robo-advisors let you start with as little as $1 (e.g., SoFi Invest). Others may require $500 to $5,000.

Here’s the good news: You don’t need a large sum to start building wealth. What matters more than the starting amount is consistency.

🪙 Example:

Let’s say you invest $50/month for 20 years at a 7% average annual return:

Total invested: $12,000
Value after 20 years: $25,902

Double that to $100/month, and you’d have over $51,000.

Can You Use Robo-Advisors for Retirement?

Yes! Many robo-advisors support retirement accounts like:

Traditional IRA
Roth IRA
SEP IRA

These accounts offer tax advantages, and the robo-advisor can help you choose the right one based on your situation. For example:

A Roth IRA is ideal if you expect to be in a higher tax bracket later.
A Traditional IRA gives you an upfront tax deduction now.

Tips for Success With Robo-Advisors

Start Early

Time is your biggest ally in investing. The earlier you start, the more you benefit from compound growth.

Invest Regularly

Set up automatic deposits, even if it’s just $10/week. Consistency builds wealth over time.

Don’t Panic During Market Drops

Robo-advisors are designed for long-term investing. Avoid reacting emotionally to short-term fluctuations.

Avoid Withdrawing Early

Investing works best when you leave your money alone to grow. Avoid dipping into your investments unless absolutely necessary.

Revisit Goals Annually

Life changes—so might your financial goals. Check in once a year to ensure your portfolio still fits your needs.

Final Thoughts: Is a Robo-Advisor Right for You?

If you’re a beginner who wants to invest but feels intimidated by the process, robo-advisors are one of the best ways to start. They offer a powerful combination of: